4 ms·

What i would do is system of minimum taxation. Like - all money made in Germany will be taxed at 20% and you pay your taxes with priority where you are incorpo

What i would do is system of minimum taxation. Like - all money made in Germany will be taxed at 20% and you pay your taxes with priority where you are incorporated. So if in Luxemburg the taxation is 5% - you pay 5% to luxemburg but cough the rest 15% to germany on the profits made in germany.

mahyarm 12y ago
That is pretty standard already. You usually get tax credits for foreign paid tax. The key is do they have the jurisdiction to tax you in the first place? If you only have a factory & employees in Luxemburg and just exported your product to the rest of the EU, is it really fair to tax you at Scandinavian tax rates for example?
- DanBC 12y ago
  Personally I would see the company you describe as being a Luxemburg company, and subject to their tax rates. But when you have English customers buying product in English shops from your English staff in your English branches - well, that sounds like an English business. To then have a Luxemburg company that sells very expensive coffee beans to those English coffee shops, thus making those shops operate at a loss but making the coffee roasting Luxemburg business very wealthy - that's just a scam and it needs to be shut down. How to shut it down when you're coordinating the tax raising laws of many different countries is going to take some time.
  - mike_hearn 12y ago
    But that's arbitrary. If the Luxembourg company opens up a sales office in Sweden, but it has only 4 employees and there are 500 in Luxembourg, does that suddenly mean all those companies sales to Sweden get taxed twice? If so why would they ever open up an office there? Why not just insist customers fly to Luxembourg and visit their office instead? Governments are whipping up a mob over this issue and aren't thinking it through. Does Google really need an office in London? No. One exists there because, in the absence of other factors, it makes sense to hire internationally so you can access good employees who might not want to live in America (or vice versa). But if the first Google employee who started work in the UK suddenly meant ALL money coming from UK based customers got taxed twice, that first employee would never make financial sense. Companies just wouldn't do it. They'd insist the employees moved to them instead of them moving to the employees. This outcome makes no sense, but in their desperate quest to squeeze ever more blood out of the stone, maybe that's where governments are going to take us ...
    - DanBC 12y ago
      If I'm an English business buying ads from an English sales team in an English office and there's an artificial final step in that process (someone in an Irish office stamps a form) then that feels like tax avoidance. No one is asking for companies to be taxed twice. But there is a strong concept in England of "not taking the piss" - people don't mind reducing your tax burden. That's expected behaviour. Reducing your burden from 50% to 38% is probably fine with most people. Reducing your burden from 40% to 3% is not fine with most people. > but in their desperate quest to squeeze ever more blood out of the stone, These are huge, very profitable, businesses that avoid tax in most jurisdictions. Governments are not squeezing blood from stones; they just want a few drips of blood from the very juicy blood-soaked sponge.
      - mike_hearn 12y ago
        How is your English business buying ads from an English sales team in an English office any different from my Luxembourg/Sweden example? It seems identical to me. I'm from south of Manchester, for what it's worth. And I think British politicians need to drop this issue as it's way beyond taking the piss by now. Tax avoidance isn't even a thing. It means whatever the speaker wants it to mean. Tax evasion is a thing, that's pretty well spelled out by law, but avoidance just means someone legally paying less tax than the speaker would like them to. Your assertion that 50% to 38% is "probably fine with most people" is in the same area: it's an entirely arbitrary set of numbers. I'm sure there are plenty of people who wouldn't think that's fine, however, it doesn't matter because there's no moral obligation to pay more tax than necessary. Governments are not charities, the British government especially so!
        justincormack 12y ago
        Many of these tax behaviours are almost certainly illegal. Some are currently being investigated, like Apple's "sweetheart" deal with the Irish government. The Google closing deals in Ireland deal is probably illegal too. The EU has opened a new investigation[1], and there may well be prosecutions. This is not just some "its obviously legal to pay no tax" kind of arrangement. [1] http://www.forbes.com/sites/kellyphillipserb/2014/07/05/european-commission-broadens-tax-inquiries-to-include-amazon-google-microsoft-mcdonalds-may-follow/ http://www.forbes.com/sites/kellyphillipserb/2014/07/05/euro...
mike_hearn 12y ago
Such a system is unworkable. Where are the profits "made" exactly? You can have sales tax, but governments already do that and they aren't satisfied. The reason taxing a person's income is (relatively) easy is because you can't split a person up. Just count the number of days they spend in a country, if it goes over a certain level then they are resident for tax purposes and away you go. America ignores this of course with citizen based taxation a.k.a. modern slavery but in all the other civilised countries that's how it works. Now consider Google. A German user goes to YouTube and sees an advert. Is this money made in Germany? Or was it made in America, where the software was developed? Or in America and Switzerland because there's a YouTube team in Switzerland too? Or was it made in Finland where the request was actually processed? Or was it made in Canada because that's where the advertiser is? Or was it made in Ireland because the advertisers contract was with Google Ireland Ltd? Pretty quickly you realise this is a fools errand. There's no way to say where the money was made in such an international operation. Any definition you come up with will be fought over by governments endlessly because they all want to buy votes by taxing foreign companies which smells to them a lot like free money (and thus free voters). So we end up with the simplest definition possible - the money is made where the company is headquartered. The headquarters can be anywhere. This solution was arrived at in both America and Europe. It sorta worked for a while because most companies were already established and new companies were small and poor so nobody cared about them much. Now we have the phenomenon of new companies that are extremely profitable, do all their business on the internet and therefore could pick a country to headquarter in purely for tax reasons. Cue moaning and wailing from stupid politicians who ran up enormous debts and now want a bigger slice of the pie. But attempting to change this simple definition will just reopen pandora's box. The best solution would be to just finish off the race to the bottom entirely and push corporate tax rates to zero everywhere. This would yield an approximately 25% hole in for example the UK budget. However the money can be made up elsewhere, such as by increasing VAT or personal income taxes. Of course that is politically difficult - people like corporation taxes because they don't like corporations, and taxing them feels like free money too.
- justincormack 12y ago
  Thats not going to happen. We are going to tax these companies. Sales in the EU can and are regulated and taxed, the problem is some issues like varying tax rates (Luxembourg) and various issues like the double Irish Dutch sandwich (that Apple invented) which was based on differences between tax definitions between countries. These can and will be fixed. Just because you, personally, hate government spending, does not mean we are going to remove corporation tax. Putting all taxes directly on a few prices, like increasing VAT (retail sales) or income tax (cost of hiring labour) is far more distortionary than spreading taxes between more prices (like returns on capital, as roughly corporation taxes are).

mahyarm 12y ago

That is pretty standard already. You usually get tax credits for foreign paid tax. The key is do they have the jurisdiction to tax you in the first place? If you only have a factory & employees in Luxemburg and just exported your product to the rest of the EU, is it really fair to tax you at Scandinavian tax rates for example?

DanBC 12y ago
Personally I would see the company you describe as being a Luxemburg company, and subject to their tax rates. But when you have English customers buying product in English shops from your English staff in your English branches - well, that sounds like an English business. To then have a Luxemburg company that sells very expensive coffee beans to those English coffee shops, thus making those shops operate at a loss but making the coffee roasting Luxemburg business very wealthy - that's just a scam and it needs to be shut down. How to shut it down when you're coordinating the tax raising laws of many different countries is going to take some time.
- mike_hearn 12y ago
  But that's arbitrary. If the Luxembourg company opens up a sales office in Sweden, but it has only 4 employees and there are 500 in Luxembourg, does that suddenly mean all those companies sales to Sweden get taxed twice? If so why would they ever open up an office there? Why not just insist customers fly to Luxembourg and visit their office instead? Governments are whipping up a mob over this issue and aren't thinking it through. Does Google really need an office in London? No. One exists there because, in the absence of other factors, it makes sense to hire internationally so you can access good employees who might not want to live in America (or vice versa). But if the first Google employee who started work in the UK suddenly meant ALL money coming from UK based customers got taxed twice, that first employee would never make financial sense. Companies just wouldn't do it. They'd insist the employees moved to them instead of them moving to the employees. This outcome makes no sense, but in their desperate quest to squeeze ever more blood out of the stone, maybe that's where governments are going to take us ...
  - DanBC 12y ago
    If I'm an English business buying ads from an English sales team in an English office and there's an artificial final step in that process (someone in an Irish office stamps a form) then that feels like tax avoidance. No one is asking for companies to be taxed twice. But there is a strong concept in England of "not taking the piss" - people don't mind reducing your tax burden. That's expected behaviour. Reducing your burden from 50% to 38% is probably fine with most people. Reducing your burden from 40% to 3% is not fine with most people. > but in their desperate quest to squeeze ever more blood out of the stone, These are huge, very profitable, businesses that avoid tax in most jurisdictions. Governments are not squeezing blood from stones; they just want a few drips of blood from the very juicy blood-soaked sponge.
    - mike_hearn 12y ago
      How is your English business buying ads from an English sales team in an English office any different from my Luxembourg/Sweden example? It seems identical to me. I'm from south of Manchester, for what it's worth. And I think British politicians need to drop this issue as it's way beyond taking the piss by now. Tax avoidance isn't even a thing. It means whatever the speaker wants it to mean. Tax evasion is a thing, that's pretty well spelled out by law, but avoidance just means someone legally paying less tax than the speaker would like them to. Your assertion that 50% to 38% is "probably fine with most people" is in the same area: it's an entirely arbitrary set of numbers. I'm sure there are plenty of people who wouldn't think that's fine, however, it doesn't matter because there's no moral obligation to pay more tax than necessary. Governments are not charities, the British government especially so!
      - justincormack 12y ago
        Many of these tax behaviours are almost certainly illegal. Some are currently being investigated, like Apple's "sweetheart" deal with the Irish government. The Google closing deals in Ireland deal is probably illegal too. The EU has opened a new investigation[1], and there may well be prosecutions. This is not just some "its obviously legal to pay no tax" kind of arrangement. [1] http://www.forbes.com/sites/kellyphillipserb/2014/07/05/european-commission-broadens-tax-inquiries-to-include-amazon-google-microsoft-mcdonalds-may-follow/ http://www.forbes.com/sites/kellyphillipserb/2014/07/05/euro...

mike_hearn 12y ago

Such a system is unworkable. Where are the profits "made" exactly? You can have sales tax, but governments already do that and they aren't satisfied. The reason taxing a person's income is (relatively) easy is because you can't split a person up. Just count the number of days they spend in a country, if it goes over a certain level then they are resident for tax purposes and away you go. America ignores this of course with citizen based taxation a.k.a. modern slavery but in all the other civilised countries that's how it works. Now consider Google. A German user goes to YouTube and sees an advert. Is this money made in Germany? Or was it made in America, where the software was developed? Or in America and Switzerland because there's a YouTube team in Switzerland too? Or was it made in Finland where the request was actually processed? Or was it made in Canada because that's where the advertiser is? Or was it made in Ireland because the advertisers contract was with Google Ireland Ltd? Pretty quickly you realise this is a fools errand. There's no way to say where the money was made in such an international operation. Any definition you come up with will be fought over by governments endlessly because they all want to buy votes by taxing foreign companies which smells to them a lot like free money (and thus free voters). So we end up with the simplest definition possible - the money is made where the company is headquartered. The headquarters can be anywhere. This solution was arrived at in both America and Europe. It sorta worked for a while because most companies were already established and new companies were small and poor so nobody cared about them much. Now we have the phenomenon of new companies that are extremely profitable, do all their business on the internet and therefore could pick a country to headquarter in purely for tax reasons. Cue moaning and wailing from stupid politicians who ran up enormous debts and now want a bigger slice of the pie. But attempting to change this simple definition will just reopen pandora's box. The best solution would be to just finish off the race to the bottom entirely and push corporate tax rates to zero everywhere. This would yield an approximately 25% hole in for example the UK budget. However the money can be made up elsewhere, such as by increasing VAT or personal income taxes. Of course that is politically difficult - people like corporation taxes because they don't like corporations, and taxing them feels like free money too.

justincormack 12y ago
Thats not going to happen. We are going to tax these companies. Sales in the EU can and are regulated and taxed, the problem is some issues like varying tax rates (Luxembourg) and various issues like the double Irish Dutch sandwich (that Apple invented) which was based on differences between tax definitions between countries. These can and will be fixed. Just because you, personally, hate government spending, does not mean we are going to remove corporation tax. Putting all taxes directly on a few prices, like increasing VAT (retail sales) or income tax (cost of hiring labour) is far more distortionary than spreading taxes between more prices (like returns on capital, as roughly corporation taxes are).