> You should tax the things that "add value" Ok we have a misunderstanding about the term, 'add value'. I was using it to mean profit but you are using it to

> You should tax the things that "add value" Ok we have a misunderstanding about the term, 'add value'. I was using it to mean profit but you are using it to mean costs. My gut feeling is that taxing costs instead of profit will lead to warped incentives, but I admit I cannot think of a good example just now. > You're asking how common it is for a company to have a less than 10% profit margin? No - I wasn't clear, sorry. I was thinking a company might typically have the following costs as a percentage of revenue: (a) domestic costs 40%; (b) imports from high-tax countries 25%; (c) imports from low-tax countries 25%. Increasing this last figure to 27.5% would not wipe out the company's profit margin. > the value of that non-geographically-dependent asset ... can be whisked off to an entity in a low tax jurisdiction A company's advantage over its rivals often geographically dependent. Toyota's famed culture of lean, just-in-time manufacturing allowed it to become the biggest carmaker in the world. That culture was a company asset rooted in Japan that could not be whisked to any tax haven. As for intellectual property, is there absolutely no way to structure the tax code so that growth in the value of these assets can be taxed? What about a simple rule that says IP cannot be transferred across borders within the same company? That is, the value of a patent is tied to the country in which the R&D was done. The value of a book's copyright is tied to the country in which it was written. The value of a software licence is tied to the country in which the software was developed. Etc. > The problem simply is that you can't have significantly higher taxes than the next country on anything that can be easily removed from your jurisdiction, or that is exactly what will happen. And the profits of international corporations fall into that category. If that was the case then the corporation tax for most of the Fortune 500 would be zero. The current system, although imperfect, is still somewhat functional.