20 ms·

EU adopts global minimum 15% tax on big business

275 points by nixcraft 4y ago

mytailorisrich 4y ago
> European leaders praised the decision, with Germany's Chancellor Olaf Scholz describing it as a "project close to my heart". French President Emmanuel Macron said the country had been pushing the idea for more than four years. Of course countries with high taxes are all for raising taxes in countries where they are lower! Now, unfortunately the article does not mention the interesting bit, which is that EU countries with lower corporation tax will therefore have to raise their rates. I'm thinking especially about Hungary and with the current tense relations I'm surprised that they agreed... What is the deal?
- jacooper 4y ago
  More money for the government, why would they refuse ?
  - jiveturkey 4y ago
    It severely reduces their ability to attract future business, as well as the likelihood that companies will continue to remain headquartered there. If you go there for tax benefits and those tax benefits go away, how likely are you to continue to bother with such complex structures?
  - anm89 4y ago
    This is empirically not always true. Higher taxes can lead to lower tax revenues if it reduces the size of the pie when business go to tax friendly jurisdictions. This can also work with income taxes. For example if you set income tax at 100%, you'd get 0 revenue probably because no one would work. This effect happens at values below 100%
    - skt5 4y ago
      This is what economists call the Laffer curve. See https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve.
  - mytailorisrich 4y ago
    Why do countries have lower tax rates to start with? For many small/remote countries, lower corporation tax is a way to attract companies that would never have come if the tax rate was higher.
    - manmal 4y ago
      Looking at you, Ireland.
      - secondcoming 4y ago
        Ireland did the right thing. The 1980’s and 1990’s were bleak times.
        lechacker 4y ago
        And the 2020s and 2030s are going to be even bleaker, now.
  - rnk 4y ago
    At a certain point, where you have such different views in countries like Hungary (Hungary wants to placate Russia or something similar leading to not helping Ukraine, wants to block Finland and Sweden from Nato, wants to disable/reduce/destroy democracy in Hungary, wants all that stimulus money from the EU to keep coming in), we just have to say we'll go our way, you go yours. Unity required for so many decisions means the extreme minority of 1 can extract too much. Similar thing for Turkey and Nato. Either that, or the groups (EU, NATO) will have to change their rules to allow a few no votes on things, or they'll just become broken orgs. I'm sure Russia would offer almost anything to the wanna-be dictators in Turkey and Hungary to get them to vote no on these things. These "complete agreement" democratic groups don't work when some leaders are dictators.
- agilob 4y ago
  Didn't know about Hungary. All I was thinking was how EU had to force Apple and Ireland to pay taxes in Ireland, because... Ireland didn't want some free billions https://www.theguardian.com/business/2016/aug/30/apple-pay-back-taxes-eu-ruling-ireland-state-aid https://www.theguardian.com/business/2016/aug/30/apple-pay-b...
  - secondcoming 4y ago
    Ireland would prefer the jobs to the taxes. A country has to tune itself to keep people employed. Every country is different and small countries would be ruined by tax harmonisation. France et al give zero shits about Ireland, it wants the jobs Ireland has.
  - NoboruWataya 4y ago
    That decision by the EU was found to be illegal by an EU court, by the way: https://www.euractiv.com/section/digital/news/commission-loses-out-in-apple-ireland-tax-battle-announces-tax-abuse-clampdown/ https://www.euractiv.com/section/digital/news/commission-los...
- gumby 4y ago
  They can use the EU as an excuse to raise taxes without taking the blame. Most people have no idea how the EU works and don't realize that that rule would not have been put in place unless their own government had supported it. That's what unanimity means. Also at the end of the day most EU laws are aquiescence rules: if you have a specification for cucumbers it must be like this. But if you don't have such a spec (and producers in other countries aren't prevented from doing business with you) then you don't need to put the rule into place. After all, every EU "law" is actually a description which has be be implemented in each country by its legislature.
- sequence7 4y ago
  Hungary desperately needs EU funds and it would have lost several billion euros is it had blocked this.
- poisonborz 4y ago
  Your wondering is justified, and (like almost every other EU issue nowadays) Hungary was a holdout opposer, and used the vote to blackmail in other areas. They struck a deal in a "package" that includes Ukrain aid as well, in return they got some of the EU funds that was held back because of corruption. What a great happy Union this is. https://www.politico.eu/article/eu-deal-hungary-drop-vetoe-recovery-plan-approved-funding-freeze-ukraine-aid/ https://www.politico.eu/article/eu-deal-hungary-drop-vetoe-r...
  - mytailorisrich 4y ago
    Ah, thanks for those details and that link.
  - TacticalCoder 4y ago
    > What a great happy Union this is. Also the EU repeatedly called out Hungary for corruption but now Hungary is having its moment pointing that several member of the european parliaments have been caught in a very serious corruption scandal (and these are only those who got caught). What a great happy honorable Union full of integrity we enjoy too.
poszlem 4y ago
> "Today the European Union has taken a crucial step towards tax fairness and social justice," EU economy commissioner Paolo Gentiloni said. There is a saying in Poland: "The difference between <<justice>> and <<social justice>> is the same as the difference between <<a chair>> and <<an electric chair>>. I wish we would actually listen to the those countries, when it comes to topics like socialism and communism. Though I suspect the Western European countries need to taste that themselves first to be able to understand what that means.
- orangebeet 4y ago
  You're absolutely right. When we are all fully fledged EU-colonies and the non-democratically elected Urzula has bought out all corrupt politicians to the benefit of Germany, "we" will understand what it means.
- consumer451 4y ago
  I am sitting in Poland, grew up under the thumb of the Soviets, but I don’t see the connection to a global minimum tax. Are you saying it’s like communism?
  - dadjoker 4y ago
    IMO yes. As I see it, this is countries with high taxes being jealous of countries with lower taxes, and so instead of maybe lowering taxes to become more competitive, they - along with the bloated EU leadership - bully the countries with a logically lower tax into raising theirs, so the bullies feel better about themselves and don't lose "their" tax money. This is the inherent problem of the EU, from both a social and economic standpoint; the member countries lose their competitive advantages over other countries because the socialistic EU bureaucrats can't handle any one country a) having any type of competitive advantage over another and b) not conforming to what they want.
    - realityking 4y ago
      In the past, before the EU single market and widespread free trade agreements, a country would simply raise a customs duty when another country would overly subsidize an industry. Or they would raise the customs duty merely to protect their domestic industry. Or because they don’t like that country for some other reason. A large purpose of the EU is to remove those trade barriers to make the economy more efficient. Of course some countries figure out how to take advantage of the single market using regulatory arbitrage, quickly entering a race to the bottom. Thus the EU is becoming the regulator in a lot of (non-tax) areas to prevent this. This is just the next logical step in this regard. It’s worth noting that any EU rules on taxation are decided with unanimous consensus. No country here has to do anything against their will.
oliv__ 4y ago
"The US has not taken steps to adopt the rules so far, despite Ms Yellen's championship of the plan." Lol, obviously. Cheering them on as they shoot themselves in the foot
- jacooper 4y ago
  America and the EU as usual
- Lionga 4y ago
  US LLCs are pass trough entities and the solution of choice for digital nomads to completely avoid paying any taxes. US is still the best tax avoidance haven for most people. EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are.
  - manmal 4y ago
    > EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are What political system could not be accused of this? Heck my small town is like that.
    - kazen44 4y ago
      also, the EU has done some quite proper laws and directives. Schengen and the entire construct of the internal market being one of the main advantages.
  - nszceta 4y ago
    One does not simply avoid paying taxes with an LLC unless your gross income is minute, tax deductible expenses are huge, or your losses are huge. IT IS NOT SOME MAGICAL LOOPHOLE. It is hard enough to stay afloat as a business without misinformation like this being spread.
    - csomar 4y ago
      If you have a US LLC without US income, you are disregarded by the IRS. The tricky thing is getting a bank account without an EIN, however. But if you can do that, you are pretty much set.
hassanahmad 4y ago
Bigger tax for bigger business. Fair enough.
- cheald 4y ago
  The US income tax was originally supposed to be a tax on just the richest, too. These things have a way of scope creeping.
  - woodruffw 4y ago
    I can't find any evidence of this: the earliest US income tax was levied for the Civil War, and amounted to a 3% tax on anybody making around $27,000 (in 2022 dollars). That's not a particularly "rich" cutoff. Edit: about $27,000[1]. [1]: https://www.in2013dollars.com/us/inflation/1861?amount=800 https://www.in2013dollars.com/us/inflation/1861?amount=800
    - bombcar 4y ago
      I think they're referring to the one that was enabled by the amendment.
      - woodruffw 4y ago
        Okay. In that case the cutoff was around $80,000 in today's money, which is certainly not poor (but not rich either).
        cjbgkagh 4y ago
        The difference in the amount of tax has a big effect on post tax money. If it's 45% (city + state + federal + social security etc.) you'd have to make x * (1 - 45%) = $80K * (1 - 3%), solving for x gives $141K which is a big difference.
        leereeves 4y ago
        Top three percent is fairly rich. > The Revenue Act of 1913 ... established a one percent tax on income above $3,000 per year; the tax affected approximately three percent of the population. https://en.wikipedia.org/wiki/Revenue_Act_of_1913 https://en.wikipedia.org/wiki/Revenue_Act_of_1913
jacooper 4y ago
> The landmark deal between nearly 140 countries aims to stop governments racing to cut taxes in a bid to attract companies. > It was praised by US Treasury Secretary Janet Yellen as "an historic agreement which helps even the playing field". This is a global goal, not just an EU Law.
- jiveturkey 4y ago
  ok but the story here is about the EU adoption of such. > The US has not taken steps to adopt the rules so far, despite Ms Yellen's championship of the plan.
  - jacooper 4y ago
    I know, but the title makes it seem like an EU campaign.
    - jiveturkey 4y ago
      I don't see how. 'global' is right in the headline.
      - stilist 4y ago
        I assumed it was a tax the EU applied to global business, not a globally-agreed tax the EU signed onto.
- lzauz 4y ago
martinald 4y ago
This isn't really as big a deal as it's been made out to be, IMO. This is Pillar 2 of the OECDs tax reform for corporations. Pillar 1 is much more interesting, and would require corporations to actually book profits where they are made (so not putting everything through Ireland for example). This will have a much bigger impact imo than this 15% ruling, because right now there are a bunch of tricks you can use to get round any tax rate. For example, even though Ireland's headline tax rate is currently 12.5%, the effective rate after all the tricks for many US tech cos was <1% to the Irish state.
- Nextgrid 4y ago
  Out of curiosity, how do you define where profits are made when it comes to selling digital services? There is no physical movement of goods. Do you determine it based on where the software was originally written?
  - torben-friis 4y ago
    Surely if, say, netflix is offered to french costumers profit is made in france?
    - toast0 4y ago
      Why should the profit be made in france if the engineering that went into delivery was made in the US, the content was made in X, the deal for the content was negotiated in Y, network source is Z (probably france, but not necessarily) VAT in France on the subscription makes sense, but figuring out where the profit lies, is more nebulous.
      - redm 4y ago
        It's where the profits are, not where the cost centers are. If the customers are in France, the profits are in France.
        dantheman 4y ago
Negitivefrags 4y ago
I don't really like this kind of idea because it really goes against a kind of fundemental freedom. "If you don't like it, you can leave". Instead, laws around making sure that the profits generated from a countries citizens are taxed by that country make more sense to me. A lot of laws around that already exist, and I suppose a lot of people would say that they have not been effective. A lot of it comes down to the treatment of Intelectual Property. A lot of the tax games that companies play relate to licencing their IP around between different countries. I wonder what would happen if a country tried banning licencing of IP between related parties internationally?
- mrweasel 4y ago
  > and I suppose a lot of people would say that they have not been effective. They really aren't. Q8, the gas stations, have been in Denmark for 30 year, if not more, they've apparently never been profitable, certainly not enough to pay taxes. The same goes for Coca Cola, which may have start to pay taxes. The only solution I've seen propose is a revenue tax. Similar to a VAT it would be added at the point of sale, making it impossible to avoid for companies. In return corporation would pay tax on profits. It has it own set of problem though.
- viraptor 4y ago
  > profits generated from a countries citizens are taxed by that country What about people who migrate somewhere else? What about dual+ citizenships? It makes little sense for me to pay taxes in a country I haven't lived in for 20 years.
  - scarmig 4y ago
    A reasonable modified goal would be "profits generated by a country's residents are taxed by that country."
    - poszlem 4y ago
      Yeah, I would not even mind a "no double citizenship" rule.
zerr 4y ago
Why businesses are taxed so low but individuals/employees so high in EU (35%-65% income tax)?
- djbebs 4y ago
  Because businesses are owned by people who in turn are taxed. In effect any corporation tax is a double tax.
  - mywittyname 4y ago
    > In effect any corporation tax is a double tax. There are a whole host of corporate entities which allow for pass-through taxation: LLC, S-Corp, sole proprietorships, and the like. I'd be surprised if European countries didn't have similar mechanisms.
    - troad 4y ago
      Believe it or not, they mostly don’t. It tends to be fairly binary. Corporations have legal personality, including separate tax identity, so no pass-through taxation. Sole proprietorships have pass-through taxation, but no legal personality (incl. no limit to liability). Intermediate entities like LLCs are a relatively recent Americanism that’s unusual in the rest of the world.
    - kwere 4y ago
      sole proprietorships are taxed at personal income level but pay pension contributions and/others at a % level, the game became unwhorthy at six figures levels. the way out are paying the lifestyle like SUVs with company funds (deductibles) and if worthy setting paper boxes to pay lower taxes. Example: San Marino offeres Trust funds that are easily taxed at 1.7% on income (can take money out after 2 accounting years). quite handy to build family/long term wealth
  - josefx 4y ago
    Double the tax for double the legally distinct entities.
  - 4y ago
techpression 4y ago
Meanwhile the Swedish government is giving massive incentives to Amazon, Google, Facebook and Microsoft to build data centers (and I assume other countries do too). Almost zero taxing on electricity and actual monetary payouts. In other words, this is a bit of a headline without any actual teeth (there’s plenty of ways to compete unfairly), which is the problem when you start wanting to govern the world, you can’t cover all the bases.
- badpun 4y ago
  In Poland, there's plenty of "special economic zones" and the companies which establish there are off the hook for corporate income taxes for the next 30 years (IIRC). Other EU countries probably also have similar things?
- deleted 4y ago
  [deleted]
- alkonaut 4y ago
  Such deals aren’t politically viable right now, and past ones seem to be scrutinized too.
Aulig 4y ago
Did I miss it in the article or was there no mention of where the cutoff is for "big" businesses? Or does it apply to all businesses?
- mhaberl 4y ago
  The threshold is set to 750 million euros. Here are the details: https://read.oecd-ilibrary.org/taxation/tax-incentives-and-the-global-minimum-corporate-tax_25d30b96-en#page10 https://read.oecd-ilibrary.org/taxation/tax-incentives-and-t...
omgomgomgomg 4y ago
This will be watered down in every way imaginable, escpecially the usual suspects like Malta with a straight up fraudluently advertised 30+ % corporate tax rate ,but they "refund" you everything but 5%, making it an effective 5% tax rate. There is no way Malta will play along, it is a small state abusing all the EU benefits for nefarious purposes and never contributing anything useful. This is just an example, there are many, many more more sophisticated schemes like that, Malta is just doing it openly.
- deleted 4y ago
  [deleted]
- kmlx 4y ago
  to put things in context, malta is an island country in Europe with a population of ~500k, and a gdp of ~$17B, truly a small state. i think it would be very hard for them to compete with a bigger, more developed country without the incentives you mention. of course taxes are just a part of the discussion, but a part nonetheless.
TheRealPomax 4y ago
You can't use "EU" and "global" in the same headline here, BBC.
mrtweetyhack 4y ago
mrtri 4y ago
antiquark 4y ago
Next question: who will get this money, and what do they plan to do with it?
todd8 4y ago
I’m not an Economist, but doesn’t such a tax lower a firm’s ability to pay its employees (by hiring more or increasing wages) or decrease the firm’s ability to pay dividends to shareholders or force the firm to raise prices. Generally, it seems like a way to collect more revenue from the population while hiding it as an indirect tax. And it seems a bit like a regressive tax that hits everyone. The fact that they want it to be global makes me feel that they don’t want to compete with other countries that may have “better” economic policies -— whatever that would mean.
anjoz 4y ago
[dead]
FrontierPsych 4y ago
Taxes on corporations to me always seemed rather silly. If there was a tax hike on my business, I'd automatically hike prices by 15%. This is what businesses are supposed to do. You buy shoes for your shoe store, you mark up the price, you can't sell them for what you bought them for. You hire an extra person, you raise the price of your goods or services. Oil prices go up? Gas stations raise the price of a gallon of gasoline. You have to pay extra taxes, you raise the price of your goods or services. It's always the customer who pays that extra 15% tax. It has to be that way, how else could it be?

275 points by nixcraft 4y ago

> European leaders praised the decision, with Germany's Chancellor Olaf Scholz describing it as a "project close to my heart". French President Emmanuel Macron said the country had been pushing the idea for more than four years. Of course countries with high taxes are all for raising taxes in countries where they are lower! Now, unfortunately the article does not mention the interesting bit, which is that EU countries with lower corporation tax will therefore have to raise their rates. I'm thinking especially about Hungary and with the current tense relations I'm surprised that they agreed... What is the deal?

jacooper 4y ago
More money for the government, why would they refuse ?
- jiveturkey 4y ago
  It severely reduces their ability to attract future business, as well as the likelihood that companies will continue to remain headquartered there. If you go there for tax benefits and those tax benefits go away, how likely are you to continue to bother with such complex structures?
- anm89 4y ago
  This is empirically not always true. Higher taxes can lead to lower tax revenues if it reduces the size of the pie when business go to tax friendly jurisdictions. This can also work with income taxes. For example if you set income tax at 100%, you'd get 0 revenue probably because no one would work. This effect happens at values below 100%
  - skt5 4y ago
    This is what economists call the Laffer curve. See https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve.
- mytailorisrich 4y ago
  Why do countries have lower tax rates to start with? For many small/remote countries, lower corporation tax is a way to attract companies that would never have come if the tax rate was higher.
  - manmal 4y ago
    Looking at you, Ireland.
    - secondcoming 4y ago
      Ireland did the right thing. The 1980’s and 1990’s were bleak times.
      - lechacker 4y ago
        And the 2020s and 2030s are going to be even bleaker, now.
- rnk 4y ago
  At a certain point, where you have such different views in countries like Hungary (Hungary wants to placate Russia or something similar leading to not helping Ukraine, wants to block Finland and Sweden from Nato, wants to disable/reduce/destroy democracy in Hungary, wants all that stimulus money from the EU to keep coming in), we just have to say we'll go our way, you go yours. Unity required for so many decisions means the extreme minority of 1 can extract too much. Similar thing for Turkey and Nato. Either that, or the groups (EU, NATO) will have to change their rules to allow a few no votes on things, or they'll just become broken orgs. I'm sure Russia would offer almost anything to the wanna-be dictators in Turkey and Hungary to get them to vote no on these things. These "complete agreement" democratic groups don't work when some leaders are dictators.
agilob 4y ago
Didn't know about Hungary. All I was thinking was how EU had to force Apple and Ireland to pay taxes in Ireland, because... Ireland didn't want some free billions https://www.theguardian.com/business/2016/aug/30/apple-pay-back-taxes-eu-ruling-ireland-state-aid https://www.theguardian.com/business/2016/aug/30/apple-pay-b...
- secondcoming 4y ago
  Ireland would prefer the jobs to the taxes. A country has to tune itself to keep people employed. Every country is different and small countries would be ruined by tax harmonisation. France et al give zero shits about Ireland, it wants the jobs Ireland has.
- NoboruWataya 4y ago
  That decision by the EU was found to be illegal by an EU court, by the way: https://www.euractiv.com/section/digital/news/commission-loses-out-in-apple-ireland-tax-battle-announces-tax-abuse-clampdown/ https://www.euractiv.com/section/digital/news/commission-los...
gumby 4y ago
They can use the EU as an excuse to raise taxes without taking the blame. Most people have no idea how the EU works and don't realize that that rule would not have been put in place unless their own government had supported it. That's what unanimity means. Also at the end of the day most EU laws are aquiescence rules: if you have a specification for cucumbers it must be like this. But if you don't have such a spec (and producers in other countries aren't prevented from doing business with you) then you don't need to put the rule into place. After all, every EU "law" is actually a description which has be be implemented in each country by its legislature.
sequence7 4y ago
Hungary desperately needs EU funds and it would have lost several billion euros is it had blocked this.
poisonborz 4y ago
Your wondering is justified, and (like almost every other EU issue nowadays) Hungary was a holdout opposer, and used the vote to blackmail in other areas. They struck a deal in a "package" that includes Ukrain aid as well, in return they got some of the EU funds that was held back because of corruption. What a great happy Union this is. https://www.politico.eu/article/eu-deal-hungary-drop-vetoe-recovery-plan-approved-funding-freeze-ukraine-aid/ https://www.politico.eu/article/eu-deal-hungary-drop-vetoe-r...
- mytailorisrich 4y ago
  Ah, thanks for those details and that link.
- TacticalCoder 4y ago
  > What a great happy Union this is. Also the EU repeatedly called out Hungary for corruption but now Hungary is having its moment pointing that several member of the european parliaments have been caught in a very serious corruption scandal (and these are only those who got caught). What a great happy honorable Union full of integrity we enjoy too.

poszlem 4y ago

> "Today the European Union has taken a crucial step towards tax fairness and social justice," EU economy commissioner Paolo Gentiloni said. There is a saying in Poland: "The difference between <<justice>> and <<social justice>> is the same as the difference between <<a chair>> and <<an electric chair>>. I wish we would actually listen to the those countries, when it comes to topics like socialism and communism. Though I suspect the Western European countries need to taste that themselves first to be able to understand what that means.

orangebeet 4y ago
You're absolutely right. When we are all fully fledged EU-colonies and the non-democratically elected Urzula has bought out all corrupt politicians to the benefit of Germany, "we" will understand what it means.
consumer451 4y ago
I am sitting in Poland, grew up under the thumb of the Soviets, but I don’t see the connection to a global minimum tax. Are you saying it’s like communism?
- dadjoker 4y ago
  IMO yes. As I see it, this is countries with high taxes being jealous of countries with lower taxes, and so instead of maybe lowering taxes to become more competitive, they - along with the bloated EU leadership - bully the countries with a logically lower tax into raising theirs, so the bullies feel better about themselves and don't lose "their" tax money. This is the inherent problem of the EU, from both a social and economic standpoint; the member countries lose their competitive advantages over other countries because the socialistic EU bureaucrats can't handle any one country a) having any type of competitive advantage over another and b) not conforming to what they want.
  - realityking 4y ago
    In the past, before the EU single market and widespread free trade agreements, a country would simply raise a customs duty when another country would overly subsidize an industry. Or they would raise the customs duty merely to protect their domestic industry. Or because they don’t like that country for some other reason. A large purpose of the EU is to remove those trade barriers to make the economy more efficient. Of course some countries figure out how to take advantage of the single market using regulatory arbitrage, quickly entering a race to the bottom. Thus the EU is becoming the regulator in a lot of (non-tax) areas to prevent this. This is just the next logical step in this regard. It’s worth noting that any EU rules on taxation are decided with unanimous consensus. No country here has to do anything against their will.

oliv__ 4y ago

"The US has not taken steps to adopt the rules so far, despite Ms Yellen's championship of the plan." Lol, obviously. Cheering them on as they shoot themselves in the foot

jacooper 4y ago
America and the EU as usual
Lionga 4y ago
US LLCs are pass trough entities and the solution of choice for digital nomads to completely avoid paying any taxes. US is still the best tax avoidance haven for most people. EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are.
- manmal 4y ago
  > EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are What political system could not be accused of this? Heck my small town is like that.
  - kazen44 4y ago
    also, the EU has done some quite proper laws and directives. Schengen and the entire construct of the internal market being one of the main advantages.
- nszceta 4y ago
  One does not simply avoid paying taxes with an LLC unless your gross income is minute, tax deductible expenses are huge, or your losses are huge. IT IS NOT SOME MAGICAL LOOPHOLE. It is hard enough to stay afloat as a business without misinformation like this being spread.
  - csomar 4y ago
    If you have a US LLC without US income, you are disregarded by the IRS. The tricky thing is getting a bank account without an EIN, however. But if you can do that, you are pretty much set.

hassanahmad 4y ago

Bigger tax for bigger business. Fair enough.

cheald 4y ago
The US income tax was originally supposed to be a tax on just the richest, too. These things have a way of scope creeping.
- woodruffw 4y ago
  I can't find any evidence of this: the earliest US income tax was levied for the Civil War, and amounted to a 3% tax on anybody making around $27,000 (in 2022 dollars). That's not a particularly "rich" cutoff. Edit: about $27,000[1]. [1]: https://www.in2013dollars.com/us/inflation/1861?amount=800 https://www.in2013dollars.com/us/inflation/1861?amount=800
  - bombcar 4y ago
    I think they're referring to the one that was enabled by the amendment.
    - woodruffw 4y ago
      Okay. In that case the cutoff was around $80,000 in today's money, which is certainly not poor (but not rich either).
      - cjbgkagh 4y ago
        The difference in the amount of tax has a big effect on post tax money. If it's 45% (city + state + federal + social security etc.) you'd have to make x * (1 - 45%) = $80K * (1 - 3%), solving for x gives $141K which is a big difference.
      - leereeves 4y ago
        Top three percent is fairly rich. > The Revenue Act of 1913 ... established a one percent tax on income above $3,000 per year; the tax affected approximately three percent of the population. https://en.wikipedia.org/wiki/Revenue_Act_of_1913 https://en.wikipedia.org/wiki/Revenue_Act_of_1913

jacooper 4y ago

> The landmark deal between nearly 140 countries aims to stop governments racing to cut taxes in a bid to attract companies. > It was praised by US Treasury Secretary Janet Yellen as "an historic agreement which helps even the playing field". This is a global goal, not just an EU Law.

jiveturkey 4y ago
ok but the story here is about the EU adoption of such. > The US has not taken steps to adopt the rules so far, despite Ms Yellen's championship of the plan.
- jacooper 4y ago
  I know, but the title makes it seem like an EU campaign.
  - jiveturkey 4y ago
    I don't see how. 'global' is right in the headline.
    - stilist 4y ago
      I assumed it was a tax the EU applied to global business, not a globally-agreed tax the EU signed onto.
lzauz 4y ago

martinald 4y ago

This isn't really as big a deal as it's been made out to be, IMO. This is Pillar 2 of the OECDs tax reform for corporations. Pillar 1 is much more interesting, and would require corporations to actually book profits where they are made (so not putting everything through Ireland for example). This will have a much bigger impact imo than this 15% ruling, because right now there are a bunch of tricks you can use to get round any tax rate. For example, even though Ireland's headline tax rate is currently 12.5%, the effective rate after all the tricks for many US tech cos was <1% to the Irish state.

Nextgrid 4y ago
Out of curiosity, how do you define where profits are made when it comes to selling digital services? There is no physical movement of goods. Do you determine it based on where the software was originally written?
- torben-friis 4y ago
  Surely if, say, netflix is offered to french costumers profit is made in france?
  - toast0 4y ago
    Why should the profit be made in france if the engineering that went into delivery was made in the US, the content was made in X, the deal for the content was negotiated in Y, network source is Z (probably france, but not necessarily) VAT in France on the subscription makes sense, but figuring out where the profit lies, is more nebulous.
    - redm 4y ago
      It's where the profits are, not where the cost centers are. If the customers are in France, the profits are in France.
      - dantheman 4y ago

Negitivefrags 4y ago

I don't really like this kind of idea because it really goes against a kind of fundemental freedom. "If you don't like it, you can leave". Instead, laws around making sure that the profits generated from a countries citizens are taxed by that country make more sense to me. A lot of laws around that already exist, and I suppose a lot of people would say that they have not been effective. A lot of it comes down to the treatment of Intelectual Property. A lot of the tax games that companies play relate to licencing their IP around between different countries. I wonder what would happen if a country tried banning licencing of IP between related parties internationally?

mrweasel 4y ago
> and I suppose a lot of people would say that they have not been effective. They really aren't. Q8, the gas stations, have been in Denmark for 30 year, if not more, they've apparently never been profitable, certainly not enough to pay taxes. The same goes for Coca Cola, which may have start to pay taxes. The only solution I've seen propose is a revenue tax. Similar to a VAT it would be added at the point of sale, making it impossible to avoid for companies. In return corporation would pay tax on profits. It has it own set of problem though.
viraptor 4y ago
> profits generated from a countries citizens are taxed by that country What about people who migrate somewhere else? What about dual+ citizenships? It makes little sense for me to pay taxes in a country I haven't lived in for 20 years.
- scarmig 4y ago
  A reasonable modified goal would be "profits generated by a country's residents are taxed by that country."
  - poszlem 4y ago
    Yeah, I would not even mind a "no double citizenship" rule.

zerr 4y ago

Why businesses are taxed so low but individuals/employees so high in EU (35%-65% income tax)?

djbebs 4y ago
Because businesses are owned by people who in turn are taxed. In effect any corporation tax is a double tax.
- mywittyname 4y ago
  > In effect any corporation tax is a double tax. There are a whole host of corporate entities which allow for pass-through taxation: LLC, S-Corp, sole proprietorships, and the like. I'd be surprised if European countries didn't have similar mechanisms.
  - troad 4y ago
    Believe it or not, they mostly don’t. It tends to be fairly binary. Corporations have legal personality, including separate tax identity, so no pass-through taxation. Sole proprietorships have pass-through taxation, but no legal personality (incl. no limit to liability). Intermediate entities like LLCs are a relatively recent Americanism that’s unusual in the rest of the world.
  - kwere 4y ago
    sole proprietorships are taxed at personal income level but pay pension contributions and/others at a % level, the game became unwhorthy at six figures levels. the way out are paying the lifestyle like SUVs with company funds (deductibles) and if worthy setting paper boxes to pay lower taxes. Example: San Marino offeres Trust funds that are easily taxed at 1.7% on income (can take money out after 2 accounting years). quite handy to build family/long term wealth
- josefx 4y ago
  Double the tax for double the legally distinct entities.
- 4y ago

techpression 4y ago

Meanwhile the Swedish government is giving massive incentives to Amazon, Google, Facebook and Microsoft to build data centers (and I assume other countries do too). Almost zero taxing on electricity and actual monetary payouts. In other words, this is a bit of a headline without any actual teeth (there’s plenty of ways to compete unfairly), which is the problem when you start wanting to govern the world, you can’t cover all the bases.

badpun 4y ago
In Poland, there's plenty of "special economic zones" and the companies which establish there are off the hook for corporate income taxes for the next 30 years (IIRC). Other EU countries probably also have similar things?
deleted 4y ago
[deleted]
alkonaut 4y ago
Such deals aren’t politically viable right now, and past ones seem to be scrutinized too.

Aulig 4y ago

Did I miss it in the article or was there no mention of where the cutoff is for "big" businesses? Or does it apply to all businesses?

mhaberl 4y ago
The threshold is set to 750 million euros. Here are the details: https://read.oecd-ilibrary.org/taxation/tax-incentives-and-the-global-minimum-corporate-tax_25d30b96-en#page10 https://read.oecd-ilibrary.org/taxation/tax-incentives-and-t...

omgomgomgomg 4y ago

This will be watered down in every way imaginable, escpecially the usual suspects like Malta with a straight up fraudluently advertised 30+ % corporate tax rate ,but they "refund" you everything but 5%, making it an effective 5% tax rate. There is no way Malta will play along, it is a small state abusing all the EU benefits for nefarious purposes and never contributing anything useful. This is just an example, there are many, many more more sophisticated schemes like that, Malta is just doing it openly.

deleted 4y ago
[deleted]
kmlx 4y ago
to put things in context, malta is an island country in Europe with a population of ~500k, and a gdp of ~$17B, truly a small state. i think it would be very hard for them to compete with a bigger, more developed country without the incentives you mention. of course taxes are just a part of the discussion, but a part nonetheless.

TheRealPomax 4y ago

You can't use "EU" and "global" in the same headline here, BBC.

mrtweetyhack 4y ago

mrtri 4y ago

antiquark 4y ago

Next question: who will get this money, and what do they plan to do with it?

todd8 4y ago

I’m not an Economist, but doesn’t such a tax lower a firm’s ability to pay its employees (by hiring more or increasing wages) or decrease the firm’s ability to pay dividends to shareholders or force the firm to raise prices. Generally, it seems like a way to collect more revenue from the population while hiding it as an indirect tax. And it seems a bit like a regressive tax that hits everyone. The fact that they want it to be global makes me feel that they don’t want to compete with other countries that may have “better” economic policies -— whatever that would mean.

anjoz 4y ago

[dead]

FrontierPsych 4y ago

Taxes on corporations to me always seemed rather silly. If there was a tax hike on my business, I'd automatically hike prices by 15%. This is what businesses are supposed to do. You buy shoes for your shoe store, you mark up the price, you can't sell them for what you bought them for. You hire an extra person, you raise the price of your goods or services. Oil prices go up? Gas stations raise the price of a gallon of gasoline. You have to pay extra taxes, you raise the price of your goods or services. It's always the customer who pays that extra 15% tax. It has to be that way, how else could it be?