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It's time to have a big talk about transparency. Some of the people who defend the ultra-rich are also the ones who claim to be in favour of free markets. A sm

It's time to have a big talk about transparency. Some of the people who defend the ultra-rich are also the ones who claim to be in favour of free markets. A small bit of economic orthodoxy is that for free markets to work, parties need to be informed (and externalities priced in, but that's another story). This is not just in terms of "this is the price of bananas" but also in terms of knowing eg what various salaries are, which businesses are profitable, etc. How can we have free markets when we don't even know who owns what? As for taxation, there needs to be an overhaul. Things need to be simpler, and I say this as someone who has used international tax advisors. There's no reason the tax guy's diagram of your business should be more complicated than your own diagram. Moving profits to other countries shouldn't be possible, or rather, it should be more fixed by the nature of the business than by the desires of the CFO. We simply hear too much about "selling IP rights" to subsidiaries and similar schemes that are clearly meant to lower tax rather than increase revenue. Granted some things will be legitimate, but it's important that some vague concept of fairness is adhered to. This again goes back to transparency. We invented corporations to help improve society, so we ought to know what kinds of things people are doing with them. Edit: Perhaps the way to see it is, if you say "we make money by selling coffees in the UK" you would expect that entity to report a tax structure that contains a bunch of coffee and UK related entries. Reporting to investors ought to mirror reporting to the taxman.

dennis_jeeves 5y ago
>A small bit of economic orthodoxy is that for free markets to work, parties need to be informed Free markets: my definition, almost complete lack of rules on how to trade, exchange information, barter etc. ( except bare minimum rules of protecting one's property, life etc. from direct harm)
chiefalchemist 5y ago
> How can we have free markets when we don't even know who owns what? Good point, but take a number. We can't have free markets because most "regulation" is set up to favor some side or the other. There isn't even and fair competition. What we have is government sanctioned winners (and losers). Before we get to who owns what, let's talk about how Uncle Sam can shamelessly put his thumb on the scale (read: bias and corruption) and too rarely be called out for doing so.
pibechorro 5y ago
// How can we have free markets when we don't even know who owns what? Free markets exist regardless of how you choose to assign property to people. Be it violence or consensus. Ownership is to be decided by the parties involved in the exchange. 3rd partys are an easy solution.
- pessimizer 5y ago
  > Ownership is to be decided by the parties involved in the exchange. No, ownership is to be decided by governments who use force to protect property rights. They may take advice from the parties involved in the exchange, they may decide that neither party involved in an exchange was the owner.
  - beerandt 5y ago
    No- ownership determines disposition of property, not government. For instance, in most jurisdictions, a dispute between two (claimed) property owners can only be decided by them, in full agreement, with the courts stepping in only when a stalemate is reached. But the judge can only decide the dispute, and can't, for instance, arbitrarily issue an order giving the property to a 3rd party, or decide a dispute where one of the parties haven't first come to the court seeking that resolution. Similarly, a property owner can summon police to help enforce their property rights in the case of a trespasser, but police can't arbitrarily enforce the rights of 3rd parties without request.
thr0wawayf00 5y ago
> We invented corporations to help improve society I think it's easy to say this, but I'm not sure the history of corporations bears this out. Technically, the first corporations were colonial expeditionary forces (like the Dutch VOC) that were sent to Africa and the Caribbean to control various types of precious resources and we all know what happened there. I guess it all depends on who "society" is in your statement, because someone has always has to lose in a corporate structure.
- LudwigNagasena 5y ago
  The VOC was established by the government because it didn’t like that there were many competing merchant companies. It wasn’t the first company, it was sort of the first public company.
  - thr0wawayf00 5y ago
    Sure, I'm not trying to argue that VOC was the very first company. Companies of various types date back to the silk road. But large-scale corporations were largely conceptualized during mercantilism and their history is inextricably tied to colonialism, which can't be overlooked when people start saying things like "corporations were created to help society." They helped some people, but they also wiped out entire populations (see the Banda Islands).
    - LudwigNagasena 5y ago
      >can't be overlooked when people start saying things like "corporations were created to help society." Uhm, who says that? Corporations were always created by people who wanted to cooperate to pursue their common interests.
      - thr0wawayf00 5y ago
        It is literally a direct quote from the post I originally responded to.
      - 5y ago
einpoklum 5y ago
"Free" and "market" are contradictions. Markets exist when individuals can amass capital irrespective of wider social needs, and this necessarily requires armed force, or the threat of armed force, to prevent people from collectively deciding about resource allocation. That's the state. Naturally the state also enforces many things besides ownership of capital, some of them better (like minimum wage and health and safety codes) and some worse. But the point is that even if you had the fantastical and anti-realistic "perfect information", markets wouldn't be "free". At the same time, markets do "work". That is, the results of market interactions are what you might expect from market interactions: Accumulation of capital in fewer hands, economic cycles of various kinds, some motivation for innovation and lots of innovation for exploitation, war, scams and such...
- hoseja 5y ago
  Also, sadly, unmatched competetiveness in the real world. Markets and states evolved because they out-murdered and out-robusted all other forms of organizing.
- me_me_me 5y ago
  You are being downvoted and its quite disturbing. And you even didn't say anything controversial, hardly any options, but simple facts and conclusions drawn from the facts. We can even bring out the comments by the Chicago school of economics - the birthplace of neoliberal free market ideology. Who with assistance from the government 'helped' south American countries by implementing more free markets than in USA. And as the result those countries imploded both politically and economically, and what does Chicago say? well obviously markets were not free enough. They laugh at communist who say failed soviet counties were not communist enough, yet they do exact same thing with their experiments (actually, the difference is that they inflicted it on other countries).
  - hardlianotion 5y ago
    > (actually, the difference is that they inflicted it on other countries) No difference there. Soviet communism was all about exportation.
losvedir 5y ago
You call it "economic orthodoxy" but it's really nothing of the sort. There's not even really a technical definition of "free markets" so I don't know where you're getting your assertions. I think you're kind of gesturing at the concept of "perfect competition", which is rigorously defined and does have technical requirements [0], one of which is perfect information. But it actually doesn't really apply to the tax situation of the owner. In other words, for political and ethical reasons, there's a lot of reform that can and should be done, but I wouldn't dress up the argument in the form of "economic orthodoxy", unless you're talking about actual economic orthodoxies like lowering corporate income tax and preferring VAT to personal income tax. edit: I should soften my confidence here, it's been a while since I did economics. At least, I've never heard of transparency extending beyond the good or service being a requirement for perfect competition... do you have a source for that, or can you clarify how it would affect things? [0] https://en.m.wikipedia.org/wiki/Perfect_competition#Idealizing_conditions_of_perfect_competition https://en.m.wikipedia.org/wiki/Perfect_competition#Idealizi...
- lordnacho 5y ago
  > unless you're talking about actual economic orthodoxies like lowering corporate income tax and preferring VAT to personal income tax. Those are more political ideologies than anything. By economic orthodoxy, I simply mean that it's a fairly common economic teaching that bad things happen when parties are uninformed. For instance Akerlof lemons is about information asymmetry. I'm not referring to any specific model (monopolistic competition etc) but to the general observation that a fair few economic models point out that having wrong information causes problems.
  - dcolkitt 5y ago
    > For instance Akerlof lemons is about information asymmetry. Akerlof lemons have zero to do with knowing the salary of the CEO of the lemon company.
    - strgcmc 5y ago
      Are you so sure about that? Think about the CEOs themselves as the lemons... a lack of transparency can lead to the same adverse selection pressure that trends towards "lemon CEOs" flourishing, and pay transparency can help align the incentives somewhat.
pjc50 5y ago
> Reporting to investors ought to mirror reporting to the taxman. This would be a nice simple GAAR: you pay either the current corporate rate or 20% of the GAAP profits you report in your stockmarket statement, whichever is the larger.
bobbob1921 5y ago
Maybe part of solution is higher sales taxes , and less (or zero) other taxes. Ie tax mainly (only?) at the purchase of a good or service. I don’t recall seeing massive sales tax fraud scandals, atlease at any meaning scale.
- whakim 5y ago
  Sales taxes are logistically simple but also highly regressive, so the wealthy wouldn't even have to use loopholes to enjoy an ultra-regressive tax system :).
  - tekknik 5y ago
    Why is the point to tax the wealthy more? Why do we want to kill the incentive for starting companies and becoming wealthy? My opinion, the left will only be happy with a 100% income tax and socialism.
    - whakim 5y ago
      > Why is the point to tax the wealthy more? Why do we want to kill the incentive for starting companies and becoming wealthy? There isn't any evidence that tax rates much higher than those we currently have have been any obstacle to growth. Perhaps in theory, but many countries around the world and across history (including the United States!) have had much more progressive taxation regimes and it hasn't "kill[ed] the incentive for starting companies and becoming wealthy."
      - tekknik 5y ago
        > Perhaps in theory, but many countries around the world and across history (including the United States!) have had much more progressive taxation regimes and it hasn't "kill[ed] the incentive for starting companies and becoming wealthy." Which countries? And what happens when another country becomes more competitive than the US from a tax perspective? Will it destroy the country? certainly not. Will the US continue to be the world reserve currency and lead the world? Again, no.
specialist 5y ago
> We simply hear too much about "selling IP rights" to subsidiaries and similar schemes that are clearly meant to lower tax rather than increase revenue. Huh. Made me wonder if advocates of IP reform could claim improved tax sanity as a benefit. Happily, not an original thought. Here's the first hit via ddg: Intellectual Property Law Solutions to Tax Avoidance [2015] https://www.uclalawreview.org/pdf/62-1-1.pdf https://www.uclalawreview.org/pdf/62-1-1.pdf "Multinational corporations use intellectual property (IP) to avoid taxes on a massive scale, by transferring their IP to tax havens for artificially low prices. Economists estimate that this abuse costs the U.S. Treasury as much as $90 billion each year. Yet tax policymakers and scholars have been unable to devise feasible tax-law solutions to this problem. This Article introduces an entirely new solution: change IP law rather than tax law. Multinationals’ tax-avoidance strategies rely on undervaluing their IP. This Article proposes extending existing IP law so that these low valuations make it harder for multinationals to subsequently litigate or to license their IP. For example, transferring a patent for a low price to a tax-haven subsidiary should make it harder for the multinational to demonstrate the patent’s validity, a competitor’s infringement, or entitlement to any injunctions. The low transfer price should also weigh toward lower patent damages and potentially even a finding of patent misuse. Extending IP law in such ways would thus deter multinationals from using IP to avoid taxes. Both case law and IP’s policy justifications support this approach." Also... > How can we have free markets when we don't even know who owns what? Yup. Open markets require symmetrical information.
deleted 5y ago
[deleted]
whakim 5y ago
I think this hits the nail on the head. Wealth is protected by a vast array of national and international laws and institutions - everything from protection of intellectual property to the technicalities of making sure that you and I can't both own the same piece of property at the same time. In return for this, it's not unreasonable for national governments to require more transparency in terms of who owns what. (By the by, I think the real reason this doesn't happen is the obvious suspicion that it could lead to more progressive forms of taxation, e.g. wealth taxes.)
cblconfederate 5y ago
Alternatively, governments need to open up these schemes to everyone so they become accessible to every middle class person. BUT they 'll also have to compete with other governments about providing better and transparent taxation options. Right now the schemes are limited not only to the rich but to the well connected rich
csomar 5y ago
> How can we have free markets when we don't even know who owns what? Great. Let's add more paperwork to the incorporation/reporting process. > As for taxation, there needs to be an overhaul. Taxation has a hard time changing the current laws because these are revenue for government. It can't do an overhaul but it can make new rules/regulations. Great, more paperwork. > Moving profits to other countries shouldn't be possible, or rather, it should be more fixed by the nature of the business than by the desires of the CFO. More paperwork, regulations, rules and advisors. That should simplify your tax diagram. > Perhaps the way to see it is, if you say "we make money by selling coffees in the UK" Many economic players are way more complex than a company selling coffee in the UK. These also happen to be the most influential and important nodes in your economy. tldr: Tax is a really complex issue. ICIJ is, surprisingly, not that transparent in its funding and the people doing the funding/leaking these documents; I'm really doubtful they are doing it because they have "good hearts" or on any goodwill to help "society".
- whakim 5y ago
  > Great. Let's add more paperwork to the incorporation/reporting process. Many of the systems required to create a more complete accounting of assets already exist. For example, in the United States financial institutions already generate 1040s for profits/losses/dividends on financial assets; it wouldn't be particularly difficult for those forms to also include the actual assets themselves and their values. Local governments already collect property taxes (which, at various points throughout history have included a lot more than just property - such as cars/boats/etc.; equipment, etc. - so the infrastructure already exists to tabulate these other categories too) - it wouldn't be hard to transmit that data. I'm not arguing that it wouldn't take any work to have a transparent accounting of who owns what, but it's certainly not impossible - after all, we do it for income and no one seems to bat an eyelid. Not to mention that we live in an age of fast and easy electronic communications. Transparent wealth accounts have existed before in much more difficult circumstances (e.g. wealth taxes imposed on war profiteering by various governments after WWII) and it didn't prove to be an insurmountable burden. > Taxation has a hard time changing the current laws because these are revenue for government. It can't do an overhaul but it can make new rules/regulations. Great, more paperwork. Taxation is law - in fact, the tax code and how it is structured is probably the most important part. > More paperwork, regulations, rules and advisors. That should simplify your tax diagram. There is already an incredible amount of paperwork, regulations, rules and advisors involved in the gaming of the global tax system that already occurs. More transparency around asset ownership would help lead to a simpler global tax regime, not a more complicated one.
silexia 5y ago
I agree completely. For free markets to work, we need the following: -Bankruptcy without bailouts to clear dead wood. -Abolish patents as these simply limit free market competition and are a ploy to try to claim ownership on something that usually is one tiny fragment of human knowledge. -Public tax records for everyone. Sunlight is the best disinfectant (and the best way to allocate resources)! -Wealth tax instead of income tax.
- 6510 5y ago
  Good list! I would also.. - allow government to compete on the free market. - allow government to force-purchase static businesses that are profitable but not innovating. - require government to monitor such port folio and privatize where innovation is failing. Privatization of this kind should not be rushed and aim to get good value for the assets. - print money against the new government assets minus earnings from privatization
  - systemvoltage 5y ago
    > allow government to compete on the free market So then we should disallow government from regulating the market? There is a conflict of interest in your conjecture.
    - 6510 5y ago
      Government has to make money some how. While it is good to extract wealth from people with deep pockets I believe profiting from transactions though taxation for the most part is discouraging economic activity. I and many other people have a laundry list of skills that I could offer to others only if I fill out piles of paper work. If little jimmy wants to wash 1 car he needs to register a business and get the business bank account? If big Joe has 100 car washes and he is earning a stable income without expanding or innovating to much government could make a bid on it and offer him a job. If say the US gov wants to force-purchase the google search engine it should pay handsomely for it. Say 1800 billion. Alphabet would do just fine bidding on the advertisement slots and selling them to their customers. (Such a large purchase should probably involve a referendum) It is our government. If we want it to sell beer in town hall it should be up to us. If you and many others are against it it obviously shouldn't happen.
no_wizard 5y ago
As far as the taxes bit, at least here in the USA I always felt that we should just get rid of corporate taxation entirely, and instead tax ya know, the CEOs etc the difference, which in effect means taxing capital gains like regular income for instance. That would do wonders for businesses to simplify the tax schemes and really moves the taxation portion to the individuals. I’m sure like any tax reform this has edge cases and stuff I know I haven’t considered but wouldn’t the upside be taxation happens more uniformly as a result?
- Pokepokalypse 5y ago
  If we get rid of corporate income tax (and we should), we should absolutely bill corporations for ALL use of publicly-funded infrastructure. - use of public highways (reimburse in proportion to wear-and-tear, etc). - use of public regulatory agencies like the FCC and FAA (to permit broadcast spectrum and airspace to be useful resources without everyone grabbing all of it all at once). - very expensive use of US military to enforce international law, or to protect assets in foreign countries. - use of publicly funded education to train their workforce. I could probably go on for pages and pages but these are probably the big ones we spend the most money on. I think a few months of this system and most corporations would be BEGGING to go back to simple income tax where they can game the system and scam their way out of paying what they owe.
- marto1 5y ago
  That's great and all, but the tax revenue in absolute terms from corporations is probably several orders higher than what you can tax a rich CEO. Just something to keep in mind.
runeks 5y ago
> How can we have free markets when we don't even know who owns what? Why would we need to know who owns what in order to have a free market?
bitL 5y ago
Most of the profit is based on information asymmetry or on being a monopoly (high barrier to entry).
- tekknik 5y ago
  Interestingly, creating difficult to understand or implement tax codes also raise the barrier to entry.
deleted 5y ago
[deleted]

dennis_jeeves 5y ago

>A small bit of economic orthodoxy is that for free markets to work, parties need to be informed Free markets: my definition, almost complete lack of rules on how to trade, exchange information, barter etc. ( except bare minimum rules of protecting one's property, life etc. from direct harm)

chiefalchemist 5y ago

> How can we have free markets when we don't even know who owns what? Good point, but take a number. We can't have free markets because most "regulation" is set up to favor some side or the other. There isn't even and fair competition. What we have is government sanctioned winners (and losers). Before we get to who owns what, let's talk about how Uncle Sam can shamelessly put his thumb on the scale (read: bias and corruption) and too rarely be called out for doing so.

pibechorro 5y ago

// How can we have free markets when we don't even know who owns what? Free markets exist regardless of how you choose to assign property to people. Be it violence or consensus. Ownership is to be decided by the parties involved in the exchange. 3rd partys are an easy solution.

pessimizer 5y ago
> Ownership is to be decided by the parties involved in the exchange. No, ownership is to be decided by governments who use force to protect property rights. They may take advice from the parties involved in the exchange, they may decide that neither party involved in an exchange was the owner.
- beerandt 5y ago
  No- ownership determines disposition of property, not government. For instance, in most jurisdictions, a dispute between two (claimed) property owners can only be decided by them, in full agreement, with the courts stepping in only when a stalemate is reached. But the judge can only decide the dispute, and can't, for instance, arbitrarily issue an order giving the property to a 3rd party, or decide a dispute where one of the parties haven't first come to the court seeking that resolution. Similarly, a property owner can summon police to help enforce their property rights in the case of a trespasser, but police can't arbitrarily enforce the rights of 3rd parties without request.

thr0wawayf00 5y ago

> We invented corporations to help improve society I think it's easy to say this, but I'm not sure the history of corporations bears this out. Technically, the first corporations were colonial expeditionary forces (like the Dutch VOC) that were sent to Africa and the Caribbean to control various types of precious resources and we all know what happened there. I guess it all depends on who "society" is in your statement, because someone has always has to lose in a corporate structure.

LudwigNagasena 5y ago
The VOC was established by the government because it didn’t like that there were many competing merchant companies. It wasn’t the first company, it was sort of the first public company.
- thr0wawayf00 5y ago
  Sure, I'm not trying to argue that VOC was the very first company. Companies of various types date back to the silk road. But large-scale corporations were largely conceptualized during mercantilism and their history is inextricably tied to colonialism, which can't be overlooked when people start saying things like "corporations were created to help society." They helped some people, but they also wiped out entire populations (see the Banda Islands).
  - LudwigNagasena 5y ago
    >can't be overlooked when people start saying things like "corporations were created to help society." Uhm, who says that? Corporations were always created by people who wanted to cooperate to pursue their common interests.
    - thr0wawayf00 5y ago
      It is literally a direct quote from the post I originally responded to.
    - 5y ago

einpoklum 5y ago

"Free" and "market" are contradictions. Markets exist when individuals can amass capital irrespective of wider social needs, and this necessarily requires armed force, or the threat of armed force, to prevent people from collectively deciding about resource allocation. That's the state. Naturally the state also enforces many things besides ownership of capital, some of them better (like minimum wage and health and safety codes) and some worse. But the point is that even if you had the fantastical and anti-realistic "perfect information", markets wouldn't be "free". At the same time, markets do "work". That is, the results of market interactions are what you might expect from market interactions: Accumulation of capital in fewer hands, economic cycles of various kinds, some motivation for innovation and lots of innovation for exploitation, war, scams and such...

hoseja 5y ago
Also, sadly, unmatched competetiveness in the real world. Markets and states evolved because they out-murdered and out-robusted all other forms of organizing.
me_me_me 5y ago
You are being downvoted and its quite disturbing. And you even didn't say anything controversial, hardly any options, but simple facts and conclusions drawn from the facts. We can even bring out the comments by the Chicago school of economics - the birthplace of neoliberal free market ideology. Who with assistance from the government 'helped' south American countries by implementing more free markets than in USA. And as the result those countries imploded both politically and economically, and what does Chicago say? well obviously markets were not free enough. They laugh at communist who say failed soviet counties were not communist enough, yet they do exact same thing with their experiments (actually, the difference is that they inflicted it on other countries).
- hardlianotion 5y ago
  > (actually, the difference is that they inflicted it on other countries) No difference there. Soviet communism was all about exportation.

losvedir 5y ago

You call it "economic orthodoxy" but it's really nothing of the sort. There's not even really a technical definition of "free markets" so I don't know where you're getting your assertions. I think you're kind of gesturing at the concept of "perfect competition", which is rigorously defined and does have technical requirements [0], one of which is perfect information. But it actually doesn't really apply to the tax situation of the owner. In other words, for political and ethical reasons, there's a lot of reform that can and should be done, but I wouldn't dress up the argument in the form of "economic orthodoxy", unless you're talking about actual economic orthodoxies like lowering corporate income tax and preferring VAT to personal income tax. edit: I should soften my confidence here, it's been a while since I did economics. At least, I've never heard of transparency extending beyond the good or service being a requirement for perfect competition... do you have a source for that, or can you clarify how it would affect things? [0] https://en.m.wikipedia.org/wiki/Perfect_competition#Idealizing_conditions_of_perfect_competition https://en.m.wikipedia.org/wiki/Perfect_competition#Idealizi...

lordnacho 5y ago
> unless you're talking about actual economic orthodoxies like lowering corporate income tax and preferring VAT to personal income tax. Those are more political ideologies than anything. By economic orthodoxy, I simply mean that it's a fairly common economic teaching that bad things happen when parties are uninformed. For instance Akerlof lemons is about information asymmetry. I'm not referring to any specific model (monopolistic competition etc) but to the general observation that a fair few economic models point out that having wrong information causes problems.
- dcolkitt 5y ago
  > For instance Akerlof lemons is about information asymmetry. Akerlof lemons have zero to do with knowing the salary of the CEO of the lemon company.
  - strgcmc 5y ago
    Are you so sure about that? Think about the CEOs themselves as the lemons... a lack of transparency can lead to the same adverse selection pressure that trends towards "lemon CEOs" flourishing, and pay transparency can help align the incentives somewhat.

pjc50 5y ago

> Reporting to investors ought to mirror reporting to the taxman. This would be a nice simple GAAR: you pay either the current corporate rate or 20% of the GAAP profits you report in your stockmarket statement, whichever is the larger.

bobbob1921 5y ago

Maybe part of solution is higher sales taxes , and less (or zero) other taxes. Ie tax mainly (only?) at the purchase of a good or service. I don’t recall seeing massive sales tax fraud scandals, atlease at any meaning scale.

whakim 5y ago
Sales taxes are logistically simple but also highly regressive, so the wealthy wouldn't even have to use loopholes to enjoy an ultra-regressive tax system :).
- tekknik 5y ago
  Why is the point to tax the wealthy more? Why do we want to kill the incentive for starting companies and becoming wealthy? My opinion, the left will only be happy with a 100% income tax and socialism.
  - whakim 5y ago
    > Why is the point to tax the wealthy more? Why do we want to kill the incentive for starting companies and becoming wealthy? There isn't any evidence that tax rates much higher than those we currently have have been any obstacle to growth. Perhaps in theory, but many countries around the world and across history (including the United States!) have had much more progressive taxation regimes and it hasn't "kill[ed] the incentive for starting companies and becoming wealthy."
    - tekknik 5y ago
      > Perhaps in theory, but many countries around the world and across history (including the United States!) have had much more progressive taxation regimes and it hasn't "kill[ed] the incentive for starting companies and becoming wealthy." Which countries? And what happens when another country becomes more competitive than the US from a tax perspective? Will it destroy the country? certainly not. Will the US continue to be the world reserve currency and lead the world? Again, no.

specialist 5y ago

> We simply hear too much about "selling IP rights" to subsidiaries and similar schemes that are clearly meant to lower tax rather than increase revenue. Huh. Made me wonder if advocates of IP reform could claim improved tax sanity as a benefit. Happily, not an original thought. Here's the first hit via ddg: Intellectual Property Law Solutions to Tax Avoidance [2015] https://www.uclalawreview.org/pdf/62-1-1.pdf https://www.uclalawreview.org/pdf/62-1-1.pdf "Multinational corporations use intellectual property (IP) to avoid taxes on a massive scale, by transferring their IP to tax havens for artificially low prices. Economists estimate that this abuse costs the U.S. Treasury as much as $90 billion each year. Yet tax policymakers and scholars have been unable to devise feasible tax-law solutions to this problem. This Article introduces an entirely new solution: change IP law rather than tax law. Multinationals’ tax-avoidance strategies rely on undervaluing their IP. This Article proposes extending existing IP law so that these low valuations make it harder for multinationals to subsequently litigate or to license their IP. For example, transferring a patent for a low price to a tax-haven subsidiary should make it harder for the multinational to demonstrate the patent’s validity, a competitor’s infringement, or entitlement to any injunctions. The low transfer price should also weigh toward lower patent damages and potentially even a finding of patent misuse. Extending IP law in such ways would thus deter multinationals from using IP to avoid taxes. Both case law and IP’s policy justifications support this approach." Also... > How can we have free markets when we don't even know who owns what? Yup. Open markets require symmetrical information.

deleted 5y ago

[deleted]

whakim 5y ago

I think this hits the nail on the head. Wealth is protected by a vast array of national and international laws and institutions - everything from protection of intellectual property to the technicalities of making sure that you and I can't both own the same piece of property at the same time. In return for this, it's not unreasonable for national governments to require more transparency in terms of who owns what. (By the by, I think the real reason this doesn't happen is the obvious suspicion that it could lead to more progressive forms of taxation, e.g. wealth taxes.)

cblconfederate 5y ago

Alternatively, governments need to open up these schemes to everyone so they become accessible to every middle class person. BUT they 'll also have to compete with other governments about providing better and transparent taxation options. Right now the schemes are limited not only to the rich but to the well connected rich

csomar 5y ago

> How can we have free markets when we don't even know who owns what? Great. Let's add more paperwork to the incorporation/reporting process. > As for taxation, there needs to be an overhaul. Taxation has a hard time changing the current laws because these are revenue for government. It can't do an overhaul but it can make new rules/regulations. Great, more paperwork. > Moving profits to other countries shouldn't be possible, or rather, it should be more fixed by the nature of the business than by the desires of the CFO. More paperwork, regulations, rules and advisors. That should simplify your tax diagram. > Perhaps the way to see it is, if you say "we make money by selling coffees in the UK" Many economic players are way more complex than a company selling coffee in the UK. These also happen to be the most influential and important nodes in your economy. tldr: Tax is a really complex issue. ICIJ is, surprisingly, not that transparent in its funding and the people doing the funding/leaking these documents; I'm really doubtful they are doing it because they have "good hearts" or on any goodwill to help "society".

whakim 5y ago
> Great. Let's add more paperwork to the incorporation/reporting process. Many of the systems required to create a more complete accounting of assets already exist. For example, in the United States financial institutions already generate 1040s for profits/losses/dividends on financial assets; it wouldn't be particularly difficult for those forms to also include the actual assets themselves and their values. Local governments already collect property taxes (which, at various points throughout history have included a lot more than just property - such as cars/boats/etc.; equipment, etc. - so the infrastructure already exists to tabulate these other categories too) - it wouldn't be hard to transmit that data. I'm not arguing that it wouldn't take any work to have a transparent accounting of who owns what, but it's certainly not impossible - after all, we do it for income and no one seems to bat an eyelid. Not to mention that we live in an age of fast and easy electronic communications. Transparent wealth accounts have existed before in much more difficult circumstances (e.g. wealth taxes imposed on war profiteering by various governments after WWII) and it didn't prove to be an insurmountable burden. > Taxation has a hard time changing the current laws because these are revenue for government. It can't do an overhaul but it can make new rules/regulations. Great, more paperwork. Taxation is law - in fact, the tax code and how it is structured is probably the most important part. > More paperwork, regulations, rules and advisors. That should simplify your tax diagram. There is already an incredible amount of paperwork, regulations, rules and advisors involved in the gaming of the global tax system that already occurs. More transparency around asset ownership would help lead to a simpler global tax regime, not a more complicated one.

silexia 5y ago

I agree completely. For free markets to work, we need the following: -Bankruptcy without bailouts to clear dead wood. -Abolish patents as these simply limit free market competition and are a ploy to try to claim ownership on something that usually is one tiny fragment of human knowledge. -Public tax records for everyone. Sunlight is the best disinfectant (and the best way to allocate resources)! -Wealth tax instead of income tax.

6510 5y ago
Good list! I would also.. - allow government to compete on the free market. - allow government to force-purchase static businesses that are profitable but not innovating. - require government to monitor such port folio and privatize where innovation is failing. Privatization of this kind should not be rushed and aim to get good value for the assets. - print money against the new government assets minus earnings from privatization
- systemvoltage 5y ago
  > allow government to compete on the free market So then we should disallow government from regulating the market? There is a conflict of interest in your conjecture.
  - 6510 5y ago
    Government has to make money some how. While it is good to extract wealth from people with deep pockets I believe profiting from transactions though taxation for the most part is discouraging economic activity. I and many other people have a laundry list of skills that I could offer to others only if I fill out piles of paper work. If little jimmy wants to wash 1 car he needs to register a business and get the business bank account? If big Joe has 100 car washes and he is earning a stable income without expanding or innovating to much government could make a bid on it and offer him a job. If say the US gov wants to force-purchase the google search engine it should pay handsomely for it. Say 1800 billion. Alphabet would do just fine bidding on the advertisement slots and selling them to their customers. (Such a large purchase should probably involve a referendum) It is our government. If we want it to sell beer in town hall it should be up to us. If you and many others are against it it obviously shouldn't happen.

no_wizard 5y ago

As far as the taxes bit, at least here in the USA I always felt that we should just get rid of corporate taxation entirely, and instead tax ya know, the CEOs etc the difference, which in effect means taxing capital gains like regular income for instance. That would do wonders for businesses to simplify the tax schemes and really moves the taxation portion to the individuals. I’m sure like any tax reform this has edge cases and stuff I know I haven’t considered but wouldn’t the upside be taxation happens more uniformly as a result?

Pokepokalypse 5y ago
If we get rid of corporate income tax (and we should), we should absolutely bill corporations for ALL use of publicly-funded infrastructure. - use of public highways (reimburse in proportion to wear-and-tear, etc). - use of public regulatory agencies like the FCC and FAA (to permit broadcast spectrum and airspace to be useful resources without everyone grabbing all of it all at once). - very expensive use of US military to enforce international law, or to protect assets in foreign countries. - use of publicly funded education to train their workforce. I could probably go on for pages and pages but these are probably the big ones we spend the most money on. I think a few months of this system and most corporations would be BEGGING to go back to simple income tax where they can game the system and scam their way out of paying what they owe.
marto1 5y ago
That's great and all, but the tax revenue in absolute terms from corporations is probably several orders higher than what you can tax a rich CEO. Just something to keep in mind.

runeks 5y ago

> How can we have free markets when we don't even know who owns what? Why would we need to know who owns what in order to have a free market?

bitL 5y ago

Most of the profit is based on information asymmetry or on being a monopoly (high barrier to entry).

tekknik 5y ago
Interestingly, creating difficult to understand or implement tax codes also raise the barrier to entry.

deleted 5y ago

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