6 ms·

Pretty hype about this TBH. There is a long history of companies domiciling in say, Monaco, The Cayman Island, Panama etc to avoid taxes and regulations where t

Pretty hype about this TBH. There is a long history of companies domiciling in say, Monaco, The Cayman Island, Panama etc to avoid taxes and regulations where they mainly operate. My understanding is that the current process in vogue for the mega cap companies is the "double irish dutch sandwich" https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut... No one, including tax lawyers, will tell you with a straight face that this is the way things were expected/designed to work. All of these tax avoidance strategies are emergent properties of complex systems that are the result of uncoordinated action amongst individual actors that cannot be fixed without collective organization. I support this and 15% seems reasonable to me.

mgolawala 5y ago
Does anyone know why this approach would be preferred over the use of VAT (Value added tax) instead of a corporate profit tax? I recall a US presidential candidate in the most recent election cycle mentioning this as the solution to the current corporate tax avoidance problem. In fact it was a major part of his campaign. I am not very knowledgeable of the downsides of a VAT approach and how it could be gamed, but what he seemed to say did make sense to me. The idea was to tax the value created in the location it was created. I suppose the way you could game that system was to somehow show that no (or very little) value was created in the US? Would moving to taking a small percentage of revenue solve this? A federal sales tax that is included in the price of products that cannot be avoided. Sure the argument against this may be that they will just pass the increased costs down to the consumer, but why wouldn't the same would happen if the corporations start having to pay more taxes in general .. whether on their profits or on something else?
- vladvasiliu 5y ago
  I don't have a good answer to this question, and am actually curious about it. But note that in the EU we do have VAT, and the governments are still (pretending to be) looking for ways to curb "tax optimization".
- notahacker 5y ago
  VAT isn't paid by corporations which shelter vast amounts of wealth whilst doing very little real trading, and is the same whether the corporation selling the goods is very low or high margin.
- 627467 5y ago
  VAT is a very regressive tax. All consumers would be taxed the same regardless of their income.
- wolfi1 5y ago
  simple, VAT is paid by the customer not by the corporation
  - rsj_hn 5y ago
    By imposing a tax the company must raise the price of the goods to pay for the tax (or produce the good more cheaply, say with fewer inputs, which reduces the quality of the good somehow, which is the same as raising the price). At a higher cost, fewer goods are sold and so the firm has less revenue and thus lower total profits as well as hiring fewer workers. So the tax burden falls on workers, consumers, shareholders. Exactly how it falls on each group is the theory of tax incidence which has nothing to do with whomever needs to collect the tax for the government. The fact that A collects the tax and sends the check does not mean that A pays the tax.
jbverschoor 5y ago
The thing is, why would T$ company want to pay 15% if it can also pay less than 2%?
- 0xB31B1B 5y ago
  because the proposals on the table are agreements that say access to the markets and banking systems of the countries in which you do business are predicated on a 15% minimum tax rate and without paying the taxes you do not get access to the markets or banking infra which are necessary to run and grow a mega cap company.
  - jbverschoor 5y ago
    What they'll do is have separate entities for that.
treespace88 5y ago
I would imagine many CEOs being on board with this. If your competitors are using these loopholes, you have to as well. It’s the individuals that shield their wealth by using international corporations that stand to lose the most.
- teachingassist 5y ago
  From a corporation's point of view, it's fine if your competitors are treated the same as you are (in a competitive market). But, even if so, CEOs/board members are often those high net worth individuals. So there's a potential conflict of interest that isn't resolvable. This explains why corporations will lobby against a minimum tax, even if the institution doesn't ultimately care.
  - onlyrealcuzzo 5y ago
    Corporations have a fiduciary obligation to maximize shareholder value. Raising taxes on your profits is surely not in the interest of your shareholders. It doesn't matter if it isn't worse for you competitively. It's worse for your profits. If you could have more competition AND more profits, you would want that.
    - teachingassist 5y ago
      > Corporations have a fiduciary obligation to maximize shareholder value. I understand this statement to mean "Corporations have a fiduciary obligation to maximize shareholder value [within the law]". Do corporations have a fiduciary obligation to change the law, as in your interpretation?
      - onlyrealcuzzo 5y ago
        Yes! Lobbying. A lot of laws are essentially written by corporations for corporations. https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture
s_dev 5y ago
>My understanding is that the current process in vogue for the mega cap companies is the "double irish dutch sandwich" You're understanding is outdated this mechanism is finished as of 2018. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement However this article is a little biased -- it's main contributor is a user called "Britishfinance" -- who appears to be a London based corporate shill to take the heat off the City of London being a tax haven.
- disabled 5y ago
  > London based corporate shill to take the heat off the City of London being a tax haven. Nice catch. It could be a Russian bot or just Russian activity. Will ‘Global Britain’ clamp down on money laundering?: Regulatory easing after Brexit risks attracting more dirty money to London https://archive.is/PR0oX https://archive.is/PR0oX
- mardifoufs 5y ago
  That's literally a reddit conspiracy theory propped up on r/Ireland. Everything seems to indicate the editor you mentioned is very well informed & doesn't have any COI a part from vague allegations. Like what do people think, some guy working in the City spent tons of time making extremely well sourced and well constructed articles just to... Divert some sort of "heat" from the entire London financial sector... On Wikipedia? Imo that's absurd, and it's very similar to the type of accusations people (pointing at the original reddit post that popularized the city shill theory) make whenever they find an article that bruises their nationalist ego.
  - candiodari 5y ago
    The point that there is no shortage of tax havens in the EU itself, including leading EU nations, is true. Luxembourg, City of London, Liechtenstein, Monaco, Netherlands, Belgium, the Vatican, Switzerland (sort of), Malta, all for slightly different reasons. I've even read articles from these nations where they point out that the only way they'll ever distinguish themselves is with tax law. Or rather: that they'd be broke if they weren't tax havens. And then we're remaining silent about "royal" tax havens that are individual companies which get preferential tax treatment from parliaments (e.g. Shell) and, uh, I guess "presidential" Total. These deals, for individual companies, are far more atrocious (and forced on tax departments) than any tax haven you'll find. They are directly enriching favored individuals in a particular country, and get tax advantaged for it. And to add a more "creative" situation to terminate, Cyprus is a double tax haven (both the Greek and Turkish parts of the Island are tax havens, for different reasons, interesting for different types of individuals and/or companies, but the fact that money can cross the line, even if people cannot, offers interesting opportunities as well). Neither side of the Island will ever have anything to offer the world other than some small tourism industry, so ... for them as well being a tax haven is the only option (other than, I guess, war). So what do you do about the problem that many of these countries have no real options other than being tax havens?
dnautics 5y ago
This is all just because we are afraid of the T word. A uniform tariff and matching currency export control achieves the same effect, and doesn't impose US hegemony on the rest of the wrold.
- PEJOE 5y ago
  Sure, but both of those will have other, potentially unwanted consequences. Besides, this isn't just "US hegemony," most of the EU wants this as well (except Ireland), as they want to tax the local profits of multinational tech.
- onlyrealcuzzo 5y ago
  So instead of actually fixing the problem - we should just hope that our government arbitrarily applies Tariffs to the right companies in the right amounts? Certainly that won't ever be abused to screw over one company and benefit another for political purposes, right? And, seemingly, a tax authority (the IRS) would be better equipped to calculate these amounts anyway.
  - dnautics 5y ago
    > arbitrarily applies Tariffs Nope. A blanket tariff that applies to everything equally.
- suifbwish 5y ago
  How does cryptocurrency fit into currency export control exactly?
rayiner 5y ago
Sounds like a step toward world government.
permo-w 5y ago
It is how it was designed to work, to an extent. The Dutch are very deliberately allowing foreign corporations to negotiate their corp tax rate with them, which benefits the Dutch and no one else. It's also a regressive tax
rsj_hn 5y ago
It’s strange that you recognize new stable equilibriums emerging as unanticipated consequences of global capital liberalization but you advocate for trying to maintain a new unstable equilibrium instead of thinking about viable strategies that may work. As a piece of advice, if your solution requires 100% compliance by random nations in order for you to tax your own citizens/corporations, then your solution is squarely in the “hopes and dreams” bucket and I’d think at this point we had enough of that. Instead, ask yourself why you can move funds so easily across borders and decide whether allowing these capital flows is a good idea or not. The inevitable cost of allowing them is tax arbitrage but it’s not close to the biggest cost - financial instability, trade deficits, a shrinking middle class and deindustrialization are much bigger costs, and are equally inevitable once you allow these cross border capital flows.
- saurik 5y ago
  Restricting the money flow in and out of a country is something we like to ding China for, and is a big reason why cryptocurrencies have become very popular there; maybe the unstable equilibrium is merely the mechanism we use to tax corporations.
  - rsj_hn 5y ago
    > Restricting the money flow in and out of a country That's not what's going on here. In a fiat money world, money doesn't move out of a country, it is held in correspondent accounts. E.g. there is a bank account here with your name on it. When you think you are moving your money, you sell that bank account to foreigner, and now their name is on it. They sell a bank account in their native country to you. No money has moved in the course of this transaction, rather you have entered into an ongoing financial relationship in a foreign nation without being subject to that nations laws (beyond a bare minimum of requirements) or tax obligations. That is what "unfettered cross border capital flows refers to". It is not so much something that needs to be stopped as something that needs to be actively allowed, because you need an entire system of international investor rights and banks with pairwise correspondent accounts in both nations to make such an arrangement work. There is a massive infrastructure needed to support this illusion that you can "move" money from one country to another with the click of a link. And this system didn't exist even 30 years ago, it's a new system. The question is whether the benefits outweigh the costs. If you allow this you are going to have lots of problems with tax evasion. But I'm not sure what the real upside is here. The only purpose of these foreign capital inflows is to finance trade deficits, and that doesn't seem to be in our interest, either. Moreover, what we dinged China for is not preventing capital outflows but preventing capital inflows, and we rightly pointed out that this forces trade surpluses, which is kinda the point (see my comment about "only purpose"). So of course China, which is interested in running surpluses rather than deficits, is going to block inflows. The question is why do we allow them? Thus we are back to the unstable equilibrium of trying to get everyone to agree to maintain this vast international system but promise not to try to tweak it to their advantage. Well, China has pretty clearly demonstrated that it's not going to play along -- neither is Korea or Taiwan, for that matter, so why are we still pretending the unstable equilibrium -- this dream of converting a world with sovereign fiat currencies into one that looks like the old specie flow model -- is a thing that can exist? The only reason is because for a lot of influential people, these capital inflows are highly profitable -- e.g. for those who can skim a little off the top. Just like Bermuda's tax laws are beneficial to financial advisors and bank staff in Bermuda. But let's not let this minority set the overall national policy: yes, these capital inflows benefit the US financial sector, as US banks can now charge fees to customers all over the world who want to maintain accounts in the U.S, but they do not benefit the US economy nor the US tax base.
losvedir 5y ago
Offtopic, but what's the story on the usage of "hype" like this? I would have said "pretty hyped" but I feel like I've seen it a few times lately without the "d", enough that I no longer think it's just a typo. Is this the kids innovating again?
visualradio 5y ago
We don't actually need a global minimum tax to make the corporate income tax raise more revenue. We just need to only record and recognize conveyance of deeds, titles, patents between domestic residents and domestically chartered corporations and eliminate deductions, depreciation, expensing for intangibles. Federal income tax does not allow depreciation of land, IP and enclosures of ideas should be treated similar to land.
- qdog 5y ago
  When Apple Argentina sells phones to Apple USA, and Apple Argentina makes profits, while Apple USA always shows a loss, how does this work? Apple Global (which owns both other companies)of course, shows a profit and their stock still goes up.
suifbwish 5y ago
Would it really be that difficult for a big company like Google or Facebook to operate from a fleet of floating data centers in international waters utilizing dedicated satellites for connectivity? If you denounce your citizenship and do not declare a new nationality you are only bound by maritime law.
- topicseed 5y ago
  In a situation like that, the place if effectice management and/or the central management and control would probably be how the tax residency is decided.
  - atatatat 5y ago
    By who?
    - topicseed 5y ago
      By whichever jurisdictions that believe the company owes them taxes.
suifbwish 5y ago
Here’s an idea. How about the government starts creating its own wealth and resources with investments in nationalized factories, farms ect with some of the wealth it has been given instead of relying on parasitically stealing it from the work of its citizens.

mgolawala 5y ago

Does anyone know why this approach would be preferred over the use of VAT (Value added tax) instead of a corporate profit tax? I recall a US presidential candidate in the most recent election cycle mentioning this as the solution to the current corporate tax avoidance problem. In fact it was a major part of his campaign. I am not very knowledgeable of the downsides of a VAT approach and how it could be gamed, but what he seemed to say did make sense to me. The idea was to tax the value created in the location it was created. I suppose the way you could game that system was to somehow show that no (or very little) value was created in the US? Would moving to taking a small percentage of revenue solve this? A federal sales tax that is included in the price of products that cannot be avoided. Sure the argument against this may be that they will just pass the increased costs down to the consumer, but why wouldn't the same would happen if the corporations start having to pay more taxes in general .. whether on their profits or on something else?

vladvasiliu 5y ago
I don't have a good answer to this question, and am actually curious about it. But note that in the EU we do have VAT, and the governments are still (pretending to be) looking for ways to curb "tax optimization".
notahacker 5y ago
VAT isn't paid by corporations which shelter vast amounts of wealth whilst doing very little real trading, and is the same whether the corporation selling the goods is very low or high margin.
627467 5y ago
VAT is a very regressive tax. All consumers would be taxed the same regardless of their income.
wolfi1 5y ago
simple, VAT is paid by the customer not by the corporation
- rsj_hn 5y ago
  By imposing a tax the company must raise the price of the goods to pay for the tax (or produce the good more cheaply, say with fewer inputs, which reduces the quality of the good somehow, which is the same as raising the price). At a higher cost, fewer goods are sold and so the firm has less revenue and thus lower total profits as well as hiring fewer workers. So the tax burden falls on workers, consumers, shareholders. Exactly how it falls on each group is the theory of tax incidence which has nothing to do with whomever needs to collect the tax for the government. The fact that A collects the tax and sends the check does not mean that A pays the tax.

jbverschoor 5y ago

The thing is, why would T$ company want to pay 15% if it can also pay less than 2%?

0xB31B1B 5y ago
because the proposals on the table are agreements that say access to the markets and banking systems of the countries in which you do business are predicated on a 15% minimum tax rate and without paying the taxes you do not get access to the markets or banking infra which are necessary to run and grow a mega cap company.
- jbverschoor 5y ago
  What they'll do is have separate entities for that.

treespace88 5y ago

I would imagine many CEOs being on board with this. If your competitors are using these loopholes, you have to as well. It’s the individuals that shield their wealth by using international corporations that stand to lose the most.

teachingassist 5y ago
From a corporation's point of view, it's fine if your competitors are treated the same as you are (in a competitive market). But, even if so, CEOs/board members are often those high net worth individuals. So there's a potential conflict of interest that isn't resolvable. This explains why corporations will lobby against a minimum tax, even if the institution doesn't ultimately care.
- onlyrealcuzzo 5y ago
  Corporations have a fiduciary obligation to maximize shareholder value. Raising taxes on your profits is surely not in the interest of your shareholders. It doesn't matter if it isn't worse for you competitively. It's worse for your profits. If you could have more competition AND more profits, you would want that.
  - teachingassist 5y ago
    > Corporations have a fiduciary obligation to maximize shareholder value. I understand this statement to mean "Corporations have a fiduciary obligation to maximize shareholder value [within the law]". Do corporations have a fiduciary obligation to change the law, as in your interpretation?
    - onlyrealcuzzo 5y ago
      Yes! Lobbying. A lot of laws are essentially written by corporations for corporations. https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture

s_dev 5y ago

>My understanding is that the current process in vogue for the mega cap companies is the "double irish dutch sandwich" You're understanding is outdated this mechanism is finished as of 2018. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement However this article is a little biased -- it's main contributor is a user called "Britishfinance" -- who appears to be a London based corporate shill to take the heat off the City of London being a tax haven.

disabled 5y ago
> London based corporate shill to take the heat off the City of London being a tax haven. Nice catch. It could be a Russian bot or just Russian activity. Will ‘Global Britain’ clamp down on money laundering?: Regulatory easing after Brexit risks attracting more dirty money to London https://archive.is/PR0oX https://archive.is/PR0oX
mardifoufs 5y ago
That's literally a reddit conspiracy theory propped up on r/Ireland. Everything seems to indicate the editor you mentioned is very well informed & doesn't have any COI a part from vague allegations. Like what do people think, some guy working in the City spent tons of time making extremely well sourced and well constructed articles just to... Divert some sort of "heat" from the entire London financial sector... On Wikipedia? Imo that's absurd, and it's very similar to the type of accusations people (pointing at the original reddit post that popularized the city shill theory) make whenever they find an article that bruises their nationalist ego.
- candiodari 5y ago
  The point that there is no shortage of tax havens in the EU itself, including leading EU nations, is true. Luxembourg, City of London, Liechtenstein, Monaco, Netherlands, Belgium, the Vatican, Switzerland (sort of), Malta, all for slightly different reasons. I've even read articles from these nations where they point out that the only way they'll ever distinguish themselves is with tax law. Or rather: that they'd be broke if they weren't tax havens. And then we're remaining silent about "royal" tax havens that are individual companies which get preferential tax treatment from parliaments (e.g. Shell) and, uh, I guess "presidential" Total. These deals, for individual companies, are far more atrocious (and forced on tax departments) than any tax haven you'll find. They are directly enriching favored individuals in a particular country, and get tax advantaged for it. And to add a more "creative" situation to terminate, Cyprus is a double tax haven (both the Greek and Turkish parts of the Island are tax havens, for different reasons, interesting for different types of individuals and/or companies, but the fact that money can cross the line, even if people cannot, offers interesting opportunities as well). Neither side of the Island will ever have anything to offer the world other than some small tourism industry, so ... for them as well being a tax haven is the only option (other than, I guess, war). So what do you do about the problem that many of these countries have no real options other than being tax havens?

dnautics 5y ago

This is all just because we are afraid of the T word. A uniform tariff and matching currency export control achieves the same effect, and doesn't impose US hegemony on the rest of the wrold.

PEJOE 5y ago
Sure, but both of those will have other, potentially unwanted consequences. Besides, this isn't just "US hegemony," most of the EU wants this as well (except Ireland), as they want to tax the local profits of multinational tech.
onlyrealcuzzo 5y ago
So instead of actually fixing the problem - we should just hope that our government arbitrarily applies Tariffs to the right companies in the right amounts? Certainly that won't ever be abused to screw over one company and benefit another for political purposes, right? And, seemingly, a tax authority (the IRS) would be better equipped to calculate these amounts anyway.
- dnautics 5y ago
  > arbitrarily applies Tariffs Nope. A blanket tariff that applies to everything equally.
suifbwish 5y ago
How does cryptocurrency fit into currency export control exactly?

rayiner 5y ago

Sounds like a step toward world government.

permo-w 5y ago

It is how it was designed to work, to an extent. The Dutch are very deliberately allowing foreign corporations to negotiate their corp tax rate with them, which benefits the Dutch and no one else. It's also a regressive tax

rsj_hn 5y ago

It’s strange that you recognize new stable equilibriums emerging as unanticipated consequences of global capital liberalization but you advocate for trying to maintain a new unstable equilibrium instead of thinking about viable strategies that may work. As a piece of advice, if your solution requires 100% compliance by random nations in order for you to tax your own citizens/corporations, then your solution is squarely in the “hopes and dreams” bucket and I’d think at this point we had enough of that. Instead, ask yourself why you can move funds so easily across borders and decide whether allowing these capital flows is a good idea or not. The inevitable cost of allowing them is tax arbitrage but it’s not close to the biggest cost - financial instability, trade deficits, a shrinking middle class and deindustrialization are much bigger costs, and are equally inevitable once you allow these cross border capital flows.

saurik 5y ago
Restricting the money flow in and out of a country is something we like to ding China for, and is a big reason why cryptocurrencies have become very popular there; maybe the unstable equilibrium is merely the mechanism we use to tax corporations.
- rsj_hn 5y ago
  > Restricting the money flow in and out of a country That's not what's going on here. In a fiat money world, money doesn't move out of a country, it is held in correspondent accounts. E.g. there is a bank account here with your name on it. When you think you are moving your money, you sell that bank account to foreigner, and now their name is on it. They sell a bank account in their native country to you. No money has moved in the course of this transaction, rather you have entered into an ongoing financial relationship in a foreign nation without being subject to that nations laws (beyond a bare minimum of requirements) or tax obligations. That is what "unfettered cross border capital flows refers to". It is not so much something that needs to be stopped as something that needs to be actively allowed, because you need an entire system of international investor rights and banks with pairwise correspondent accounts in both nations to make such an arrangement work. There is a massive infrastructure needed to support this illusion that you can "move" money from one country to another with the click of a link. And this system didn't exist even 30 years ago, it's a new system. The question is whether the benefits outweigh the costs. If you allow this you are going to have lots of problems with tax evasion. But I'm not sure what the real upside is here. The only purpose of these foreign capital inflows is to finance trade deficits, and that doesn't seem to be in our interest, either. Moreover, what we dinged China for is not preventing capital outflows but preventing capital inflows, and we rightly pointed out that this forces trade surpluses, which is kinda the point (see my comment about "only purpose"). So of course China, which is interested in running surpluses rather than deficits, is going to block inflows. The question is why do we allow them? Thus we are back to the unstable equilibrium of trying to get everyone to agree to maintain this vast international system but promise not to try to tweak it to their advantage. Well, China has pretty clearly demonstrated that it's not going to play along -- neither is Korea or Taiwan, for that matter, so why are we still pretending the unstable equilibrium -- this dream of converting a world with sovereign fiat currencies into one that looks like the old specie flow model -- is a thing that can exist? The only reason is because for a lot of influential people, these capital inflows are highly profitable -- e.g. for those who can skim a little off the top. Just like Bermuda's tax laws are beneficial to financial advisors and bank staff in Bermuda. But let's not let this minority set the overall national policy: yes, these capital inflows benefit the US financial sector, as US banks can now charge fees to customers all over the world who want to maintain accounts in the U.S, but they do not benefit the US economy nor the US tax base.

losvedir 5y ago

Offtopic, but what's the story on the usage of "hype" like this? I would have said "pretty hyped" but I feel like I've seen it a few times lately without the "d", enough that I no longer think it's just a typo. Is this the kids innovating again?

visualradio 5y ago

We don't actually need a global minimum tax to make the corporate income tax raise more revenue. We just need to only record and recognize conveyance of deeds, titles, patents between domestic residents and domestically chartered corporations and eliminate deductions, depreciation, expensing for intangibles. Federal income tax does not allow depreciation of land, IP and enclosures of ideas should be treated similar to land.

qdog 5y ago
When Apple Argentina sells phones to Apple USA, and Apple Argentina makes profits, while Apple USA always shows a loss, how does this work? Apple Global (which owns both other companies)of course, shows a profit and their stock still goes up.

suifbwish 5y ago

Would it really be that difficult for a big company like Google or Facebook to operate from a fleet of floating data centers in international waters utilizing dedicated satellites for connectivity? If you denounce your citizenship and do not declare a new nationality you are only bound by maritime law.

topicseed 5y ago
In a situation like that, the place if effectice management and/or the central management and control would probably be how the tax residency is decided.
- atatatat 5y ago
  By who?
  - topicseed 5y ago
    By whichever jurisdictions that believe the company owes them taxes.

suifbwish 5y ago

Here’s an idea. How about the government starts creating its own wealth and resources with investments in nationalized factories, farms ect with some of the wealth it has been given instead of relying on parasitically stealing it from the work of its citizens.