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G7: Rich nations back deal to tax multinationals

• orf 5y ago
  Summary: > Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. > Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits. Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition.
  • cblconfederate 5y ago
    This taxes everyone along with the multinationals. The complex deals they do mean they always pay a lot less than the 12.5% or whatever the tax rate is so i don't see how raising it for everyone else will help
    • galangalalgol 5y ago
      A flat tax on business without deduction seems like it would squash smaller players that must devote a larger percentage of their profits to fixed costs.
      • EastSmith 5y ago
        Deduction means hiring people to do your deductions. Flat rate for everyone means less money spent on tax consultants.
        • galangalalgol 5y ago
          I was thinking of either a standard deduction, or a deductionless progressive tax
  • amelius 5y ago
    > Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country?
    • dalbasal 5y ago
      As always with tax, the concepts that we want to discuss are not discreet enough to translate into tax law. Revenue, profit, location and such are arbitrary decisions that can be made by an accountant. Does Apple makes its money in the US, where the company is headquartered and listed? Does it make it in China, where products are manufactured? Does it make it wherever people buy the stuff. Ireland, where the IP is "located." Since corporate tax is an income tax, it's taxed on profit... the not of revenue and expenses. Revenues and expenses are accrued everywhere. The entity booking them is arbitrary.
    • patd 5y ago
      Because in practice if you make 1 million in a country, you’ll claim 1 million in expense in another country (with little to no taxes) for things like IP, trademark, etc.
      • nopassrecover 5y ago
        Restrict expense claims of that nature and/or tax on revenue and minimum expected profit for large companies?
      • jabl 5y ago
        AFAIU proposals for taxing companies wherever they do business rather than where they are headquartered often involve paying MAX(X% of profits, Y% of sales), precisely to avoid these kinds of shenanigans.
      • lixtra 5y ago
        Of course it could be argued that the second company is also making the money in the first country where it’s IP, trademark etc. gets used and has to be taxed there. Tax authorities already try to control for arbitrary cross country bills that try to shift profits (at least in some jurisdictions). The downside is more bureaucracy and unproductive friction of course.
  • Zenst 5y ago
    > Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition. It's a compromise/balance and as we know of many taxes - easier to raise them than to get them inplace too start with. Biggest issue in all this would be that it will need the weight of those supporting it to peer-pressure the other countries to join. So Ireland, Luxenburg and other corporate tax over-friendly countries need to come onboard and that will be easier to achieve with a lower bar of 15% than to go in hard at 28%. Also when negotiating, there are always compromises and by going in high at 28%, left a lot of room to compromise had he gone in at 15% inititialy and with 15%, whilst far from what people demand, it is better than currently and good foundation start. Far more important though is the second aspect: "Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits." That is far more important IMHO as currently see countries seeing their taxes due being off-shored and lost - that in itself is the bigger issue and this addresses that aspect.
    • sumedh 5y ago
      > So Ireland, Luxenburg and other corporate tax over-friendly countries Why cant US pass laws banning companies registered in tax haven countries to operate in the US?
      • treis 5y ago
        That's throwing the baby out with the bath water. Apple has a legitimate need for a subsidiary in countries they operate. What needs to stop is the shenanigans around revenue & costs designed solely to generate profit in low tax countries.
      • gruez 5y ago
        Because that would lead to a trade war?
        • sumedh 5y ago
          Do you really think countries like Ireland, Liechtenstein can afford to piss of US. US has the leverage here, it should use it.
  • hellbannedguy 5y ago
    "Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition." He can always change his mind. Plus--I have a weird feeling Biden would't mind putting off spending trillions on a nebulus bill right now. Of course he won't admit it publically.
  • refurb 5y ago
    This is a terrible idea. This “race to the bottom” is what drives efficiency and better ways of doing things. It’s why we don’t have $10,000 desktops in our homes with 386 processors. If computer chip manufacturers decided to create a floor price for their products that would be collusion and bad for consumers. Same here. It’s bad for citizens of a country. You damn know some developing country is going to be told “nah, sorry, can’t lower your corporate tax rate too low to spur investment, those jobs are staying in developed countries”.
    • CryptoPunk 5y ago
      To add to that, there structural problems with an income tax in general, and a corporate income tax in particular, and there are many arguments for eliminating it altogether, and replacing it with other types of taxes (e.g. a transaction tax, a carbon tax, a land tax, etc). But this locks it in place as a constant for all countries.
    • etherael 5y ago
      This is just G7 isn't it? Seems to me like all the typical very low tax jurisdictions you'd select for as somebody optimizing tax with the freedom to locate wherever you choose are still open.
      • toyg 5y ago
        This is the first step. G7 can then strongarm or cajole their "client states" with coordinated action. Even just the fact that such action is finally happening, is a great step. This was considered a sci-fi scenario 20 or 30 years ago and now it's become reality.
        • etherael 5y ago
          It's one thing to get G7 to agree on something when they're literally in the same club, another to get their client states that might previously have been attractive options like Ireland or Estonia to get on board to some degree. But jurisdictions that are much more independent and less prone to leverage like Georgia or Malaysia on the other hand I just don't see it. And that's before you get off into the weeds of jurisdictions that are more accurately described as oppositional and are raising their own efforts to attract offshore investment which it seems would be even less likely to kiss the ring. It's easy to forget that the legacy brand countries with the extremely high tax rates and absurd conditions like citizenship based taxation in the most abhorrent cases internationally are the exception, not the rule. Their residents with their political biases make up the majority of participants in forums like this, and this contributes to the perception that their regime is enormously more widely adopted than it actually is, but if you look at the actual numbers by the actual areas that's just not the case. And worst case scenario then you have crypto, where it goes from the legally difficult realm into the technically impossible realm. This is just a fight they're guaranteed to lose on a long enough timeline.
  • hliyan 5y ago
    Good. I didn't think such a global minimum was politically possible. There was recently an article on HN where the author claimed that high tax rates don't impact high net worth individuals because they have already made their money. It just makes it harder for others to join the club. Perhaps what we need is a global maximum wealth (rather than income) cap, as a multiple of global median per-capita wealth. Perhaps start with a large multiplier (say 10,000x) and reduce 1% annually?
    • thinkloop 5y ago
      The problem is a wealth tax is almost impossible to implement. People will form crappy charities or put the money in their kids' names or move it to the Caribbean or some other gymnastics that will make worse use of the money overall.
      • bluecalm 5y ago
        There is one asset you can't hide - land. Tax that.
        • a1369209993 5y ago
          I predict your proposal will significantly increase the demand for yachts.
          • sagarm 5y ago
            Yachts are depreciating assets that don't confer the ability to rent-seek. Let them buy yachts.
      • nostrademons 5y ago
        If the wealth tax is uniform it doesn't matter if they put it in crappy charities or their kids names or whatever - the crappy charity or kids will still need to pay the tax. I see bigger problems with evasion and valuation. Evasion can be solved by coupling the wealth tax with enforcement of property rights. You own an offshore bank account, somebody steals from that offshore bank account, you show up in court to prosecute them, and the government says "I'm sorry, we don't have any record of your ownership of this bank account, and you have never paid taxes on it." Oops. Also makes logical sense, as the function of the state is to enforce property rights. Valuation is tricky, as a lot of wealth-producing assets are illiquid and it's hard to pin a specific value on them in the absence of a specific transaction. The way LVTs handle this is through statistics: you know what comparable land sells, you know what improvements are on it, you can run a regression against all the features that impact valuation and subtract them out to get a reasonable estimate of the value of the land itself. Something similar could work for income-producing assets: you know all the cash flows from the asset (because you've been declaring your income, right?), you can do a discounted cash flow analysis that smooths them out and arrives at an estimate of the NPV of the asset under current cash flow & interest rate conditions.
  • slver 5y ago
    > Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition. 28% is a ridiculous minimum to try and impose on the ENTIRE WORLD. You have to be quite clueless about taxation worldwide to think this has a snowflake in hell chance of passing at all. "Domestic opposition" is not a factor at all.
  • dtwest 5y ago
    "It’s a shame that Biden had to back down from the initial 28% because of domestic opposition." You are misrepresenting the situation. A 28% global minimum was never on the table. 28% was Biden's proposed domestic rate (which to your point, he is backing down from). But these are two separate rates so we should be clear what we are discussing here.
  • dd36 5y ago
    It’s odd that they aren’t already paying taxes where goods are sold.
    • deleted 5y ago
      [deleted]
    • jpadkins 5y ago
      The argument is a tax on revenue is very unfair to low margin business like retail or farming, so corp. tax is usually on profits. Which creates the loophole of where are the profits recognized.
    • teddyh 5y ago
      IIUC, they are paying taxes on goods sold, but those taxes are then offset by “losses” which they incur by “buying”, say, IP licenses, from their sister company. This sister company get record profits, but this company is then located in a tax haven, and pays no taxes on these profits.
  • andy_ppp 5y ago
    Biden has been consistently good at this, going in with a crazy bold position and letting people argue him down to somewhere that would probably be his real position in the first place.
    • toyg 5y ago
      Veteran politician can do politics, who knew! /s It's about time people started to elect leaders who can get shit done in the frameworks that exist to get shit done, instead of trying (and failing) to destroy such frameworks.
    • hosker4u 5y ago
      This was all pre-biden, just could not go forward with Trump. With Biden it was possible again. Give him credit for agreeing. Don't give him credit for creating.
  • lanevorockz 5y ago
    More taxes is always good, can’t wait for 100% taxes so I can use my gucci bag voucher while playing ps5 at home
    • throwkeep 5y ago
      The absurdity of this comment is actually useful because it forces you to question how much is too much.
    • Tostino 5y ago
      What a reductionist view of things. No one serious is arguing for that.
      • cal5k 5y ago
        Top marginal income tax rates in many countries now exceed 50%, not even considering payroll tax, property tax, sales tax, etc. The question is: how can anyone seriously support tax rates that high? After a certain level, more than half your time is spent working for the government - failure to pay means fines and possible jail time. This is serfdom. Higher corporate tax rates should not be applauded by anyone. Higher corporate tax rates invariably increase cost of living because companies can simply raise prices to compensate. If all of your competitors have to pay the same (higher) tax rates as you, the correct game theoretic move is for everyone to simply bake the higher tax rates into the price of their products/services. Almost all forms of taxation ultimately impact the middle class in one way or another, either directly or indirectly. So while nobody is "seriously arguing" for, say, a 70% top marginal tax rate, it's easy to get there when you actually look at the entire tax burden across all levels of government, including price increases caused by higher tax rates.
        • marcosdumay 5y ago
          > Top marginal income tax rates in many countries now exceed 50% You mean, for people right? I have never heard about any place that taxes anywhere near 50% of a corporation revenue, but yeah, it's not rare to find places that tax more than 50% of a worker's income (all taxes in, if you are talking exclusively about income tax, I never heard about it either). Why do corporations need lower taxes than individuals?
  • walshemj 5y ago
    nah Biden wanted other countries to raise the rate but wasn't going to address US companies moving revenue from country a to country b.
    • hosker4u 5y ago
      UK was the holdout that forced this Two Pilar compromise.
  • dalbasal 5y ago
    The actual rate is the least important part. What is important is jurisdictional issues, accounting standards, corporate law, deferral rules and the like. This is the problem with corporation tax generally. You can't really have a conversation about it in "normal" terms, that a journalist, politician or MOP can understand. It can only be understood via scenario plans and spreadsheets. It's a million little details. There is no "big picture."
    • Ericson2314 5y ago
      And furthermore, I'd say however they harmonize the taxation shouldn't even matter, because the the G7 countries (or at least the euro ones acting zone wide) have no structural constraints preventing the money printer. The real important thing here is establishing the importance in preventing the race-to-the-bottom, so more important things like multinational carbon taxes, developing country capital controls, etc. are newly inside the Overton Window.
      • dalbasal 5y ago
        IDK what you mean by "constraints preventing the money printer," but in the eurozone we have the opposite problem. Only the ECB can "print" money, or rather, only the ECB can create primary loans to national governments. National banks can't. In practice, expanding national debt requires eurozone-wide unanimity. Ask Greece.
        • a1369209993 5y ago
          > Only the ECB can "print" money > expanding national debt I feel the need to point out that currency debasement is a fundamentally different thing from taking out loans/issuing bonds/other debt. If anything, currency debasement reduces national debt in real terms, by devaluing the currency it's denominated in. I'm not especially clear on the situation, but I was under the impression that Greece's problem was that noone was willing to lend them money due to a expectation that they wouldn't be paying it back, not that they were prohibited from borrowing by EU law, but even that would be a different thing from being prohibited from printing money.
  • sneak 5y ago
    > Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition. This presupposes that maximizing revenue to the state is itself beneficial.
  • phkahler 5y ago
    Similar could be achieved by taxing locally and also having import/export taxes. Other options exist too, but they're aiming for global control.
    • starkd 5y ago
      Agreed. You have to wonder how establishing a global minimum lessens or even removes the incentive to make local government more efficient. It may even establish an acceptable level of grift.
  • crisdux 5y ago
    This is currently the top comment and it includes obvious misinformation. 28% was never proposed by the Biden administration for the global minimum tax.
  • papito 5y ago
    15% is a more reasonable minimum tax rate if there is a guarantee this is a loophole-proof, concrete floor rate. 28% would probably never fly without loopholes that would bring the effective rate to 15% anyway.
  • smnrchrds 5y ago
    Canada's corporate tax rate is 15%. Canada would have never agreed to double its tax rate overnight.
  • Hermel 5y ago
    I agree with the minimum tax rate. But I think the criterion for taxing profits should not be where the products are sold (for that, we have the sales tax or the VAT). The right criterion is where the value is created, which is usually the country where the most expenses/employees are. For example, if an Australian mining company digs up iron ore and sells it to China, it would seem unnatural to tax the company's profits in China. Of course, China might impose tariffs or a sales tax, but the profits should be taxed in Australia. A strange side effect of this would be that the law of one price on international markets would no longer hold. Imagine you manufactured a product for 10$ that you could either sell for 50$ in a country with a low profit tax of 15% or for 60$ in a country with a profit tax of 40%. Then the rational choice would be to sell it for 50$ in the low-tax country, because after taxes, you still get 44$, whereas in the high-tax country, you would only get 40$ after taxes. Consequently, a destination-dependent profit tax will lead to lower prices for consumers in low-tax countries and higher prices for consumers in high-tax countries, essentially making the consumers pay for it just like with a sales tax or VAT.
    • skeletal88 5y ago
      Then the effect would be that all the taxes on facebook, google etc go to the US, not in the countries where they earn the money. The problem exist for example with internet advertising - the local agencies are all doing badly, advertising has moved to the internet - to google and facebook, so they receive most of the money that otherwise would be spent on local radio, print and tv advertisements, the local ad agencies organizing that would pay taxes in our country but now all the money and the taxes leave our countries and we get nothing - no taxes, and no money spent locally. this is what all the countries except the US want to avoid.
      • varispeed 5y ago
        The Facebook value is created in the countries they operate through the data they harvest. The work is done by people who use this service. Any Ad revenue that used targeting in the UK should be taxed in the UK. Simple as that. Unfortunately HMRC is only strong towards individuals. They wouldn't dare to go after company like Facebook. Even if they did, I am sure, given how little inspectors earn, they'd happily accept an offshore bearer account and quit.
• the-dude 5y ago
  The cynic in me thinks this is primarily good for the Rich nations (G7), otherwise they would not have closed the deal. Somehow, this deal will be used to keep unincumbents out.
  • ggm 5y ago
    I'd ask some economists if thus is net negative or net positive for developing economies. If the principle is you pay tax in the economy you supply service, then a lot of service is supplied over mobile devices to emerging economies. Maybe their tax revenues will rise?
    • the-dude 5y ago
      Ah, economists, those who pretend to know things.
      • thrill 5y ago
        Ah, government, those who don't even pretend.
    • csomar 5y ago
      Net negative. This will put additional burden on small exporters who can't manage the ever-increasing bureaucracies linked to foreign exports.
    • neilwilson 5y ago
      Only if they peg their currency to the dollar or each other: If they don’t then tax revenue has little to do with the rate of tax and more to do with the level of saving. And nothing at all to do with the capacity of the nation to provide public services - which is more to do with its overall productivity level and power structure. Economists struggle with how money actually works let alone the function of taxation and its incidence.
    • sbacic 5y ago
      > Maybe their tax revenues will rise? I think it will depend on whether these services will even _be_ supplied there. More likely than not, companies will just pass over the opportunity to provide services to smaller and poorer countries due to higher fixed costs of doing business there offsetting the benefit of low per-unit costs inherent to digital services.
• bodono 5y ago
  The US tax code is absolutely riddled with tax loopholes. Many of these loopholes were designed to act as an incentive, such as tax breaks for hiring former felons, building factories in certain locations, investing in R&D etc etc. Major corporations often pay far lower than the US corporate tax rate precisely because they respond to these tax incentives (and sometimes abuse them, but that's a different story). Does this deal mean that the US will close these loopholes? If so, then 'rich nations' have lost a major tool for creating desired outcomes. If not, then how can this deal prevent other countries just offering whatever loopholes they want that reduce the effective tax rate below the minimum?
  • gostsamo 5y ago
    This is a minimum with the corporate tax rate in the US being above that. Therefore, the difference between them minimum and the official value is the incentives margin that the government can use to nudge corporations in the desired direction.
    • bodono 5y ago
      Yes I understand that, but I believe that many corporations today pay even lower than a 15% effective tax rate. I suppose you're saying that these loopholes will be closed up to that minimum?
      • nomoreplease 5y ago
        Depends what you mean by loop holes. In the US, you can deduct R&D or capital costs like building a factory. That can make your tax bill nearly zero. I wouldn’t call that a loop hope. It’s something out there to incentivize capital spending and job creation. Other countries have the same
        • bodono 5y ago
          Right, so the question is will those 'deductions' still be allowed or not? If so, then get ready for endless deductions from countries that want lower tax rates than 15%.
• Proven 5y ago
  Sight, those socialist thugs... All of them are above the minimum, so what does that really achieve? Message for the central planners: you can't tax me anything if I don't work. Or if I work but not here. And let's not forget that involuntary taxation is theft.
  • dgb23 5y ago
    The massive infrastructure and education is free then?
    • logicchains 5y ago
      If you actually looked at any western country's budget, you'd see the vast mmajority of tax revenue is spent on welfare (and in the US case, warfare); only a miniscule amount is spent on infrastucture. Singapore for instance has way better education outcomes and infrastructure than most western countries in spirte of way lower taxes.
      • aero-glide2 5y ago
        Even in US, they spend more on welfare than warfare. https://en.wikipedia.org/wiki/United_States_federal_budget#/media/File:2020_US_Federal_Budget_Infographic.png https://en.wikipedia.org/wiki/United_States_federal_budget#/...
      • mnouquet 5y ago
        > you'd see the vast mmajority of tax revenue is spent on welfare By "welfare", I guess you meant the sponsoring of useless administrative job meant to ensure easy mechanical turk work to appease the masses. The money actually going for care is pretty minimal.
        • StandardFuture 5y ago
          > The money actually going for care is pretty minimal. That is literally the point. Welfare = Welfare bureaucracy + Welfare Benefits This is true of everything the government does. Government = bureaucracy + benefits, with a larger percentage going to support the bureaucracy than in any other organization or context. And even if you increase money for benefits, the same (or sometimes larger percentage) goes to supporting the bureaucracy of those benefits. It's not hard.
• greenwich26 5y ago
  Why are governments allowed to collude like this? Isn't this the same idea as price fixing? Exploiting their monopoly (governments' monopoly on the right to do commerce) to unfairly raise prices (taxes)? The world needs at least somewhere where you can opt-out from Western neoliberalism and socialism.
  • trainsplanes 5y ago
    There are some countries that you can move to that are generally free of the laws of western nations. For some reason, people from “western neoliberal and socialist” countries generally don’t move to them, though.
    • Chris2048 5y ago
      Because if they did, bombs would soon fall in order to destabilise that threat.
      • lixtra 5y ago
        I have difficulties to come up with current examples. Maybe some could argue that pre Soviet Afghanistan (in the ‘60) was such a place. But today?
        • Chris2048 5y ago
          Its similarly difficult to find examples of competent propaganda ; because anything easily labeled propaganda is not competent. Scientific and logical principles of "evidence" to not apply to human political systems, b/c the method of inquiry are too compromised by the power the system wields over them. Even information about Afghanistan comes through via the government. But today? There is us nothing modern the government wants you to know about.
    • greenwich26 5y ago
      On the contrary, those countries are extremely popular places to base your business activities or start a company or manage your finances from. Ever been to Bermuda? Or the Virgin Islands? You can't move for wealthy industrious Western expats and their business ventures. And also to a lesser extent Ireland, the Luxembourg, Singapore, Switzerland, etc. These are all some of the most popular countries to move to in the world. But now the United States and Canada and whoever else is the G7 are trying to shut them down and force everyone to follow their hellish tax laws.
• joelbondurant 5y ago
  Slavery is on.
• tonyedgecombe 5y ago
  The deal - from the US, UK, France, Germany, Canada, Italy and Japan - will put pressure on other countries to follow suit, including at a meeting of the G20 next month. I can imagine what those other nations responses will be.
  • peteretep 5y ago
    Short-term whining from Ireland and Hungary, big words and little action from the true tax havens, and everyone else should be pretty happy with it?
• workallday21 5y ago
  In other words, US is the #1 backer if imaginary assets which are also the best trick used by major multinationals to shift their tax burden. In order to solve this problem US does not get rid of imaginary assets but raises the tax on the world. Sure, so the competitive advantage of poor countries will be what -- low wages? This is nothing more than ladder pulling.
  • csomar 5y ago
    It could be worse. If these doesn't exclude small time exporters, and they need to report to foreign tax bureaus; I can see them having trouble doing any exports or having to go through intermediaries who will make additional charges.
• jessecurry 5y ago
  If private companies did something like this it would be called price-fixing and they would be prosecuted.
  • the-dude 5y ago
    If private companies would start to imprison shoplifters, it would be illegal and they would be prosecuted. A private company is not government and government is not a private company. What is your point exactly?
    • ourmandave 5y ago
      https://www.wikihow.com/Legally-Detain-a-Shoplifter https://www.wikihow.com/Legally-Detain-a-Shoplifter
      • the-dude 5y ago
        That is why I said imprison. Even if the state does it in NL, there is a difference between imprisonment and detainment. They are even physically different : they are different buildings.
• peteretep 5y ago
  Irish are gonna be pissed. Also and not ironically, what a huge win for the workers over capital.
  • loxs 5y ago
    Such a huge win, now poorer countries will get even poorer.
    • peteretep 5y ago
      I think you are misinformed about the level of corp tax in most poor countries. Twenty countries have corp tax less than 15%, of which about half are poor. 15 have no corporate tax and are either rich or are just unambiguous tax havens. Average corp tax in Africa and South America is 28%, Europe and Asia are 20%. https://taxfoundation.org/publications/corporate-tax-rates-around-the-world/ https://taxfoundation.org/publications/corporate-tax-rates-a...
      • loxs 5y ago
        Most of these are poorer than G7 (and especially the US who is the main beneficiary), so my statement is 100% correct. I didn't say that all poorer countries will get poorer by this specific action. There are many other actions to make everyone poorer than the US.
        • peteretep 5y ago
          What’s the mechanism by which poor countries will get even poorer exactly here?
          • loxs 5y ago
            Less companies will be formed there if they don't have a tax advantage.
            • peteretep 5y ago
• ajkdhcb2 5y ago
  A few countries agreeing on a global law. Sounds to me like "USA and UK agree that China should do X". Good luck enforcing it and closing all loopholes when there are powerful people that don't want that. Empty political talk to make it look like they are trying
  • peteretep 5y ago
    China’s tax rate is considerably higher than 15% and they also don’t want their industries to be competing against companies who are cheating the tax man.
    • ajkdhcb2 5y ago
      I just wanted to show how silly is sounds that some ally countries think they can enforce actions on other countries
      • seoaeu 5y ago
        Isn't the literal definition of 'allies' a group of countries which pool their military resources to compel other countries to act how they want? I don't see the contradiction
      • Schlaefer 5y ago
        This happens all the time, see e.g.: https://en.wikipedia.org/wiki/Brussels_effect https://en.wikipedia.org/wiki/Brussels_effect Of course you're free to ignore it, if you don't care about hundreds of million potential customers.
        • ajkdhcb2 5y ago
          It links to the opposing effect too: https://en.wikipedia.org/wiki/Race_to_the_bottom https://en.wikipedia.org/wiki/Race_to_the_bottom So it isn't that simple when it is something like this. So far history shows that tax havens work and the loop-holes are very challenging to close.
• throwaway13337 5y ago
  This sounds like it will be hell for small software companies with customers all over the world. Paying taxes differently for each country of the customer you sell to is a ridiculous hardship. It only benefits the large multinationals to reduce their competition. These sorts of rules centralize markets to fewer and fewer companies able to spend the resources to fulfill more and more complex rules. The end result is higher prices and lower innovation for consumers. While employment gets centralized to slow-moving, inefficient, but compliant companies. It's a real shame that legislation is actively trying to make it harder to do business as a small entity. Functioning governments should have it very high on their list of priorities to do the opposite.
  • dalbasal 5y ago
    It's neither here nor there, for that. If you are a simple, single entity, your income tax is calculated there. It's hard to say what if anything will actually come of this. Tax legislation has a tendency to hide the main point. But currently, small businesses disadvantaged by the things this legislation ostensibly wants to curb. Multinationals have the resources and complexity to avoid tax entirely. It's usually just sole traders that pay full income tax.
    • fighterpilot 5y ago
      So if someone has a small company in Bermuda with 10 employees and they serve US customers primarily, will they be impacted by this?
      • dalbasal 5y ago
        There isn't a public "this" yet, so IDK. Also, Bermuda is unlikely to agree to this. It sounds like the primary purpose here is residency definitions, which could mean that the US would be obligated or entitled to consider the Bermuda company american for tax purposes. IRL, that Bermuda company is likely to be a shell company, receiving payment from a single client (EG msft) so that the parent company can book it as an expense. That said, it's pretty much impossible to say anything at all before details go live, and accountants have had time to chew on it. Tax rules are all detail. Headlines really do mean nothing. "Where they do business" could mean a lot of things. Sales. employees, manufacturing, financing/listing. Corporate income tax is applied to the net of revenues and expenses. Some of the language in other statements seems to suggest there will be some sort of a quota system. MSFT will be defined as x% american, y% Bermudan, etc. This is pure speculation though.
• decasteve 5y ago
  It would be nice to see some analysis. This is just a write-up of the G7 talking points.
• dgan 5y ago
  Interesting left to see how it will be enforced. Definitely a step in the right direction
• lbriner 5y ago
  The G7 won't be able to make a decision on behalf of the world! Why do companies already register their ships in Panama or hide their money in the Cayman islands? (Other havens are available) Because these countries have decided they would rather have the income than agree that what they are doing is somewhere between morally dubious and completely ammoral. It is easy to point the finger though, some of these places probably don't have many other ways of making money...
  • ko27 5y ago
    Read the article again. G7 countries will collect tax difference that international companies avoided paying in tax heavens. Thus deincentivising companies from even doing buisness there.
  • fabbari 5y ago
    Yes, they will - as they did with Swiss bank secrecy [0]. It's actually quite simple: if you want to do business with the G7 countries - with close to 40% of the world economy [1] - you follow their rules. While 60% is a lot, it's a much different blend of markets to work with - hundreds of other countries, legislations, etc. - and it would be a much larger effort to cover. So: wether I like it or not the truth is: if the G7 countries agree on something, other countries will follow. [0] https://www.reuters.com/article/us-swiss-secrecy-idUSKCN1MF13O https://www.reuters.com/article/us-swiss-secrecy-idUSKCN1MF1... [1] https://www.nationmaster.com/country-info/groups/Group-of-7-countries-(G7) https://www.nationmaster.com/country-info/groups/Group-of-7-...
• BlackVanilla 5y ago
  This is a G7 agreement, so it seems the success of the policy will depend how much sway this will have with G20 countries. If it doesn't get the G20's agreement, what stops multinationals from simply domiciling themselves in another country like South Korea or Australia? It's currently done in Ireland, so this isn't a big jump. Also, there are countries that are not in the G20 that could quite easily undercut an agreement, notably, Switzerland. It already acts as a tax haven for personal income (and corporate income), so an expansion of this haven seems forseeable. Despite this, I don't think this is a reason to not act. There will be reasons why multinationals will not want to be domiciled in Switzerland.
  • ko27 5y ago
    It doesn't matter where they are "domiciling themselves". If the company is international and does buisness in any of the G7 countries, than those countries will collect the tax difference between 15% and whatever they are paying in Switzerland.
• odiroot 5y ago
  Can someone rain on my parade and explain how is it not going to work?
  • Pelam 5y ago
    Seems that most comments here are negative on the prospects of this. Almost as if they want things like this to fail, but of course it can also be seen as valid and informed critical thinking. Regardless, in my book this is at least a mildly positive bit of news even if the road to implementation will be long and difficult. Obviously, while no law can be enforced to 100% or be free of loop holes that is not a strong argument to be dismissive of the rule of law, international treaties or democratic or other political processes.
• throwaway4good 5y ago
  But will it actually work? Let’s see if Apple Microsoft Google etc drop 15% when the market opens on Monday.
• sagarkava 5y ago
  I'd ask some economists if thus is net negative or net positive for developing economies.
• nickpp 5y ago
  So the largest violence monopolists in the world are using the unique opportunity handed to them by the pandemic to create a cartel with two purposes: - raise the protection tax they levy on their subjects - prevent smaller violence monopolists from undercutting their protection fees through competition Basically governments deciding competition is not good for them and everyone should just pay up.
  • miohtama 5y ago
    It's good if all competition can be taxed equal. Small biz cannot compete against Amazon that pays 0% tax in their international arrangements.
    • nickpp 5y ago
      Small biz can use their creativity to find other ways of competing, not just price. Support for example, which Amazon is atrocious for. We cannot held consumers hostage for the good of the "small biz".
    • mnouquet 5y ago
      "Small business" are just the "think of the children" or "9/11" argument to justify money grab. True motive is simply to siphon more money to the ruling western elites.
  • grey-area 5y ago
    This is all true, but I think I marginally prefer the dominion of politicians I can vote for to the feudal structure of multinational corporations, which we have even less power over.
    • nickpp 5y ago
      There are 3 ways to vote in a corporation: - with your wallet: buy or not buy from them - with your broker: invest (and then literally vote from the inside) or not in them - with your feet: work or not for them Corporate interests are directly aligned with us exactly because without these votes they are finished. That is why corporates try to create products clients want, profit investors want and salaries workers want. On top of that, social responsibility programs to keep everyone happy and pay their taxes. There is only one way to vote when it for politicians: with your feet. And they don't care since they win by getting votes and they get votes by spending money which is taken from us. They have no interest aligned to ours. That is why I much prefer the dominions of corporations.
• CryptoPunk 5y ago
  This reminds me of when the G7 political elite got together in 1990 and created FATF, to institute a financial warrantless mass-surveillance system, euphemistically called an anti-money laundering system, and nearly every government in the world soon signed up, despite it turning out to be one of the least effective policy experiments in history: https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1725366 https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...
• diamondhandle 5y ago
  Will rich nations back a deal to tax multinational citizens? This is one area where America has a secret lead for both foreigners and ultra-rich citizens. Checkout GRATs and Opportunity Zones if you want to daydream about how to pay near-nothing in taxes as an American sitting on a massive windfall. And then there’s all of the things you can do inside of an insurance policy.
• hemantv 5y ago
  This feels like US wants to keep competition out from creating big companies. Very similar to feeling to how wealthy wants higher income taxes (not wealth taxes) when they have all the money the need. To maintain status quo. Seems like US enjoyed with this arrangement by creating very large companies (monopolies) worldwide, now they want to keep US world order intact. Good for world, China wouldn't play balls with this. Bad for Europe since they have ever smaller shrinking big companies.
  • M2Ys4U 5y ago
    This is good news for countries where US companies are active, but use creative accounting to move their profits out of those countries.
  • ffggvv 5y ago
    pretty sure google and facebook would be just as big even if they didn’t dodge taxes. especially as they were already sizable before they started doing it. it’s mostly to disincentivize all this creative accounting
• cletus 5y ago
  The first proposal of having a minimum corporate tax rate probably doesn't mean a lot because you to then start policing what subsidies governments give to effectively discount below 15%. The more interesting part is what I hope is the start of serious efforts to tackle profit-shifting, which is a name invented for "transfer pricing" because that is technically illegal. But it's the same thing. A good starting point is that if you book x% of your revenue in country A then country A should get to tax x% of your profit. Here's another part of this they should adopt: borrowing money should count as repatriating profits. In the era of zero interest rates debt is used to effectively defer taxes forever. There's no legitimate reason to allow entities to borrow money at near-zero interest rates instead of repatriating retained earnings.
  • einpoklum 5y ago
    While it's true that corporate influence over governments may result in subsidies to effectively give a discount - it is less likely than you describe, because the taxation is international. To illustrate why that is, think about a state like Ireland. So far, Ireland has gotten corporations to be HQ'ed there, or pay taxes there, because the tax rate is only 12.5%. The detriment for Ireland has been minimal, if any, from that corporate presence. It _could_ have gotten more but that's just theoretical. If this goes into effect, then a corporation will no longer benefit as much from being Ireland-based: It will pay 12.5% corporate income tax annually, but will pay extra in other countries it's active in. Who's going to subsidize the extra 2.5%? Ireland? Technically possible, but it's unlikely for Irish politicians to subsidize the taxes a private corporation pays _elsewhere_. Showering a corporation with money to that extent requires corruption on a whole new level.
    • atopuzov 5y ago
      It's not like MNCs in Ireland actually pay any tax anyway (various loopholes and agreements provided by the Irish government). To quote from [1] "the revelations shone a fresh spotlight on Irish tax policy that “has been designed precisely to facilitate this kind of avoidance”." [1] https://www.theguardian.com/world/2021/jun/03/microsoft-irish-subsidiary-paid-zero-corporate-tax-on-220bn-profit-last-year https://www.theguardian.com/world/2021/jun/03/microsoft-iris...
• whatever1 5y ago
  The problem with businesses is that they hide systematically profits. The big ones are shifting their profits globally. The small ones never register profits (claiming they always operate at a loss, specially if they operate with mostly cash and not credit cards). And in business, it is easier to hide your profits because you can shift around money to assets (this ferrari and the Manhattan condo are company owned), compensation (my CEO will get a 1000% raise this year), liabilities (paid off that huge loan we got to buy the lambo) etc. The problem cannot be solved unfortunately. There are crude methods like estimating profits from revenues, but really, this has never worked.
  • saddlerustle 5y ago
    Companies shifting profits to compensation is better for states than booking corporate profits, because income is taxed at a higher rate.
    • whatever1 5y ago
      It depends. In my country there are examples of employers who were paying extra their employees (who were not taxed due to their pity salaries) and were requiring them to return part of their salary as cash.
      • anticensor 5y ago
        > requiring them to return part of their salary as cash. I thought that was illegal.
• jokoon 5y ago
  I already said that the pandemic would force the entire world to lean to the left in terms of politics. It's inevitable. I'm very happy about that decision, but I'm not really confident it will lead to something. I'm also a bit cynic that it took a pandemic to make countries realize they need money. I'm also waiting to see if government are really planning to fight against tax havens. The problem is that it's impossible to protest against those small Island tax havens because they're just too far away. Maybe protesters could block flights or boats that go to those tax havens?
  • runarberg 5y ago
    If the tax havens are democratic (and most are) then government boycotts + divestment + sanctions could go a long way. Imagine being a panama citizen, your government is hellbent on protecting foreign billionaires from paying taxes in their home country. Now the Panama Canal is seeing only 50% of the traffic with resulting job-loss, the national team is no longer allowed to play in Copa America, and your countrymen have to play under a different flag if they go to the Olympics. And all because of a government policy you don’t agree with. You will probably factor that in when you decide who you will vote for in the next election.
    • toyg 5y ago
      Panama is probably the one country that could hold it out - retaliation on the Canal would escalate matters to a point where rich countries have to choose between a dangerous military occupation or sitting at the table with the local government. But yes, isolation of countries like Bermuda and Cayman Islands could achieve a lot very quickly. To be brutally honest, the UK government could shut down most of them tomorrow, if they wanted to; but they have a few incentives to do only just enough to appear like they want to, without actually doing so (going from nefarious "their own moneyed citizens want to keep money flowing" to relatively innocent "they risk losing whatever little formal power they still have on former colonies that they can't directly occupy anymore").
      • runarberg 5y ago
• seaourfreed 5y ago
  Finally a politician (Joe Biden) is fixing one of the major area of the rigged economy. If workers auto-deposited their paycheck overseas and didn't pay taxes, they would be in jail. If small businesses did fraud that their profits were over seas, they would be in jail. Our politicians have been selling us out, as big corporations did this. Big corporations are doing fraud at saying their profits are happening in these other countries. Hopefully Joe Biden can actually fix this. Big corporations will fight him hard.
  • hosker4u 5y ago
    Biden did not invent this. Its been in the works for years pushed by other countries. USA just agreed or some will say conceded.
• rjknight 5y ago
  I do wonder if we wouldn't be better off eliminating corporation tax entirely. The revenue of a corporation can, roughly, be: 1. Spent on goods or services from another company (including freelancers, contractors, etc.) 2. Spent on rent 3. Spent on capital purchases 4. Spent on wages 5. Spent on debt repayment or other forms of financing 6. Paid out in dividends 7. Spent on share buybacks 8. Invested in something else Items 1-5 are all good things that we want companies to do, and corporation tax is normally applied after this spending is accounted for. Items 6 and 7 ought to be taxed, and frequently are (dividends and buybacks create income for individuals who will pay tax on that income). Item 8 is a bit vaguer, but probably shouldn't be taxed in most cases (if we're worried about companies parking cash in very low-risk assets, then super-low yields are effectively a tax on that anyway). All that the corporation tax adds to this picture is the creation of work in tax avoidance services, and an unjust inequality between those firms that can afford those services and are structured to take advantage of the rules, and those that can not and are not. It's not obvious to me that corporation tax /can/ be fixed, and so it may be better simply to scrap it and replace it with something more difficult to dodge. EDIT: formatting
  • ffggvv 5y ago
    i really don’t get why people get upset over share buybacks but not dividends. they’re literally the same thing. as a stock holder there’s no difference between the stock going up 10 cents from a buyback versus me getting a 10 cent dividend. other than the fact that i can have more control as a shareholder in the buy back
    • dvainsencher 5y ago
      FTFY: "they're _almost_ the same thing." Dividends lower stock price by moving cash from company to owner, buybacks increase stock prices[1] by de-diluting, so only one of those is evidence of the CEO (whose compensation is often tied to stock price) acting on his own interests. Also taxation is different. [1] https://www.investopedia.com/articles/active-trading/073015/dividend-versus-buyback-which-better.asp https://www.investopedia.com/articles/active-trading/073015/...
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• jakozaur 5y ago
  Essentially countries are forming a cartel to set bottom income tax. Forming cartels by private companies to „fix” prices is illegal, but countries are free to do it. However, the actual mechanics of that tax is hard: 1. Countries can still do subsidies, but avoid touching income tax. 2. Taxing by income where revenue is generated is hard to compute. It would make sense to enforce it only on big multinationals. E.g. Big tech pay income taxes proportional to revenue from different countrues or/and where they employees are located. 3. Looking at statistics the ideal income tax floor should be around 19%.
  • nickflood 5y ago
    Countries are supposed to in the end benefit people who live in those countries. There are many things that countries do that private companies can't, like jail people without their consent, for example.
  • Fordec 5y ago
    On point 1., EU countries can't do state subsidies. It's illegal under Single Market rules. It was one of the arguments for Brexit that if they leave they can engage in state subsidies again.
• boublepop 5y ago
  Putting the safety nets in place so the nations can gear up against corporations when time comes due to reap back everything that has been poured int the economy during the pandemic. Your can’t really raise interest rates and taxes if corporations will just move to Ireland. And you can’t fault Ireland for accepting them with open armes in times when they need money.
• MichaelMoser123 5y ago
  which of the FANG companies is going to take the biggest losses? They all seem to be very good at dodging taxes, but are there any differences between them?
• allengeorge 5y ago
  “The rules on making multinationals pay taxes where they operate - known as "pillar one" of the agreement - would apply to global companies with at least a 10% profit margin. Twenty percent of any profit above that would be reallocated and taxed in the countries where they operate, according to the G7 communiqué.” How will taxing authorities determine which companies meet the 10% profit margin threshold? Which jurisdiction is this threshold calculated in for multinationals?
  • toyg 5y ago
    These are details that inevitably will be hammered out in the following months. In the end, most of these companies are public, their profit margins are already disclosed.
• abc03 5y ago
  As there are some misinformation and confusion, I try to summarize a few points: What is it: Pillar 1 tries to tax the digital economy (FAANG etc., scope still under heavy discussion). The goal is to prevent a digital tax in each country. Basically, the profit will be taxed in market states (i.e. Google pays tax in Germany). Pillar 2 tries to impose a global minimum tax rate. Countries levy a top-up tax on the foreign operations of their headquarter companies (i.e. difference between minimum global tax rate and effective tax rate) Who will be affected: This is different for Pillar 1 and Pillar 2 but both only want to tax multinational corporations defined for example by sales (> EUR 750 m turnover for pillar 2) and only if you have some minimum foreign operations. So your typical small company is not affected at all. What's so genius about this project: The OECD is very worried that there are still some loopholes, so they want to close them. They do it by basing the effective rate on IFRS income (or US GAAP) with some adjustments. IFRS income is also the basis they report to shareholders, so companies have a problem: Higher IFRS -> more taxes to pay How do the countries ensure that all countries participate: You don't have to impose a global minimu rate. If one country doesn't do it, other countries can levy the top-up tax through a different system (undertaxed payments rule for those who want to look it up). What's the position of the Biden Administration: The USA has their own system called GILTI which is accepted as well. It looks like the USA gets away again by participating but in the end, they will decide we won't follow the rules. Is this fair? Opinions differ. Why should highly developed economies like Ireland, Switzerland, Singapore not be able to set their own tax rates. They invest a lot in the education of their people. And if you think tax is fair, you don't know life. What countries will do is increase tax on profit but decrease other "taxes" (i.e. price on mining rights, social contributions etc.). If you have questions, AMA. I devote a large part of my life on this project.
• konart 5y ago
  More taxes = higher prices. In the end buyer is the one who will be charged. +50$ for an iPhone in the US, +50€ in EU and +5000₽ in Russia. People in rich nations will spend proportionally less than people in poor ones obviously. (no serious analytics, just thoughts)
  • dane-pgp 5y ago
    If we're being simplistic, then I could just as well say: More corporation taxes = lower income taxes A citizen should be happy that their government is seeking a greater share of its tax revenue from corporations, especially foreign-owned corporations, because it is easier for the citizen to avoid buying an iPhone than to avoid earning income.
    • konart 5y ago
      >More corporation taxes = lower income taxes Not in my country though. Why not raise both and steal some money?
  • jasondigitized 5y ago
    Raise prices all you want. The invisible hand will figure out what people value and what they don't and supply and demand will adjust accordingly. "Your margin is my opportunity."
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• EMM_386 5y ago
  This is absolutely necessary. Think about this Microsoft Irish subsidiary that "made" $200 billion with ZERO EMPLOYEES. Not even a single person to go buy a sandwich at lunch and "help the local economy". Nobody. The only beneficiary is Microsoft because nobody gets any tax revenue. And Microsoft can just hoard cash, it's not like they are going to rain it down to everyone's paycheck. This is a global problem, it requires a global solution. As much as that answer is anathema to some, it seems necessary here.
  • flavius29663 5y ago
    they do have some employees - the directors > Microsoft Round Island One, the registered address of which is at an office of the law firm Matheson in Dublin, states in its accounts that it has “no employees other than the directors”. https://www.theguardian.com/world/2021/jun/03/microsoft-irish-subsidiary-paid-zero-corporate-tax-on-220bn-profit-last-year https://www.theguardian.com/world/2021/jun/03/microsoft-iris... What the Guardian is not saying (but I am not surprised, since it's a rag) is that MS has a huge presence in Ireland, in a different company, probably. Ireland has been MS base in Europe for decades, they have 2000 employees there, and it's where Azure had it's first European data center. I know because I applied to them back in the day, and my company had a one day outage in 2011 because of a lighting strike to the data center... MS should pay a minimum of 5-10% of those money in taxes, where they are produced, for sure. But let's get our facts straight, so we have a better voice when we say this.
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• antattack 5y ago
  "The rules on making multinationals pay taxes where they operate - known as "pillar one" of the agreement - would apply to global companies with at least a 10% profit margin. " Tying tax rate to profit margin sounds like a loophole. For example - Hollywood Accounting[1] [1]https://en.wikipedia.org/wiki/Hollywood_accounting https://en.wikipedia.org/wiki/Hollywood_accounting
  • unreal37 5y ago
    Amazon ran at almost 0 profit for years, but then they ran out of ways to make the money disappear. Still, this would catch them.
    • bpodgursky 5y ago
      In 2020 Amazon had revenue of $386 billion and profit of $21.33 billion, so no it would not. That's far under 10% (as expected for a retail seller).
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• gok 5y ago
  > It was reported this week that an Irish subsidiary of Microsoft had paid zero corporation tax on $315bn (£222bn) profit last year because it was resident in Bermuda for tax purposes. This seems wrong. Microsoft didn't even have that much revenue globally last year ($143b) let alone profit ($53b)
• johnminter 5y ago
  I suspect that here in the US it will require a vote by the Congress.
• dmje 5y ago
  There was a time that companies paid back into their local communities, funding schools and parks and infrastructure. It was normal until relatively recently for a pretty big chunk of profit to be "distributed" in this way. And it made sense. A company needs the community it sits in as much as the community needs the company. Then everyone went all single entrepreneurial / maximise profits for shareholders; a tiny sliver of people got astonishingly rich and incredibly greedy, and we ended up where we are with a huge poverty gap. Companies are making enormous, enormous profits - of course they should be taxed. Tax them more. Bring back more money to the services that need them. Redistribute the wealth, because the alternative is absolute insanity.
• CrazyCatDog 5y ago
  This is collusion, plain and simple.
  • timbit42 5y ago
    Not illegal for governments to do.
• fastball 5y ago
  > It was reported this week that an Irish subsidiary of Microsoft had paid zero corporation tax on $315bn (£222bn) profit last year because it was resident in Bermuda for tax purposes. This is just flat wrong, right? MSFT's profits last year weren't even close to that.
  • gorbypark 5y ago
    I think the consensus is that Microsoft shifted some assets from it’s Irish shell company to another shell company and recorded a bunch of “profit“ because of it.
• estebarb 5y ago
  I'm thinking that this will be a entry barrier for new global startups. How are a self funded entrepreneur supposed to support any country tax at day zero? Taxes where business takes place is nice, but an easy way to pay taxes globally would be better.
  • hosker4u 5y ago
    SmallCo are excluded.
• drclau 5y ago
  This reminds me of Ken MacLeod's Descent [0]. It's a great hard SF book, mainly about UFOs, governments and conspiracies, but in a typical MacLeod style it covers plenty more subjects. I can't recommend it enough, and I definitely can't do it justice in a HN comment. Anyway... there's a sub-thread in the book about how things got really bad economically for the population, about a brewing revolution, and how governments around the world have struck a deal to 'defuse a hidden time-bomb under the world economy'. This was known as the Big Deal. It was tried many times before, but failed. So no one took it very seriously this last time. Except, this time there was a military crackdown on tax havens (except Switzerland): France took over Monaco, Belgia over Luxembourg, US over Panama, Russia over Dubai etc. This time, it did work. There's a funny and sad moment when a student receives a letter from the 'student loan company', informing her that her loan was suspended, but she should apply for a grant, instead. And it took her a moment to remember what a grant even is. [0]: https://www.goodreads.com/book/show/20618981-descent https://www.goodreads.com/book/show/20618981-descent
• SavantIdiot 5y ago
  Is this really happening? It is too good to be true so I fear it is not real.
• TacticalCoder 5y ago
  Is this really about taxing multinational companies or is this about establishing a "minimum 15% corporate tax rate" for every SME and mom and pop shop? TFA says that Ireland is going to accept the change: atm they've got a 12.5% tax rate. What about Hungary? Corporate tax rate at 9%. Once this shall be in place, the one sure thing is this "minimum 15%" is only ever go up, never down. There won't be any incentive ever to make it go down as there won't be the risk of companies moving abroad to pay less corporate taxes. And this says nothing about dividends or income taxation, so you'll end up with SME owners paying "minimum 15% corporate tax" and then on top of that 34% dividend tax, for example. I really wouldn't be surprised if this was sold as "tax the FAANG" while ending up trouncing the SMEs owners a bit more.
  • hn_throwaway_99 5y ago
    > What about Hungary? Corporate tax rate at 9%. That's the whole point of this agreement, it doesn't matter what Hungary does. I mean, if a business wants to only sell in Hungary, sure, but what this agreement does is prohibit multinationals that want to sell in any of these G7 nations from cooking up the corporate fiction where a company is "headquartered" in a low tax jurisdiction, and then the "real" company pays all of their income to this shell corp in "licensing fees".
    • fighterpilot 5y ago
      How would this work for a business in Hungary with 10 employees, no location elsewhere, who has sizeable US business?
  • trasz 5y ago
    SMEs tend to already pay their taxes, as opposed to corporations.
  • hosker4u 5y ago
    Both. USA wanted minimum tax another countries were more competitive. Other countries are pissed at Google charging for day Adverts but paying no tax in there country on services they sell. A compromise was made.
• bobthechef 5y ago
  I would love to know the real motives. I don't automatically buy the "ensure fairness for the middle class and working people" line. "Love for the people" is always the stated motive of all oligarchs and tyrants. And frankly, these politicians aren't exactly in some adversarial relationship, or at the very least a legal supervisory one, with corporations. That myth died a long time ago. Better to ask: why would corporations allow for something like this? Why would their political allies push for this? Somehow it must be in their interest. Perhaps they're hedging because they sense a real threat and have chosen to concede in some way, or perhaps this actually contributes to furthering some perceived advantageous end.
  • hosker4u 5y ago
    Established Companies love regulations, it hinders competition to eating market share.
• cheche07 5y ago
  Not convinced, they may appear to be taxing them more, to the public eye But the offset from new "grants" and "funding initiatives" will result in the same outlay for these corporations Basically all politics and double speak
• williesleg 5y ago
  Great! Now we all pay more! Taxes come from somewhere.
• jacquesm 5y ago
  In other news, Amazon, Apple, Microsoft, Facebook, Twitter and a whole raft of other companies have just moved their headquarters to Nigeria.
  • srswtf123 5y ago
    Should be interesting for Twitter, since they’re now banned in Nigeria? ;)
    • jacquesm 5y ago
      No, that's perfect. Absolutely no way to get into conflict with the local rulers. And no way for the locals to discuss the unavoidable corruption.
• imchillyb 5y ago
  > want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. That is competition. Governments, corporations, and every other entity on earth should work that way. If a global entity wants a better deal, they should be able to get one. This is nothing more than universal trade restriction. Trade restriction that is designed to keep global powers in power and keep the little guy scraping by.
• ChuckMcM 5y ago
  I think this is long overdue, and I'm glad they recognize the challenge of smaller nations offering lower tax rates in order to "seduce" companies to do business there. For me, that is the insidious problem where if BigCorp paid 5% in taxes in a country with a GDP of a few hundred million $ they would provide all the tax revenue for all the services that country could need. This "it's a good deal for both sides" situation has made progress here difficult, and it will make getting this through the G20 hard as well. I would imagine that in the ideal situation a government would tax some percentage of GDP which would spread the tax burden across the economy evenly, but making that work seems impossible.
• ptr2voidStar 5y ago
  I'm fascinated that people actually believe this would make a material difference to the way all the paraphernalia surrounding taxes (e.g. legal, accounting, geopolitics etc.) are currently structured. To quote Tancredi (from "The Leopard"): "Everything must change for everything to remain the same”
• rufus_foreman 5y ago
  >> The G7 group of advanced economies has reached a "historic" deal to make multinational companies pay more tax No, it hasn't. Some finance ministers met and talked: "Finance ministers meeting in London agreed to battle tax avoidance by making companies pay more in the countries where they do business. They also agreed in principle to a global minimum corporate tax rate of 15% to avoid countries undercutting each other." I have no idea how it works in other countries, but in the US, finance ministers don't have the power to agree to treaties. Treaties in the US require a super-majority (two thirds) vote in the Senate. Unless Mitch McConnell has signed off on this, the G7 group of advanced economies did not reach a deal on anything. I don't even see the word "Senate" in the entire article. US Treasury Secretary Janet Yellen can tell reporters whatever she wants. Without buy-in from Republicans in the Senate, finance ministers agreeing "in principle" amounts to finance ministers agreeing that if they had ham, they could make ham and eggs, if they had eggs.
  • caymanjim 5y ago
    Not every international agreement is a treaty. You're right, though; this is merely an agreement in principle and has no force whatsoever. That doesn't mean it won't lead to actual legal changes, but this article is misleading.
    • wolverine876 5y ago
      > this is merely an agreement in principle and has no force whatsoever You mean that it's unenforceable in a court, but that doesn't mean at all that it lacks force: Court enforcement isn't the the only force. If your boss, client, spouse, etc. pressures you to do something, it can't be enforced in a court, but it can have great force. We all are subject to great social pressure in our behavior, conduct, life choices, etc. - we all generally speak the same language, dress the same, follow the same life and career paths, avoid socially unacceptable things (even those that are unfairly discriminated against), etc. HN mods have great influence here, even though they have no means of court enforcement (in any practical sense). International relations in particular has no law, in the sense of a court that can make enforceable decisions. In a sovereign legal sense, it's anarchy. There is no international sovereign government (the UN is a conference of sovereign governments). But obviously a great deal is done which has real force. It's actually very interesting to see the creative ways in which 'international law' (again, not the same as a sovereign government's law) is crafted, given that very significant constraint, in order to give it force and effectiveness. Note that the G7 is exceptionally influential despite having no legal power - why do you think these very powerful, busy people are spending their time there? The President controls the Executive Branch of the U.S. government. Their decisions have great legal force. Politically, those decisions mostly carry forward to future presidents.
• throwkeep 5y ago
  > The deal announced on Saturday, between the US, the UK, France, Germany, Canada, Italy and Japan, plus the EU If all these nations can strike this kind of deal, won't they do the same with Bitcoin to render it useless?
  • Analog24 5y ago
    What would such a deal look like? I'm not sure how much they can do to a decentralized entity. There are certainly things they could do but I don't think it can be as effective as if it was a central entity like a corporation.
• exabrial 5y ago
  Taxation is a barbaric practice that humans need to move past. Refusing to pay taxes ensures the state will dispatch a team of armed thugs to assault you and likely kill you if you resist.
• IG_Semmelweiss 5y ago
  The actual laws on the books are more nuanced than posters would like to portray. Google cannot sell something at 100% licensing fee cost, ie 0% margin. There is a whole set of rules that govern cross border interco transactions under tax transfer pricing rules. Google must by law reflect effective market markup in order to stay wothin the law. They cant just say "we are going to pay ireland 95% of sale price" and call it a day. There is a whole analysis that needs to take place to show that the final applied margin is market. The moment they dont , googles accountants will not sign off on financials, which starts another meltdown. Yes, there is some estimate wizardy that goes on, but for the most part companies stay within the law because its very easy to show otherwise. Benchmarks are transparent. Most of the upside is abroad because the IP is whats most valuable. Whatever shared-services google performs in the US to spread that IP around, are unsurprisingly low value and yiwld the corresponding taxes.
• option 5y ago
  why corporations have to pay tax at all?! They are owned by investors who pay tax on dividends and capital gains. And employees pay taxes wherever they live.
  • timbit42 5y ago
    So dividends and capital gains should be taxed like interest and income? OK.
• rayiner 5y ago
  Seems like a pretext for a G7-wide cut of corporate tax rates to 15%. Bravo globalists.
• alasdair_ 5y ago
  Perhaps we can simply state that AMT applies to corporations.
• fairity 5y ago
  For anyone wondering if this will actually have a sizable impact on FAANG and their aggregate tax burden, my guess is no based on the following quote: > Tech firms say they welcomed the move. Facebook vice president Nick Clegg said they recognised it could mean the company "paying more tax, and in different places".
  • wongarsu 5y ago
    Paying taxes, just like employing people, gives you leverage and generally more friendly conditions (including court rulings). With Facebook (and FAANG in general) coming under increasing scrutiny I imagine they would happily pay a bit more if their tax is spread over more territories and thus influences more politicians and courts.
• varispeed 5y ago
  If they really wanted to do it, they'd do a requirement for a company to show their books to IRS in a given country. They would call out fake charges to hide profits and demand back tax on that. It's all doable, but all those politicians are corrupt. The whole piece reads as if it was bought by Facebook and Amazon for PR. It's going to be business as usual unfortunately. I hope a party will show up and have guts to actually do something about those tax dodgers. To charge tax on these fake intellectual property arrangement you don't even need any laws changed. You only need a few officers that are not bent.
• Black101 5y ago
  They will just pass that on to the consumer... it's an expense, after all
• young_unixer 5y ago
  Any increase in market productivity is quickly compensated by aggressive, wasteful government interference. Citizens can never enjoy the benefits of increased productivity, only politicians and government.
• alfiedotwtf 5y ago
  Doesn't this do exactly what it's not designed to do - i.e make multinationals leave G7 countries and shop for lower taxing countries? Sounds like it's almost a tarrif, and we've got ample evidence that the country that imposes a tarrif on itself is the country that ends up paying for it in the long run
• known 5y ago
  I think rich nations should collect tax on behalf of poor nations from the multinationals;
• anovikov 5y ago
  A new crypto rally comes next?
• technick 5y ago
  Wouldn't this be considered Collusion? I heard some other president was accused of the same thing...
  • brazzy 5y ago
    No, openly agreeing with other government to prevent tax evasion and thereby benefiting all countries involved is not the same thing as clandestinely using resources of a foreign government to influence an election for your personal benefit.
• kekeblom 5y ago
  One thing I rarely see discussed anywhere is that a corporate tax is essentially a subsidy to existing companies and is anti-capitalistic. The reason is that an existing corporation turning a profit can tax-free reinvest their profits in, for example, product development to improve their market positioning and profits in the future. If they were to book that profit and pay it out as a dividend to their owners, who would then invest it into other companies, the money would get taxed twice before ending up in the investment target. The first time as a corporate tax and the second in the form of a capital gains tax on the owners. Intuitively, it seems like this could have a significant effect on markets and might be one of the reasons we see so many markets dominated by big companies, even in non winner-take-all markets.
• u678u 5y ago
  More realistically G7 will keep the taxes of the big global corps and small countries will most likely lose.
• lr1970 5y ago
  If country A undercuts taxes below a set minimum of 15%, country B is within its rights not to recognize taxes payed in A for the purpose of avoiding double taxation. As a result, country B can demand tax payments on profits generated in B regardless of what taxes were payed in A. Unfortunately, in the real world governments are beholden to the commercial interests and rarely use the mechanisms available to them. Given enough willpower offshore tax havens can be eliminated in a split-second.