5 ms·

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 sustain

by 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?
      - jacques_chester 15y ago
        You're right that future liabilities are a mess. In Australia in the early 1990s the government introduced a program of compulsory superannuation. Already something like a trillion dollars has been saved by Australians against their retirement under the scheme. Singapore does something similar. Australia has also put away tens of billions of dollars against the future liabilities of public service pensions. Will it completely do away with government liabilities? No. Australia too will face higher health care costs. But some of those costs will be defrayed by the superannuation and taxes levied on an economy that grew faster without the taxes than with them. I am ambivalent about the Euro-US situation. On the one hand, it sucks that you face a period of painful adjustment to inescapable economic reality. On the other hand, your politicians have steadfastly refused to face up to those realities. As an Australian I find it annoying that profligate governments in Europe and the USA are hurting my prospects, even though here we've largely enjoyed fairly sensible economic policy for the past 25 years.
      - 15y ago
yummyfajitas 15y ago
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. How is this "freeloading"? Medical schools located in Germany train doctors, who then pay the medical school. People in Switzerland pay the doctors for services. Is Germany also freeloading on Switzerland if they purchase Swiss chocolates or watches? Is the US freeloading off India because the US buys BPO services from India?
- Atropos 15y ago
  Not entirely comparable. Most universities don't have tuition fees in Germany, the highest fees are 1000€/year, while it is estimated that the costs of educating a medical student are at least 30,000€ / year. Basically the education is heavily subsidized by the German taxpayer, so if a huge number of doctors later work and pay taxes in Switzerland it is somewhat suboptimal.
  - yummyfajitas 15y ago
    Ok, so the real problem is that Germany is forcing it's citizens to subsidize doctors and the Swiss, rather than that the Swiss are freeloading. The obvious solution (for Germany's citizens, if not their politicians) would be to charge market rates for medical education.

by Atropos 15y ago

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?
    - jacques_chester 15y ago
      You're right that future liabilities are a mess. In Australia in the early 1990s the government introduced a program of compulsory superannuation. Already something like a trillion dollars has been saved by Australians against their retirement under the scheme. Singapore does something similar. Australia has also put away tens of billions of dollars against the future liabilities of public service pensions. Will it completely do away with government liabilities? No. Australia too will face higher health care costs. But some of those costs will be defrayed by the superannuation and taxes levied on an economy that grew faster without the taxes than with them. I am ambivalent about the Euro-US situation. On the one hand, it sucks that you face a period of painful adjustment to inescapable economic reality. On the other hand, your politicians have steadfastly refused to face up to those realities. As an Australian I find it annoying that profligate governments in Europe and the USA are hurting my prospects, even though here we've largely enjoyed fairly sensible economic policy for the past 25 years.
    - 15y ago

yummyfajitas 15y ago

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. How is this "freeloading"? Medical schools located in Germany train doctors, who then pay the medical school. People in Switzerland pay the doctors for services. Is Germany also freeloading on Switzerland if they purchase Swiss chocolates or watches? Is the US freeloading off India because the US buys BPO services from India?

Atropos 15y ago
Not entirely comparable. Most universities don't have tuition fees in Germany, the highest fees are 1000€/year, while it is estimated that the costs of educating a medical student are at least 30,000€ / year. Basically the education is heavily subsidized by the German taxpayer, so if a huge number of doctors later work and pay taxes in Switzerland it is somewhat suboptimal.
- yummyfajitas 15y ago
  Ok, so the real problem is that Germany is forcing it's citizens to subsidize doctors and the Swiss, rather than that the Swiss are freeloading. The obvious solution (for Germany's citizens, if not their politicians) would be to charge market rates for medical education.