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Corporations, small businesses and even people will rationally pay only the minimum tax that they can get away with under the law. The law favours big internati

Corporations, small businesses and even people will rationally pay only the minimum tax that they can get away with under the law. The law favours big international corporations so this is what you get. If you find this inequitable then laws need to be changed. On the other hand big corporations as well as wealthy people usually have more leverage in terms of being able to move and operate or reside in more tax-friendly or hospitable regimes.

Silhouette 14y ago
On the other hand big corporations as well as wealthy people usually have more leverage in terms of being able to move and operate or reside in more tax-friendly or hospitable regimes. That's often claimed, but I'm not convinced. Some people/businesses might move away because of being forced to pay tax at the same rate as everyone else. Most people/businesses won't, because most people don't choose where to live only by tax rate and most businesses aren't going to give up a market of 60+ million people. And frankly, if they're only paying a million or so in taxes at that size, good riddance to those who think they can do better elsewhere anyway.
- nikcub 14y ago
  NPR Planet Money did an episode on the claim that rich people move states based on increasing tax rates: http://www.npr.org/blogs/money/2011/04/22/135635574/the-friday-podcast-do-the-rich-flee-high-tax-states http://www.npr.org/blogs/money/2011/04/22/135635574/the-frid... They found, based on research, that the effect was negligible, and that other impacts of increasing taxes are much more noteworthy.
- jasonlingx 14y ago
  Businesses might not be able to choose so much where their market is, but they surely have a choice in where they set up manufacturing, R&D, corporate HQ etc etc. Countries constantly compete for business investment. Wealthy individuals are similar. They probably won't move their chosen country of residence for tax reasons, but I am pretty sure they will move their assets and investments to protect their value. Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this.
  - chii 14y ago
    I suspect that the equilibrium would be that there is no taxation, but also there is no social net and welfare. The divide between the haves and the have nots will grow and grow.
  - Silhouette 14y ago
    Businesses might not be able to choose so much where their market is, but they surely have a choice in where they set up manufacturing, R&D, corporate HQ etc etc. In which case surely the solution is to change the basis of taxation from profits to alternative sources such as sales or commercial property, which are inherently tied to the real location where things are happening, at least for bricks 'n' mortar businesses. Taxing on-line transactions is trickier, but even in that case there are certain relatively broad international agreemeents covering things like VAT across Europe rather than in individual countries. Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this. That is probably all true right now, but it doesn't mean we have to leave things that way. Speaking as someone who runs small businesses in the UK that pay their taxes at the normal rate, with those taxes ultimately reducing the money that reaches the owners, it really is galling to see reports of big international companies getting such favourable treatment.

Silhouette 14y ago

On the other hand big corporations as well as wealthy people usually have more leverage in terms of being able to move and operate or reside in more tax-friendly or hospitable regimes. That's often claimed, but I'm not convinced. Some people/businesses might move away because of being forced to pay tax at the same rate as everyone else. Most people/businesses won't, because most people don't choose where to live only by tax rate and most businesses aren't going to give up a market of 60+ million people. And frankly, if they're only paying a million or so in taxes at that size, good riddance to those who think they can do better elsewhere anyway.

nikcub 14y ago
NPR Planet Money did an episode on the claim that rich people move states based on increasing tax rates: http://www.npr.org/blogs/money/2011/04/22/135635574/the-friday-podcast-do-the-rich-flee-high-tax-states http://www.npr.org/blogs/money/2011/04/22/135635574/the-frid... They found, based on research, that the effect was negligible, and that other impacts of increasing taxes are much more noteworthy.
jasonlingx 14y ago
Businesses might not be able to choose so much where their market is, but they surely have a choice in where they set up manufacturing, R&D, corporate HQ etc etc. Countries constantly compete for business investment. Wealthy individuals are similar. They probably won't move their chosen country of residence for tax reasons, but I am pretty sure they will move their assets and investments to protect their value. Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this.
- chii 14y ago
  I suspect that the equilibrium would be that there is no taxation, but also there is no social net and welfare. The divide between the haves and the have nots will grow and grow.
- Silhouette 14y ago
  Businesses might not be able to choose so much where their market is, but they surely have a choice in where they set up manufacturing, R&D, corporate HQ etc etc. In which case surely the solution is to change the basis of taxation from profits to alternative sources such as sales or commercial property, which are inherently tied to the real location where things are happening, at least for bricks 'n' mortar businesses. Taxing on-line transactions is trickier, but even in that case there are certain relatively broad international agreemeents covering things like VAT across Europe rather than in individual countries. Most tax systems are inherently unfair with the middle-class and small business taking more than their fair share of the burden. The increasingly globalised and virtual nature of the economy only exacerbates this. That is probably all true right now, but it doesn't mean we have to leave things that way. Speaking as someone who runs small businesses in the UK that pay their taxes at the normal rate, with those taxes ultimately reducing the money that reaches the owners, it really is galling to see reports of big international companies getting such favourable treatment.