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The issue is neither corporate tax nor globalization, but the difference between corporate tax rates, which provides an incentive in the first place to shuffle
by samus 2y ago
The issue is neither corporate tax nor globalization, but the difference between corporate tax rates, which provides an incentive in the first place to shuffle profits offshore.
A solution could be to tax offshore expenses with the difference in tax rates, i.e., min(0, corporate tax rate -destination company's corporate tax rate)%. That would eliminate the advantage of lower tax rates at the destination.
Another way would be to allow deducting only min(100, 100 - corporate tax rate + destination company's corporate tax rate)% of the offshore expenses. That still provides benefits for shuffling profits offshore, but the origin location gets some of it.
- AmericanChopper 2y agoThis is just a reinvention of the global minimum corporate tax effort, and it would fail for exactly the same reasons. Except, with the added benefit of making corporate tax avoidance procedures more complicated, without actually accomplishing anything (now you need to offshore your profits to a friendly high tax jurisdiction before offshoring them again to a low tax one). Also, aside from the fact that this policy would fail, what you’re describing is a rather extreme import tarrif, which is a highly protectionist policy.
- samus 2y agoThanks for the insight!