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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. >

• 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
      Though whole accountancy process has many parallels to a pyramid selling, with the IP being the top of the pyramid located in some tax favourable country of the moment.
• 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.