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If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. So if a company had $100B global revenue and $10

If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. So if a company had $100B global revenue and $10B global profit and 0% of the profit was in France while 10% of the revenue was in France, then the company should be taxed based on the $1B profit that can be attributed to France based on revenue there. Any other scheme seems it’s prone to creative licensing schemes and similar.

cscurmudgeon 4y ago
> If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? Labor seems a better way to distribute and incentivize employment.
- breakfastduck 4y ago
  Not really because its extremely exploitable. Revenue is not - it DOES come from someone somewhere - its traceable. Work effort could be distorted in whatever fashion the country wants. They could declare all their work is done in some off shore 0% tax nation and pay nothing.
- bilbo0s 4y ago
  This seems to just scream "outsource to low or no tax developing nation".
- yardstick 4y ago
  > if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? The UK gets 100% already from the income tax for their workers.
- alkonaut 4y ago
  It’s “fair” only in that it’s understandable and somewhat enforcacble (and not possible to avoid with loopholes). It’s not fair in the sense that the right countries necessarily get the tax money - but it’s certainly more likely than it is today. It’s not fair in that it guarantees businesses aren’t taxed too much or too little, but it does guarantee that the profits are taxed somewhere which ends the incentive to shift the profits around. Perhaps “fair” is the wrong word. I mean “fair” as in hard to evade overall, not fair distribution.
jpollock 4y ago
That would have different tax results depending on whether or not it was operating under a reseller model, where the reseller is the one importing the item. Then there is little or no revenue local to France.
sfe22 4y ago
What if France has complex rules and extra regulations that bring the profit from the country to just 1 percent, compared to ~10% on global operations. With your logic you will tax the subsidiary way more than 100%.
causality0 4y ago
If you're trying to do fair taxation do away with "profit" taxes entirely. Not like any of us plebs get to dodge taxes by spending our income. Subtract what the company spends on salaries from its total revenue and then charge them 20-30 percent of the remainder just like the rest of us pay. "Corporations are people" after all. Toss in a seven percent sales tax on all stock purchases.
- diggernet 4y ago
  That would instantly bankrupt every single company in the many industries with single-digit profit margins.
  - exceptione 4y ago
    True. Proposal of parent could be made more realistic by making sure only few things like bill of materials, resale items and personnel costs can be deducted. Companies already keep track of all these things. You will have to go after financialization tricks, where healthy companies get loaded with debt, weird tricks with assets and all the stuff the finance industry comes up with that has nothing to do with core function of the company. Now imagine the powerful lobby you have to work against.
    - diggernet 4y ago
      Yup, gets pretty complicated. Seems like it'd be easier to forget about corporate tax, and charge income tax on every dollar going from the company to an individual.
    - exceptione 4y ago
      Apparently some lobby found my little comment too. :) Food for thought: in a distribution chain you will find lots of small value adds. Take sea ports, there are loads of companies that handle import of materials or products. The price they charge for their goods/services are dominated by their import costs.
  - pclmulqdq 4y ago
abeppu 4y ago
Maybe this is obvious to people that do accounting for multinationals, but it's not clear to me how you even establish that 10% of the revenue was in France. If a global company like Google pays a global company like Apple $K billion to be the default search engine on iphones, should Apple consider that revenue to be all in the US because Google is headquartered in the US even though it's purchasing something that will apply to people in lots of countries? Does it matter if Google uses local corporations in a number of companies to each pay Apple? If Google pays through its subsidiary in the jurisdiction with the highest corporate taxes, can it force Apple to realize revenue there?
- kwere 4y ago
  a "simple" solution would be requiring companies to set up legal entities/subsidiaries into the countries they make above xx millions of revenue, getting taxed at the local level, keeping simultaneously things simple for small companies which may sell across borders.

cscurmudgeon 4y ago

> If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? Labor seems a better way to distribute and incentivize employment.

breakfastduck 4y ago
Not really because its extremely exploitable. Revenue is not - it DOES come from someone somewhere - its traceable. Work effort could be distorted in whatever fashion the country wants. They could declare all their work is done in some off shore 0% tax nation and pay nothing.
bilbo0s 4y ago
This seems to just scream "outsource to low or no tax developing nation".
yardstick 4y ago
> if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? The UK gets 100% already from the income tax for their workers.
alkonaut 4y ago
It’s “fair” only in that it’s understandable and somewhat enforcacble (and not possible to avoid with loopholes). It’s not fair in the sense that the right countries necessarily get the tax money - but it’s certainly more likely than it is today. It’s not fair in that it guarantees businesses aren’t taxed too much or too little, but it does guarantee that the profits are taxed somewhere which ends the incentive to shift the profits around. Perhaps “fair” is the wrong word. I mean “fair” as in hard to evade overall, not fair distribution.

jpollock 4y ago

That would have different tax results depending on whether or not it was operating under a reseller model, where the reseller is the one importing the item. Then there is little or no revenue local to France.

sfe22 4y ago

What if France has complex rules and extra regulations that bring the profit from the country to just 1 percent, compared to ~10% on global operations. With your logic you will tax the subsidiary way more than 100%.

causality0 4y ago

If you're trying to do fair taxation do away with "profit" taxes entirely. Not like any of us plebs get to dodge taxes by spending our income. Subtract what the company spends on salaries from its total revenue and then charge them 20-30 percent of the remainder just like the rest of us pay. "Corporations are people" after all. Toss in a seven percent sales tax on all stock purchases.

diggernet 4y ago
That would instantly bankrupt every single company in the many industries with single-digit profit margins.
- exceptione 4y ago
  True. Proposal of parent could be made more realistic by making sure only few things like bill of materials, resale items and personnel costs can be deducted. Companies already keep track of all these things. You will have to go after financialization tricks, where healthy companies get loaded with debt, weird tricks with assets and all the stuff the finance industry comes up with that has nothing to do with core function of the company. Now imagine the powerful lobby you have to work against.
  - diggernet 4y ago
    Yup, gets pretty complicated. Seems like it'd be easier to forget about corporate tax, and charge income tax on every dollar going from the company to an individual.
  - exceptione 4y ago
    Apparently some lobby found my little comment too. :) Food for thought: in a distribution chain you will find lots of small value adds. Take sea ports, there are loads of companies that handle import of materials or products. The price they charge for their goods/services are dominated by their import costs.
- pclmulqdq 4y ago

abeppu 4y ago

Maybe this is obvious to people that do accounting for multinationals, but it's not clear to me how you even establish that 10% of the revenue was in France. If a global company like Google pays a global company like Apple $K billion to be the default search engine on iphones, should Apple consider that revenue to be all in the US because Google is headquartered in the US even though it's purchasing something that will apply to people in lots of countries? Does it matter if Google uses local corporations in a number of companies to each pay Apple? If Google pays through its subsidiary in the jurisdiction with the highest corporate taxes, can it force Apple to realize revenue there?

kwere 4y ago
a "simple" solution would be requiring companies to set up legal entities/subsidiaries into the countries they make above xx millions of revenue, getting taxed at the local level, keeping simultaneously things simple for small companies which may sell across borders.