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Explainer: What is a global minimum tax and what will it mean?
- whiddershins 5y agoI’ve never understood how taxing corporations isn’t just double taxation. The corporations end up distributing the money to stakeholders who then owe taxes on it. What would happen if corporate tax rates were 0% because ... they aren’t really people after all?
- anamexis 5y agoWho is saying it isn't double taxation?
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- acover 5y agoIncome tax and sales tax are double taxation. Double taxation happens a lot. I don't think it's a good rule for determining if a tax is fair.
- skohan 5y agoThere's double taxation all the time. For instance, if I run a store, and I pay sales tax on what I sell, and then I pay income tax on net revenue, the income from the same transaction is taxed twice.
- nemo44x 5y agoAnd your employees are paid from that taxed income and that is taxed. When the employee buys something with that money that is taxed as is their dwelling via property tax. And the cycle continues. I do wonder how long it takes for a dollar to be 100% taxed as it is exchanged. Transactional taxes certainly give government incentive to stoke consumption as the faster the dollar is exchanging hands the more tax revenue they are collecting.
- indymike 5y agoNope. Employees are an expense. Expenses are subtracted from income before taxes are calculated.
- nemo44x 5y agoYeah sort of. But whatever they are paid restarts the tax machine. I’m not railing against taxes here. Just curious how long it takes the government to completely reconsider each dollar put into circulation.
- woodruffw 5y agoApart from the material question of whether or not it’s double taxation: why does it matter? Plenty of things are doubly taxed: I pay taxes once on my income, and then I pay it again when I exchange my income for goods or redeem any financial instrument that my income went into.
- samstave 5y agoPersonally, I would say it matters because that scenario is BS. Further, don't forget that while the IRS knows exactly how much you have made - they still require you to figure it out at the end of the year and then in all likelihood pay more taxes than what was taxed. In scandanavian countries - their taxes are high - but at least the system is simple; they send you a summary of what you made, what you were taxed and you basically just sign it (according to some friends from there - I do not have first hand knowledge of how its actually done in Sweden/Norway/Finland)
- woodruffw 5y ago> Personally, I would say it matters because that scenario is BS. Which scenario? To be clear, I agree that the IRS’s guessing game system is ridiculous. I’d much prefer the Scandinavian system. But I’m not clear on what that has to do with double taxation, seeing how those countries do it as well (via VAT or any discretionary tax.) No country can accurately tax you ahead of time on discretionary spending, and I don’t believe any does.
- ajb 5y agoDouble taxation is a funny concept because the economy is cyclic anyway. If any given dollar could only be taxed once, eventually you'd run out of untaxed dollars to tax.
- samstave 5y agoSo... wouldnt that mean that there should be a government MAXIMUM amount of taxes that can be collected? Why are their taxes on every single transaction?
- krastanov 5y agoBecause taxes are necessary and we just make up a rule that works in practice. This is not "foundations of logic", it is just "where can I shoehorn a tax so I can fund the public services and the military". It does not need to make sense when put in weird hypothetical made up edge cases.
- jerry1979 5y agoTaxes on corporate net income should not count as "double taxation" because the corporation is legally distinct in nearly every way from its shareholders. That's the whole point of corporations. The corporation gets taxed once on net income because that corporation exists as a construct within govt structures. The shareholders get taxed because of the relationship they have with the corporation. It's literally fee for service.
- weird-eye-issue 5y agoThis argument falls apart for flow through entities. They are essentially treated the same as the shareholders by the IRS but they are treated as distinct by other parts of the government, banks, courts, etc. So what service are you actually paying for besides just... Getting taxed by the IRS?
- jerry1979 5y agoI do not have any professional expertise that would allow me to make recommendations or financial/legal advice. Do you know if these flow through entities provide any limits on liabilities for the people who benefit from owning the pass through entity? If so, I would consider that as a benefit.
- weird-eye-issue 5y agoThat's my point. They are not taxed separately but they do provide liability protection. In your other comment you made it sound like they are taxed separately and that was the cost to pay for being treated like a separate entity.
- jerry1979 5y agoIt looks like I misunderstood your comment. The point I want to drive home is that when the government "backs" one entity, paying for that backing via taxes on net income should not count as double taxation because I consider that tax a fee to pay for that one entity. Whether the government offers some other kind of entity with different tax advantages is, to me, beside the point because as someone who is not a corporate tax expert, I have to assume that there must be some kind of advantage to running a C corp vs an llc.
- DudeInBasement 5y agoIt is, but it's there to protect the liability of the owners
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- mjw1007 5y agoAs I understand it, many countries set the rate of tax on dividends, and on gains from selling shares, to be below the rate of income tax by roughly the rate of corporation tax. In particular, things tend to be set up so that for small companies it doesn't make much difference whether the owner takes money out by paying themselves a salary or a dividend.
- ucha 5y agoIt's one of the reasons why dividend tax is much lower that income tax.
- ModernMech 5y agoTaxes are incurred when money flows. It's taxed once when it flows to the corporation, and it's taxed again when it flows to the individual.
- ibeckermayer 5y agoA global price fixing scheme.
- foxhop 5y agoMoving anti competitive laws up a level of abstraction and then ignoring them completely just like our existing monopoly laws.
- mschuster91 5y agoYeah, to prevent the race to the bottom the world has experienced over the last decades and that led to widespread inability of governments to fulfill their responsibilities. Time for that to end.
- StandardFuture 5y ago> inability of governments to fulfill their responsibilities So, governments don't have trillions in tax dollars a year to provide necessary services for citizens? Billions more should radically change everything for the better, right? Clearly, that's just a modus ponens logic 101 right there. Yup.
- atatatat 5y agoImagine what could get done if a $10k-$30k "donation" wouldn't work on a Congressman.
- StandardFuture 5y agoYou don't actually think that your comment negates my point, do you? The point of the sarcasm is to emphasize that if you already cannot do it with trillions then you certainly are not going to get it done with billions. It's a simple argument that stands entirely on it's own. You first need to provide convincing evidence to the contrary rather than just saying things like "imagine if we gave even more money to something that we already give money too ..." Is HN devolving into 3-year old logic? I swear the last couple of years have been bad.
- readonthegoapp 5y agowe could use one of these for US States too
- SMAAART 5y agomore money to accounting companies to do the taxes, and find loopholes.
- DudeInBasement 5y agoHow does it work if the company is located outside the G20 and move all the assembly to outside the G20?
- deleted 5y ago[deleted]
- nabla9 5y agoAs the article explains, that has been taken care of. Search for "top-up".
- DudeInBasement 5y agoHow? Example: I sell you a good at inflated price and you resell it at shipping cost. You make 0 profit. I made all the profit. I'm outside the G20. You're my corp inside the G20. Your tax rate is zero
- motohagiography 5y agoSurprised other countries aren't calling this out as an attack on their sovereignty. Co-operation frameworks seem to become governance bodies pretty fast. The problem isn't that these companies aren't taxed enough, the problem is their influence operations on various national governments, and this tax issue is a distraction. What I think we're seeing more broadly is the dissolution of the nation state into a single global administrative regime, and the inevitable consequence from a risk perspective is when you homogenize and correlate everyone under the same rules and criteria, it also fails as a single correlated entity, and this is why people and smaller countries should resist it in principle.
- jasondigitized 5y agoBermuda is an island of 65k people in the middle of the Atlantic with 40k registered companies. Claiming sovereignty to take registration fees from multinationals that want to obfuscate their financials is just absurd. This is just blatant financial shenanigans: https://www.gov.bm/38865/google-bermuda-limited-thomas-hutchinson-38865 https://www.gov.bm/38865/google-bermuda-limited-thomas-hutch... https://www.gov.bm/18571/general-electric-bermuda-ltd-marcello-ausenda-18571-0 https://www.gov.bm/18571/general-electric-bermuda-ltd-marcel... https://www.gov.bm/30983/caterpillar-bermuda-holding-company-paul-james-housey-30983 https://www.gov.bm/30983/caterpillar-bermuda-holding-company...
- yunohn 5y agoA globalized economy needs globalized cooperation and governance. The current situation is not feasible.
- cblconfederate 5y agoEconomies have been globalized since ancient times
- yunohn 5y agoThere has never existed accounting methods for corporations to funnel taxes via cherry-picked countries, until the modern globalized economy. Do provide some sources or examples?
- mikewarot 5y agoThis is a good start, funding the IRS enforcement division and having them focus on the big fish would be an excellent next step. The working class shouldn't be subsidizing large corporations.
- yunohn 5y ago> The working class shouldn't be subsidizing large corporations. Totally agreed. This is exactly why HN’s constant support for corporate tax avoidance confuses me. Most HNers live in high CoL countries, where corps do not pay their share of taxes. This leads to the same HNers paying more taxes to support their country. Truly hilarious!
- 238475235243 5y agoBecause it all works out in the end. If a company is taxed more it just means less profits which means I have a smaller 401k, fewer employees and so on, buys less materials, does less work... Corporations aren't magic money trees. It's like damming a river, you don't get magic free water and get to send water downstream too. Dams have lots of downsides in return for controlling flow.
- yunohn 5y ago* Untaxed profits go to shareholders and executives, not employees. * Higher taxes does not mean companies will attempt to output less revenue. Why would companies work /less/? Do HNers work less or ask for lower salaries due to being in higher tax brackets?
- 238475235243 5y agoSounds like you haven't run a company, with respect.
- yunohn 5y agoDo you have a non-personal reply? Maybe with some substance or explanation?
- rossdavidh 5y agoInteresting and I agree there's a real problem, but...what about the difference in what tax deductions are allowed? It seems like you'll just end up with competition in which countries allow more 'expenses' to be deducted. If one country gives a higher tax benefit for any business that is carbon-neutral, say, allowing deductions to count more if they are somehow linked to combating climate change, is that cheating? How broad are they allowed to define "combating climate change"? Or any other thing you might plausibly have tax policies that are intended to encourage something or other. I see why they want to do this, but ultimately I am skeptical as to whether or not it will make any real change in the tax rates that large corporations (who can afford savvy accountants) will pay.
- gumby 5y agoThe intent is like the US’s Alternative Minimum Tax: individuals can use all the tax breaks they qualify for but also calculate AMT which has a simpler formula, and then pay the larger of the two. In this case the agreement calls for that AMT to be 15% or more.
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- sebastianconcpt 5y agoTax is a perfect synonym of friction, so this "solution" would work great for producing a world recession.
- jonplackett 5y agoSo having no tax would be great, right? Who needs public services!
- sebastianconcpt 5y agoA global tax, is the way to inject global enforcement and global justice, hence global government. Guess which party is the only one that is international, has many genocides in its history and wants to rule the world eagerly as a predator with hunger?
- cblconfederate 5y agoWhat it means is world government. First the coordination on monetary policy , now taxation , then world army or sth. Centralization and the inevitable authoritarianism that grows with it continues apace
- krastanov 5y agoA union/federation/etc is not exactly centralization. Neither does centralization imply authoritarianism. Whether this is good policy imposed on poor countries by rich countries is a great question. But that has little to do with the premise you suggest.
- marcusverus 5y agoInternational coordination on economic/monetary/tax policy doesn't necessarily mean a move toward world government. In my mind, it opens a path in the exact opposite direction! The trend toward coordination has been almost exclusively on matters of trade/monetary policy, with the power being consolidated in supra-national organizations and broad trade agreements. It seems safe to consolidate power in this area, so long as nations are weary of these institutions (given that all institutions tend to develop a kind of will to grow in power and scope) and, of course, as long as nations are able to unilaterally opt out. But even as this consolidation of economic power has occurred, there has been no trend of consolidation of general governmental power. In fact, the opposite has occurred. The number of distinct nations has increased by ~10% since the 80's (from (roughly) 188 [1] to 206 [2], though the definitions are a bit fuzzy). The proportion of elective/representative governments has also risen dramatically.[3] So there is no trend toward centralized/authoritarian governance. The general trend has been in the direction of smaller, more representative governance. The trend of economic coordination has merely nibbled away at some aspects of national governmental autonomy, and only the consent of those governments and their people. In my mind, these two trends have us headed toward a marvelous future; one where supra-national institutions facilitate economic integration, and cumbersome national governments give way to modern states which are smaller, more accountable, and more democratic. [1] https://en.wikipedia.org/wiki/List_of_sovereign_states_in_the_1980s https://en.wikipedia.org/wiki/List_of_sovereign_states_in_th... [2] https://en.wikipedia.org/wiki/List_of_sovereign_states https://en.wikipedia.org/wiki/List_of_sovereign_states [3] https://www.pewresearch.org/fact-tank/2019/05/14/more-than-half-of-countries-are-democratic https://www.pewresearch.org/fact-tank/2019/05/14/more-than-h...
- nabla9 5y agoExplainer for the explainer: * the minimum corporate tax rate is 15% * countries don't have to increase their corporate tax rate to 15% * home countries can "top-up" until the effective tax rate is 15% * Tax havens can still exist, but the incentive for multinational firms to move their profits to tax havens goes away because their home countries just top-up until effective tax rate is 15%. Inversion prohibitions are suggested. Inversions happen when companies move to tax havens while keeping their management and substantial operations in their previous home country.
- thepangolino 5y agoHow does this combat transfer pricing? What would stop companies to record losses by buying “consulting services” in from companies in third countries with lower tax rates?