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> In a global economy higher business taxes just cause large international corporations to incorporate in a different jurisdiction, which gives them an advantag

> In a global economy higher business taxes just cause large international corporations to incorporate in a different jurisdiction, which gives them an advantage over smaller purely domestic corporations, which is bad. This is the common wisdom. I doubt it. The legal system in the USA is worth paying for. If these companies really want to submit to European law, then, they're welcome to it. I don't think that loss actually hurts domestic businesses but helps the massively.

AnthonyMouse 1y ago
Companies are subject to the laws in all the places they do business. They pay income tax in the place they have net income, which is something that they control themselves. Corporate income tax is essentially designed wrong. Property tax is where the buildings are, payroll tax is where the workers are, sales tax is where the customers are, corporate income tax is where the profit is. Which they just put in the country with the lowest taxes. It's basically this: Employees in the US get paid $1B to design a product that employees in China get paid $1B to manufacture and then it gets sold to customers in Europe for $3B. The net profit is then $1B, but where is it? If the subsidiary in Ireland pays the subsidiary in California $2B for the design then it's in California. If they instead pay the subsidiary in Shenzhen $2B to manufacture it then it's in China. If they instead pay them each $1B then it stays in Ireland. And then the company picks based on whichever one has lower taxes. There is no real way around this because in real arms length negotiations it would depend on which subsidiary has more leverage against the others, but in modern companies what that really comes from is the strength of the company's brand or customer lock-in as a result of patents or copyrights, since without them the profit would be negligible because there would be no barriers to competitors entering the market and causing razor-thin margins, but all of those things are easy to move into whatever jurisdiction you like since they only exist on paper. So international corporations pay taxes in Ireland and purely domestic corporations pay taxes in California which puts the domestic corporations at a disadvantage when the taxes in California are higher.

AnthonyMouse 1y ago

Companies are subject to the laws in all the places they do business. They pay income tax in the place they have net income, which is something that they control themselves. Corporate income tax is essentially designed wrong. Property tax is where the buildings are, payroll tax is where the workers are, sales tax is where the customers are, corporate income tax is where the profit is. Which they just put in the country with the lowest taxes. It's basically this: Employees in the US get paid $1B to design a product that employees in China get paid $1B to manufacture and then it gets sold to customers in Europe for $3B. The net profit is then $1B, but where is it? If the subsidiary in Ireland pays the subsidiary in California $2B for the design then it's in California. If they instead pay the subsidiary in Shenzhen $2B to manufacture it then it's in China. If they instead pay them each $1B then it stays in Ireland. And then the company picks based on whichever one has lower taxes. There is no real way around this because in real arms length negotiations it would depend on which subsidiary has more leverage against the others, but in modern companies what that really comes from is the strength of the company's brand or customer lock-in as a result of patents or copyrights, since without them the profit would be negligible because there would be no barriers to competitors entering the market and causing razor-thin margins, but all of those things are easy to move into whatever jurisdiction you like since they only exist on paper. So international corporations pay taxes in Ireland and purely domestic corporations pay taxes in California which puts the domestic corporations at a disadvantage when the taxes in California are higher.