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G7: Rich nations back deal to tax multinationals

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Re: G7: Rich nations back deal to tax multinationals

#421

Earlier quoted context omitted.

As an Australian who moved to Sweden, I was amazed at how efficient the Swedish income tax process was. The government already knew everything they needed to calculate your return, and gave it pre-filled. There were not endless exemptions. Nobody at my work used an accountant, most approved their tax with a few clicks and were done. So much more efficient than in Australia!

I’m pretty sure the system we have here in the US is designed to be complicated to encourage us to rely on tax filing companies. Also, a more complicated system is easier to game. Makes it easier for the rich to take advantage of loopholes.

I think a lot of it is the nudging that the US does with tax incentives. Taxes are often used as a way to economically nudge society toward desired outcomes.

Think tax breaks for solar panels or even just getting insulation added to your home. There are thousands of this type of tax break available to nudge people to move toward the gov's goals.

Re: G7: Rich nations back deal to tax multinationals

#422

Earlier quoted context omitted.

As an Australian who moved to Sweden, I was amazed at how efficient the Swedish income tax process was. The government already knew everything they needed to calculate your return, and gave it pre-filled. There were not endless exemptions. Nobody at my work used an accountant, most approved their tax with a few clicks and were done. So much more efficient than in Australia!

The American tax system is similarly frustrating. I’m a senior engineer and I have a hard time navigating tax forms even with the help of Intuit, and it frustrates me that I have to pay Intuit (or someone else) to help me do taxes which are complicated in large part because Intuit et al lobby for complex tax codes and against the sort of Swedish model you describe. Worse, when I moved to Chicago the state of Illinois…

> I’m a senior engineer and I have a hard time navigating tax forms even with the help of Intuit, and it frustrates me that I have to pay Intuit (or someone else) to help me do taxes which are complicated in large part because Intuit et al lobby for complex tax codes and against the sort of Swedish model you describe.

I don't think Intuit has anything to do with why the tax code is complex. Their lobbying is for making filling out the forms complicated, such as by stopping the IRS from pre-filling forms with the information they already have.

The tax code complexity almost all stems from people not wanting to pay tax. That complicated the code in two ways. First, it means that we get exceptions and special cases written into the code either because people that want to pay less tax convince Congress to make a special case for them or Congress takes advantage of the desire to pay less tax to provide exceptions to motivate people to change behavior.

Second, it means that if there is any ambiguity or wiggle room in interpreting something, someone will exploit that to pay less tax than Congress intended them to pay. The tax code gets patches to fix that, usually resulting in an increase in complexity.

A great example of the later was that a long time ago a big company was going to give shareholders a dividend. This would be taxes as ordinary income to the shareholders.

Someone came up with an idea to turn that into capital gains instead. Rather than give a divident, the company first did a stock split, say 100 for 99. So each 99 shares each stockholder held became 100 shares. This is not a taxable event.

Then the company did a stock buyback, 1 out of every 100 shares. That decreased each stockholders holding by 1%, so every 100 shares a stockholder held became 99, and the stockholder got some cash. That is a taxable event, but it is capital gains.

Net result: every stockholder ended up with the exact same percentage of the company that they started with, with some cash from the company, and got to pay the lower capital gains tax on that cash instead of the higher income tax.

The tax code was patched to fix that. Buybacks became ordinary income. But it didn't end there. Consider a family owned business owned by four members of the same family. One of them is moving away and will not be participating in the business. The company wants to buy him out. It was generally agreed that this was not a buyback to dodge taxes--it is a legitimate buyback and should get capital gains treatment.

And so the patch to fix the buyback tax dodge needs an exception to try to recognize "legitimate" buybacks. It ends up having a formula that involves looking at the distribution of ownership before and after the buyback and having several criteria for recognizing when the distribution change signifies a legit buyback that should get capital gains treatment.

This was a fairly simple instance, so it only added maybe a few paragraphs to the tax code, plus some more to the regulations.

But that sort of thing is all over the code, sometimes just adding a few sentences, and sometimes pages.

Re: G7: Rich nations back deal to tax multinationals

#423

Earlier quoted context omitted.

If you're going to legally treat corporations the same as actual humans - then tax them the same. We pay taxes for services we expect from governments, defence, policing, justice, water, sewers etc etc I don;t see why corporations that use all these things shouldn't pay their share

Humans are taxed on their income. Corporations are taxed on their profits (they deduct their expenses). Corporations can be taxed on the money coming in, that would look like a sales tax or VAT. The problem with that tax is it falls on the consumer (since what really matters is which transaction you tax, not which side pays the tax). But this brings me to a solution to the corporate tax avoidance issue that has alrea…

> Humans are taxed on their income. Corporations are taxed on their profit

Not true. States like WA have general B&O taxes which are a tax on revenue, not profit.

This makes it much harder to operate thin margin businesses like groceries and manufacturing, while favoring high margin businesses like software.

Re: G7: Rich nations back deal to tax multinationals

#424

Earlier quoted context omitted.

George’s ideas are interesting to ponder now and then. I’d definitely want to be a billionaire in that system, though, you’d pay pennies on your penthouses split with everyone living below you. If only taxes were that easy to figure out.

Middle class families in single family homes are hoarding a scarce and essential resource. Billionaires in high rises aren’t. The idea is to punish bad behavior and reward good behavior, not to cut down the tall poppies.

In urban area's sure, but I don't think it's fair to call it hoarding in suburban or rural areas. There's tons of land in the US, it's just that there are no homes _right_ next to jobs and restaurants and the culture people want to live in.

Now that I'm remote, I plan to move to a rural area and grow some of my own food in a single family home. I don't think that should be considered hoarding.

Re: G7: Rich nations back deal to tax multinationals

#425
post #385
post #361

Earlier quoted context omitted.

> Note that land taxes are only assessed on the value of the land, not the value of any buildings on the land. This incentivizes land owners to put the land to its highest and best use. Doesn't it incentivize them to put land to the use that generates the most revenue? I don't see how that is necessarily the "best" use. There will almost always be a way that a yard or garden could make more revenue, for example, such…

Do you think that's a problem with existing property taxes? The main difference between property and land tax is that with a land tax, the structure isn't taxed. So you can build up "for free" wrt taxes, which encourages more density on the most valuable land. E.g. land in the middle of downtown San Francisco that's currently rented out as a flat parking lot, could instead be built up into multi level parking or hous…

San Francisco is an interesting case cause they used to have a land tax and economists argued that's what cause San Fran to be quickly rebuilt after it was burned to the ground in 1906. Land owners were still taxed the same, even though their building was gone. They'd have to either sell or rebuild.

Contrast that with New Orleans after Hurricane Katrina. Property owners had their buildings destroyed, so taxes went to zero (taxes based on the property value, not the land value). This incentivized property owners to wait and see if their neighbors would rebuild rather than take immediate action.

Re: G7: Rich nations back deal to tax multinationals

#426
Is this really about taxing multinational companies or is this about establishing a "minimum 15% corporate tax rate" for every SME and mom and pop shop?

TFA says that Ireland is going to accept the change: atm they've got a 12.5% tax rate.

What about Hungary? Corporate tax rate at 9%.

Once this shall be in place, the one sure thing is this "minimum 15%" is only ever go up, never down. There won't be any incentive ever to make it go down as there won't be the risk of companies moving abroad to pay less corporate taxes.

And this says nothing about dividends or income taxation, so you'll end up with SME owners paying "minimum 15% corporate tax" and then on top of that 34% dividend tax, for example.

I really wouldn't be surprised if this was sold as "tax the FAANG" while ending up trouncing the SMEs owners a bit more.

Re: G7: Rich nations back deal to tax multinationals

#427

I do wonder if we wouldn't be better off eliminating corporation tax entirely. The revenue of a corporation can, roughly, be: 1. Spent on goods or services from another company (including freelancers, contractors, etc.) 2. Spent on rent 3. Spent on capital purchases 4. Spent on wages 5. Spent on debt repayment or other forms of financing 6. Paid out in dividends 7. Spent on share buybacks 8. Invested in something els…

None of those things directly go to improve society and infrastructure though.

Re: G7: Rich nations back deal to tax multinationals

#428

I do wonder if we wouldn't be better off eliminating corporation tax entirely. The revenue of a corporation can, roughly, be: 1. Spent on goods or services from another company (including freelancers, contractors, etc.) 2. Spent on rent 3. Spent on capital purchases 4. Spent on wages 5. Spent on debt repayment or other forms of financing 6. Paid out in dividends 7. Spent on share buybacks 8. Invested in something els…

Hmm, insightfully looking but profoundly ignorant.

Take a look at the history of tax. And make a judgement on the necessity of tax yourself. Stop wasting time coming up with some seemingly clever explanation of things.

https://en.m.wikipedia.org/wiki/Tax#:~:text=The%20first%20kn....

Re: G7: Rich nations back deal to tax multinationals

#429

Earlier quoted context omitted.

the fact that streets are illuminate at night and pollice patrols them is using services provided by taxpayer's money. Uber benefits from streets more than the average citizen. if corporations had to pay per use, they would prefer to build their private infrastructures and police forces, while public infrastructure would lag behind chronically underfunded.

I'm not entirely sure why you think what corporations -prefer- matters when it comes to a discussion on taxation?

Well they have a right to petition the government in the US at least. Would you say the same about what citizens prefer does not matter in a representative democracy?

Re: G7: Rich nations back deal to tax multinationals

#430
post #269

Earlier quoted context omitted.

Small software companies with customers all over the world are not multinational companies. These small software companies are located in one country i.e. one physical presence, unlike tech companies where their presence is in multiple countries. So this tax change won't affect small software companies located in one country with international customers. Edited to add ... The article states: " the rules will aim to m…

If it's going to be anything like the digital services tax, then the answer is a resounding yes as the US is where your customers are. I see two things come out of this: 1. Companies selling their B2C services digitally will be paying both their sales (or VAT) AND their corporate income tax in countries where their customers are. This will be a benefit for countries with large markets and leave smaller countries wher…

They still would hire domestically and pay salaries that would be taxed.
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