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G7: Rich nations back deal to tax multinationals

bbc.co.uk

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Re: G7: Rich nations back deal to tax multinationals

#751

Post by saddlerustle »

dalbasal wrote: post #746
saddlerustle wrote: post #733

Earlier quoted context omitted.

Broadly, the point of these tax structures for US companies isn't for the company to completely avoid paying US corporate tax, it's to - Avoid paying corporate tax at a higher rate than in the US, and - Defer paying corporate tax, often for decades, until theres a more favourable tax situation in the US, or a better opportunity to reinvest their capital comes up. At the end of the day the profits belong to the shareh…

Avoiding paying more than the US rate doesn't require any of these shenanigans. They could just charge royalties to the US. Beyond that, the arrangement essentially turns corporate income tax into a corporate dividend/buyback tax. Dividends are always much lower than profits, and many companies don't do them at all. >> the only way to return the money to shareholders is by paying US corporate tax "Return" is somewhat…

> Avoiding paying more than the US rate doesn't require any of these shenanigans. They could just charge royalties to the US.

I'm not sure exactly what you mean by this

> Dividends are always much lower than profits, and many companies don't do them at all.

Dividends are lower than profits only for companies that have opportunities to reinvest profits into growth. For companies that don't, in principal, you'd expect dividends to be exactly profits.

> Shareholders already own those profits, and cash is reflected pretty directly in share prices. They don't necessarily have to "return" value this way.

There's large opportunity cost to shareholders for companies to hold onto cash, which is usually in low-risk investments, compared to how that shareholder would invest it themselves. That's what I mean by cost-of-capital.

> Many don't.. eg Berkshire.

This is a bit of a special case because Berkshires core business is making investment decisions (and doing so through a holding company is itself tax advantaged). When the day comes the value of Berkshire companies consistently underperforms the market, shareholders will absolutely demand Berkshire start distributing profits instead of making investment decisions on their behalf.

> A small, unsophisticated company doesn't get to (eg) reinvest its profits tax free.

It absolutely can reinvest its profits tax free! It just can't build up a long-term cash pile tax free.

Re: G7: Rich nations back deal to tax multinationals

#752

Post by kinkora »

rufus_foreman wrote: post #540

>> The G7 group of advanced economies has reached a "historic" deal to make multinational companies pay more tax No, it hasn't. Some finance ministers met and talked: "Finance ministers meeting in London agreed to battle tax avoidance by making companies pay more in the countries where they do business. They also agreed in principle to a global minimum corporate tax rate of 15% to avoid countries undercutting each ot…

"Every journey of a 1000 miles begins with 1 step"

Maybe we should laude and celebrate that at least loads of effort was put into getting all the G7 finance ministers in one place and actually have a discussion + agree to a next step?

Feels unnecessary negative and very arm chair criticism to just hand wave the whole endeavour and say "oh nothing was done and all they did was talk".

I sometimes think people in the last decade are to quick to find faults for every little thing that falls short of a 100% effort (and even that gets criticism) without even considering that they are not the men-in-the-arena [1] doing the hard work.

----

[1] Whenever I think of criticizing something/someone, I always consider Theodore Roosevelt comment on this sort of behaviour where he once said:

"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat."

Re: G7: Rich nations back deal to tax multinationals

#753

Post by ondross »

rjknight wrote: post #162

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…

This would make total sense if the entire world were under one tax system. Taxing corporations is a way of of taxing the dividends of shareholders outside your country, whose income you can't tax individually.

Re: G7: Rich nations back deal to tax multinationals

#754

Post by dodobirdlord »

Ericson2314 wrote: post #387
skybrian wrote: post #369

Earlier quoted context omitted.

I’m wondering how this is supposed to interact with zoning? There is a lot of agriculturally-zoned land in California that would turn into housing developments pretty quick if it weren’t illegal. It’s typically in a nice-looking area near some water or a park, not in the middle of a city. If you keep the zoning then maybe the land isn’t worth that much, but if property taxes were based on the “true” land value then i…

Agricultural-zoned land would be cheaper. I would rip up urban zoning with an LVT to ensure density, but keep the agricultural zoning because we can't eat skyscrapers.

There is no actual tradeoff between availability of food and availability of skyscrapers. Even if we actively tried, we couldn’t run out of agricultural land in the US by building on it.

Re: G7: Rich nations back deal to tax multinationals

#755

Post by dodobirdlord »

silexia wrote: post #514
eloff wrote: post #440

Earlier quoted context omitted.

I remember my economics professor arguing that would be the most efficient tax after he explained how all taxes have the side effect of reducing the thing being taxed. So taxing something bad like CO2, great idea. Taxing something good like income or creating jobs - bad idea. Land tax would be simple, and very progressive, the tax rate of most young people renting world now be 0. It's more complex than that because t…

I actually love this idea, although I would just do a wealth tax. Anyone who owns wealth gets taxed a bit. If you only taxed land, then lots of people would just move all their assets into stocks instead of land.

Someone still has to be owning the land though, and paying taxes on it in proportion to its value. In most cases that’s going to be corporations. If I own stock in a corporation that owns land and the tax burden shifts from corporate income taxes to land taxes, on the whole this isn’t much different except for rewarding corporations that make efficient use of land and punishing ones that make inefficient use. Similarly, if I sell my land to a corporation, everyone who collectively owns the corporation is now paying what used to be my land taxes.

Re: G7: Rich nations back deal to tax multinationals

#756

Post by edoceo »

nearbuy wrote: post #622
edoceo wrote: post #557

Earlier quoted context omitted.

The demand side actor is the driver of the transaction.

So if you had a completely Australian company selling stuff online, they'd be subject to US corporate tax for profit earned from American customers, French tax for customers from France, etc? This seems complicated because unlike sales tax, corporate tax is based on profit at the end of the year. It's much more complicated than sales tax. Companies would have to handle corporate tax code for up to 195 countries.

Sure? Why not? I practice it wouldn't be 195. We're trying to fix a tax avoidance issue so we've to fix the money somewhere. Demand-side seems the right choice. I'm assuming there'd be some minimum threshold. Most companies are selling mostly at home. And if you want to play InternationalBigCo game it seems a reasonable burden to me.

Re: G7: Rich nations back deal to tax multinationals

#757

Post by pmalynin »

nearbuy wrote: post #728
pmalynin wrote: post #720

Earlier quoted context omitted.

A company cannot depreciate land, but they can depreciate the value of the buildings on top of it over a fixed period of time. So in addition to writing off the mortgage as an expense, you can also amortize it since the value of additions (not the land) decreases.

I'm not sure what you mean here. You can't write off a mortgage. You could write off interest, but not the value of the mortgage. Real estate tends to appreciate in value, especially in cities. The company would have to get unlucky with their real estate to be able to write off a loss. Buildings don't usually depreciate. They could allow their buildings to fall into a state of disrepair, hoping it would lower their v…

As a business I can take out a mortgage and give you a rental for the exact same price. The income and “expenses” cancel out, so the profit of your business is zero. Since this rental is an income producing activity the IRS (and other tax bodies) allow you to depreciate (https://www.irs.gov/publications/p946) the value of additions on the land (I.e the building) on a straight line over a 28 year period. The basis of the depreciation is the value of the property, so you divide that over 28 years and can take that away from the income as well. Now I can transfer that cost to you in rent and the profit of my business is still zero. This is a benefit that is generally only available to corporations. Then there is prop 13 which is yet another mess.

I’m not an accountant, but I’ve studied enough of it in University to be dangerous.

Re: G7: Rich nations back deal to tax multinationals

#758

Post by ckw »

silexia wrote: post #514
eloff wrote: post #440

Earlier quoted context omitted.

I remember my economics professor arguing that would be the most efficient tax after he explained how all taxes have the side effect of reducing the thing being taxed. So taxing something bad like CO2, great idea. Taxing something good like income or creating jobs - bad idea. Land tax would be simple, and very progressive, the tax rate of most young people renting world now be 0. It's more complex than that because t…

I actually love this idea, although I would just do a wealth tax. Anyone who owns wealth gets taxed a bit. If you only taxed land, then lots of people would just move all their assets into stocks instead of land.

Seems like the price of land would drop and the price of stocks would rise such that the yield on improved land (after taxes and mutatis mutandis) would match that of stocks.

Re: G7: Rich nations back deal to tax multinationals

#759

Post by dragonwriter »

saddlerustle wrote: post #638
dragonwriter wrote: post #538

Earlier quoted context omitted.

> The UK already has an 18% GST rate, which is equivalent to an 18% tax on revenues. No, GST is a VAT (in fact, the UK’s is called a VAT, not a GST), which is not the same as a revenue tax.

The majority of Apple's sales is to consumers, so it's equivalent for the sake of argument.

Its not equivalent to a revenue tax, because a VAT excludes purchase price and revenue doesn’t.
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