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There is a lot of loaded language in that report, and I got the feeling that the reporter should have taken an economics class before doing it. It was like watc

There is a lot of loaded language in that report, and I got the feeling that the reporter should have taken an economics class before doing it. It was like watching a ignorant economics student get lectured about reality and she not wanting to accept any of it. So, instead of pulling down a bunch of theory from the shelf and going over it, I'll just point out the obvious flaw: she believes that the country "owns" all the businesses inside of it and that by the companies acting in their own best interest, somehow they are cheating the rest of us. Most folks who have really thought about this realize that everybody acts in their own self interest and that government's role is to set things up so they grow and that a reasonable amount of money can be harvested to help fund things. At times it sounded to me like she wanted the country to be a prison: set up shop here and you can never go abroad. Paying a tax lawyer to make the best moves for your company was cheating. Etc. I am deeply troubled that people are using mental models of business that look at businesses like the corner shopkeeper when business doesn't work like that anymore. Business is increasingly location-independent. Ranting about how unfair all of this is? It's not going to change that fact. It's 2011. I can live in Aruba, have corporate offices in Switzerland, have officers scattered around the world, make things in a dozen countries, market on the net, and sell in a hundred countries. You're using a mental model that doesn't match up to reality. You'll never make progress like that. Never once did she mention that the United States double-taxes income where no other country in the world does - a critical part of the entire discussion. That omission alone should tell you how well-researched and thoughtful the piece was.

Atropos 15y ago
I agree with your view of what the realities are. But I don't see why should applaud them: What happens if a country like Switzerland or Singapore has a sustainable competitive advantage over the USA or Germany, that simply cannot be overcome? They can achieve some efficiencies by "freeloading" that bigger countries cannot match, for example Switzerland doesn't train enough doctors at their own universities but relies heavily on hiring doctors from Germany. If companies cannot compete, in the long term they goe bankrupt and disappear. But how would a country disappear? It's not like every citizen could simply move somewhere else. Also the correlation/causality is not entirely clear to me. Possibly countries are more succesful, because they have lower taxes. But at some point it could also be true that only countries that are already succesful are able to lower their rax rates so much.
- jacques_chester 15y ago
  > What happens if a country like Switzerland or Singapore has a sustainable competitive advantage over the USA or Germany, that simply cannot be overcome? You may find the theory of absolute and comparative advantage to be enlightening in its detail; but the broad conclusion is that even if country A is better than country B at everything, it will still make sense for A to focus on some things and B on other things.
  - Atropos 15y ago
    I know comparative advantage, but does it really apply to competition with tax rates? For example inside the European Union it doesn't matter in which country a company is based, you have basically freedom of trade for goods and services. In Germany the medium age is 45 years, in Ireland it is 35 years; Population > 65 years is 20,6% vs.11,6%. Even if all other regulation in Germany + Ireland was identical, it seems unrealistic that Germany could sustain as low a tax rate, since the government has bigger expenses due to demographic issues alone. (Retirement benefits, medical) If every company moved to Ireland because of the lower tax rate, what should be done with the old people in Germany?
    - jacques_chester 15y ago
      You seem to labour under the illusion that if the money isn't taxed in a particular country, it somehow disappears from that country altogether. Yet wages are paid to employees and profits are distributed to shareholders. Lower taxes allow companies either to lower their prices or distribute more wages and profits. That's generally considered to be A Good Thing. If Germans want a slice of those profits, they can buy shares in the Irish-domiciled companies like everyone else.
      - Atropos 15y ago
        Employees and shareholders do not get their money from the government. But what about old people, government employees, social services? It just seems to me that the "assets" of the government move to a low tax country, but the "liabilities" stay the same... If there was a hypothetical "ZeroTaxCountry", to which companies could declare their allegiance and pay no taxes at all. Would you consider that "A Good Thing" as well, since it seems to have all the benefits you alluded too?
temphn 15y ago
Excellent points. To add to this: a) Taxes are used to pay for a whole host of things that large majorities find highly undesirable, including bombing Libya, harassing air travellers, and bailing out Wall Street. Whether you are on the left or right, you can add a slew of other programs that are of dubious or negative value. b) Taxes are also extracted involuntarily, literally at the point of a gun if one thinks about the limit case of tax resistance. Try protesting the war(s) by not paying your taxes, and soon enough the IRS will come with guns and throw you in jail. There are some government programs each person will agree with. But it's the lump sum, involuntary nature of taxes that make them a highly inefficient way to fund said programs.
- sixtofour 15y ago
  What would be a more efficient way to fund Medicaid and bombing Libya?

Atropos 15y ago

I agree with your view of what the realities are. But I don't see why should applaud them: What happens if a country like Switzerland or Singapore has a sustainable competitive advantage over the USA or Germany, that simply cannot be overcome? They can achieve some efficiencies by "freeloading" that bigger countries cannot match, for example Switzerland doesn't train enough doctors at their own universities but relies heavily on hiring doctors from Germany. If companies cannot compete, in the long term they goe bankrupt and disappear. But how would a country disappear? It's not like every citizen could simply move somewhere else. Also the correlation/causality is not entirely clear to me. Possibly countries are more succesful, because they have lower taxes. But at some point it could also be true that only countries that are already succesful are able to lower their rax rates so much.

jacques_chester 15y ago
> What happens if a country like Switzerland or Singapore has a sustainable competitive advantage over the USA or Germany, that simply cannot be overcome? You may find the theory of absolute and comparative advantage to be enlightening in its detail; but the broad conclusion is that even if country A is better than country B at everything, it will still make sense for A to focus on some things and B on other things.
- Atropos 15y ago
  I know comparative advantage, but does it really apply to competition with tax rates? For example inside the European Union it doesn't matter in which country a company is based, you have basically freedom of trade for goods and services. In Germany the medium age is 45 years, in Ireland it is 35 years; Population > 65 years is 20,6% vs.11,6%. Even if all other regulation in Germany + Ireland was identical, it seems unrealistic that Germany could sustain as low a tax rate, since the government has bigger expenses due to demographic issues alone. (Retirement benefits, medical) If every company moved to Ireland because of the lower tax rate, what should be done with the old people in Germany?
  - jacques_chester 15y ago
    You seem to labour under the illusion that if the money isn't taxed in a particular country, it somehow disappears from that country altogether. Yet wages are paid to employees and profits are distributed to shareholders. Lower taxes allow companies either to lower their prices or distribute more wages and profits. That's generally considered to be A Good Thing. If Germans want a slice of those profits, they can buy shares in the Irish-domiciled companies like everyone else.
    - Atropos 15y ago
      Employees and shareholders do not get their money from the government. But what about old people, government employees, social services? It just seems to me that the "assets" of the government move to a low tax country, but the "liabilities" stay the same... If there was a hypothetical "ZeroTaxCountry", to which companies could declare their allegiance and pay no taxes at all. Would you consider that "A Good Thing" as well, since it seems to have all the benefits you alluded too?

temphn 15y ago

Excellent points. To add to this: a) Taxes are used to pay for a whole host of things that large majorities find highly undesirable, including bombing Libya, harassing air travellers, and bailing out Wall Street. Whether you are on the left or right, you can add a slew of other programs that are of dubious or negative value. b) Taxes are also extracted involuntarily, literally at the point of a gun if one thinks about the limit case of tax resistance. Try protesting the war(s) by not paying your taxes, and soon enough the IRS will come with guns and throw you in jail. There are some government programs each person will agree with. But it's the lump sum, involuntary nature of taxes that make them a highly inefficient way to fund said programs.

sixtofour 15y ago
What would be a more efficient way to fund Medicaid and bombing Libya?