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Global minimum corporate tax: 130 nations to support U.S. proposal

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Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#341

Post by tastyfreeze »

davvolun wrote: post #339
tastyfreeze wrote: post #162

Earlier quoted context omitted.

An agreed upon international base tax rate is the wrong solution. This becomes a minimum wage for nations and removes the incentive to compete to be the home of corporate headquarters. Border adjustment tax removes the tax shelter loophole and strengthens the incentive to be a good place to headquarter a corporation.

> This becomes a minimum wage for nations Why is that a problem? > removes the incentive to compete to be the home of corporate headquarters No, it shifts the means of incentives. It's no longer a race to the bottom tax rate. As I understand it, the problem with a border adjustment tax is implementation overhead; it would be expensive to audit. Noting that the IRS in the U.S. is not funded enough to investigate tax f…

Governments should earn their taxes the same as a person should earn their income. Governments "earn" their taxes by making the benefits of operating in a nation worth the tax. Price fixing and collusion is illegal for companies to practice. Being a government doesn't remove the deleterious effects of price fixing and collusion. An international base corporate tax rate makes nations not care if the tax rate is even worth it to businesses. If the tax rate isn't worth it then a business will close or just never start.

Lets say that a corporation choosing a home nation is akin to you shopping for a good refrigerator. The refrigerator manufacturers don't like that one manufacturer is selling their equal quality fridges at 50% less than everyone else. There are two choices for manufacturers. Collude and fix the price of refrigerators or figure out what the 50% cut rate company is doing and try to compete. If the manufacturers choose collusion they can continue with business as usual without making improvements to cut cost or improve quality. But, they will cut cost, possibly sacrificing quality, as that is now the only way to increase revenue. The incentive to improve is removed and the risk of a refrigerator cabal outsider pricing at 50% increases. If the competitors instead choose to work on reducing cost or improving quality you as the consumer get cheaper higher quality fridges. Under the price fixing regime, when an outsider starts selling a fridge at 50% the fixed price the cabal either has to destroy them, bring them in the fold, or remove the price fixing.

With price fixing an outsider will always arise. Competition is the only solution that doesn't destroy itself.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#342

Post by ris »

robertlagrant wrote: post #133
ris wrote: post #112

Earlier quoted context omitted.

> tax competition It is not tax competition. It's tax fleecing. The issue is that companies are paying the rates of low-tax countries while operating by and large in "high"-tax countries and reaping all the benefits from their expensive infrastructure, law enforcement, healthcare, education, welfare (to top up absurdly low employee wages)... all of which gets paid for by "someone else" (you and me). It might be tax c…

It is tax competition. It's just not also labour/university/transport etc competition all lumped into one huge unwieldy choice.

No - you don't get to go to a supermarket and choose to pay the price listed for the cheapest bottle of wine and walk out with the most expensive bottle of wine.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#343

Post by davvolun »

tastyfreeze wrote: post #341
davvolun wrote: post #339

Earlier quoted context omitted.

> This becomes a minimum wage for nations Why is that a problem? > removes the incentive to compete to be the home of corporate headquarters No, it shifts the means of incentives. It's no longer a race to the bottom tax rate. As I understand it, the problem with a border adjustment tax is implementation overhead; it would be expensive to audit. Noting that the IRS in the U.S. is not funded enough to investigate tax f…

Governments should earn their taxes the same as a person should earn their income. Governments "earn" their taxes by making the benefits of operating in a nation worth the tax. Price fixing and collusion is illegal for companies to practice. Being a government doesn't remove the deleterious effects of price fixing and collusion. An international base corporate tax rate makes nations not care if the tax rate is even w…

> Governments should earn their taxes the same as a person should earn their income

So you're coming from the perspective that individual minimum wage is wrong, and applying that assumption everywhere. Thanks, but I absolutely disagree. I don't see a reason to discuss further when we're so far apart on our base assumptions of reality.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#344

Post by zizee »

trompetenaccoun wrote: post #326
zizee wrote: post #213

Earlier quoted context omitted.

This is an interesting concept, and worthy of including in the discussion, but you are presenting Border Adjustment Tax as if the results are a certainty. The Wikipedia article describes this as theoretical with quite a bit of uncertainty, and economists are far from concensus on what the outcomes would be. There are also definitely winners and losers in this system, so it's not so simple to say it the proposal was k…

You mean theoretical and uncertain like the experiment they're doing on a global scale now? When did we ever have 130 nations all agree on the same corporate tax rate? Not that I think it's necessarily bad, it's probably better than the current system which is very broken. But can you explain how and why that is actually a better idea than introducing a BAT system? Again, both are theoretical and have never been trie…

> But can you explain how and why that is actually a better idea...

> ...so you should have very good research to back up a claim that the global flat rate tax is the better idea.

Should I presume the "you" in these sentences is me? Or is it some hypothetical future person making such claims? If you did mean me, I don't understand what part of what I wrote was me making any claims of superiority of one system over the other?

My comment was pointing out that the grandparents comments should not be written so definitively, where much doubt exists.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#345

Post by robomartin »

RhysU wrote: post #340
robomartin wrote: post #335

Earlier quoted context omitted.

I am not proposing we have classes of voters. I am simply highlighting that votes are equal despite the massive range of understanding from voters, from ignorant to expert. This is very real problem. Yes, experienced business people are far better at understanding the range of issues pertaining to economic and taxation policy. That is self evident. Most people have zero experience and very little understanding of thi…

I appreciate the thought that went into your response. Also, I like your list of concerns and public priorities. Go run for office so that I can vote for you. > And, yes, people with expertise need to be making decisions, not politicians or ignorant voters. I agree with the sentiment but there's no universal definition of ignorant voter in the political sphere. There's only, subjectively, useful to someone or not use…

Politics...

Many decades ago I actually worked with Frank Zappa for a few months on one of his projects. Long story. We had dinner together almost every night, just a few of us, sometimes just he and I.

Frank was very active politically. One night, as we were discussing various ideas, he said something like:

"Martin, the reason people like you and I don't go into politics is that you have to be a member of a very specific human subspecies to be able to survive the brutality you will encounter. Most intelligent people don't want to touch politics because they know it is a meat grinder. The sad part is we end-up with people who know nothing about anything and would likely be ambulance chasers or criminals if they had not figure out how to scam their way into politics. We are hopeless."

The epic climax of this reality was when, out of all the amazing people in the US, we ended-up with Trump and Clinton as the only two choices we could make. I can't see how anyone could argue either of those clowns is an example of the best the US can offer.

I still agree with Zappa. I can't imagine ever getting into politics. Particularly these days. I have zero interest in having my life and my family's life violently ripped to shreds by the unscrupulous actors who permeate that world and protect their turf at all costs. One day we might just come up with a way to govern ourselves without these mutants, until then, it's the best we got.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#346

Post by trompetenaccoun »

zizee wrote: post #344
trompetenaccoun wrote: post #326

Earlier quoted context omitted.

You mean theoretical and uncertain like the experiment they're doing on a global scale now? When did we ever have 130 nations all agree on the same corporate tax rate? Not that I think it's necessarily bad, it's probably better than the current system which is very broken. But can you explain how and why that is actually a better idea than introducing a BAT system? Again, both are theoretical and have never been trie…

> But can you explain how and why that is actually a better idea... > ...so you should have very good research to back up a claim that the global flat rate tax is the better idea. Should I presume the "you" in these sentences is me? Or is it some hypothetical future person making such claims? If you did mean me, I don't understand what part of what I wrote was me making any claims of superiority of one system over th…

Yes, I understand your comment perfectly and just tried to explain it's not a rational argument in this case. BAT has never been tried, same as the global minimum tax.

The situation is we have a tax system that's broken. Apart from the multinational corporations practically everyone agrees on this part. Now we have to find a way to fix it in an ever more globalized world, a situation which we never had to deal with and for which there is no proven solution for that reason. Whatever we do will be untested. The question is which is the better idea and why?

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#347

Post by zizee »

throwaway34241 wrote: post #307
zizee wrote: post #213

Earlier quoted context omitted.

This is an interesting concept, and worthy of including in the discussion, but you are presenting Border Adjustment Tax as if the results are a certainty. The Wikipedia article describes this as theoretical with quite a bit of uncertainty, and economists are far from concensus on what the outcomes would be. There are also definitely winners and losers in this system, so it's not so simple to say it the proposal was k…

Do you have any resources for how in-dispute the (eventual) currency adjustment part is? As you probably know, there is never 100% agreement among economists on anything, and no matter how narrow the opposition is you can often count on politically-motivated groups to find and promote it relentlessly. The main data I have is both Mankiw and Krugman (both highly eminent economists from different sides of the aisle) se…

My comment was not arguing one way or another. Instead I was pointing out that the original wording of your top level comment might mislead people as it sounded like there was little doubt to the effectiveness of a Border Adjustment Tax, when in truth it has never been tried.

Rereading your original post it now seems more reasonable. I don't know if that is because it has been edited, or because I am reading it in a new light.

To be clear, I welcome the suggestion of trying new solutions. The current system is clearly broken.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#348

Post by throwaway34241 »

davvolun wrote: post #339
tastyfreeze wrote: post #162

Earlier quoted context omitted.

An agreed upon international base tax rate is the wrong solution. This becomes a minimum wage for nations and removes the incentive to compete to be the home of corporate headquarters. Border adjustment tax removes the tax shelter loophole and strengthens the incentive to be a good place to headquarter a corporation.

> This becomes a minimum wage for nations Why is that a problem? > removes the incentive to compete to be the home of corporate headquarters No, it shifts the means of incentives. It's no longer a race to the bottom tax rate. As I understand it, the problem with a border adjustment tax is implementation overhead; it would be expensive to audit. Noting that the IRS in the U.S. is not funded enough to investigate tax f…

> You would also likely need foreign cooperation. There's no reason to believe a corporation headquartered in the U.S. needs to be truthful about their foreign revenue

If I understand it right, you actually wouldn't need this much. Foreign revenue would be the other countries' responsibility. So the implementation would look something like a domestic VAT coupled with deductions for domestic expenses. It's true that the US doesn't have a VAT but that's been well-tested in many other places.

Agree with your conclusion though, they've got to prioritize how much time / political capital they invest into each issue and putting a huge amount of effort into this sort of thing (when it went nowhere recently and would likely go nowhere again) probably would be a mistake.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#349

Post by zizee »

trompetenaccoun wrote: post #346
zizee wrote: post #344

Earlier quoted context omitted.

> But can you explain how and why that is actually a better idea... > ...so you should have very good research to back up a claim that the global flat rate tax is the better idea. Should I presume the "you" in these sentences is me? Or is it some hypothetical future person making such claims? If you did mean me, I don't understand what part of what I wrote was me making any claims of superiority of one system over th…

Yes, I understand your comment perfectly and just tried to explain it's not a rational argument in this case. BAT has never been tried, same as the global minimum tax. The situation is we have a tax system that's broken. Apart from the multinational corporations practically everyone agrees on this part. Now we have to find a way to fix it in an ever more globalized world, a situation which we never had to deal with a…

> I understand your comment perfectly and just tried to explain it's not a rational argument in this case.

I don't know how you can say you understand my comment perfectly when you then tell me my "argument" is not rational. I am not making any "argument" about different tax systems.

My original comment was a metacomment about the original comment being too strongly worded.

I agree with you that the current situation is broken, and a fresh look is required to solve it.

Re: Global minimum corporate tax: 130 nations to support U.S. proposal

#350

Post by jlokier »

robomartin wrote: post #309
jlokier wrote: post #267

Earlier quoted context omitted.

> Wouldn't it be simpler to just set corporate tax rates to zero, and instead raise taxes on income Do you mean income as in profit (= revenue minus expenses), or income as in revenue (not subtracting costs)? If you mean profit... that's what corporation tax is already. So I'll assume you mean revenue. No it wouldn't. It would kill many businesses overnight, and incentivise the worst behaviour in the rest. Consider a…

I was hoping the pandemic taught people something about business. I guess it didn't. Society does not benefit from businesses operating on vapor-thin profits. When (not if) anything goes wrong these businesses trigger a job-loss chain reaction that is impossible to avoid. What you want are businesses who make enough in profits to build a solid safety net, evolve, compete, provide security and upward mobility to emplo…

I was hoping the pandemic taught people to read.

I didn't say profit was bad. The discussion point was not about razor-thin margins. The 5% was just notional for discussion. The same problems occur with fat margins.

Building on your point that profits are necessary for growth, stability and job security, presumably you have in mind that the company gets to keep the profit, to use for those things as needed.

The GP proposal I replied to is a tax system which sets a legally required minimum profit margin, and then takes 100% of that required minimum as tax, though I expect the poster didn't think of it that way.

As the proposal is to force the company to make some profit percentage and take that directly from the company, the remaining profit the company can reinvest in growth, stability and job security is reduced. Aside from reducing the amount available to plow back, this also acts to amplify variance in profit from period to period, increasing instability in the company's finances. Reducing profit that can be used by the company and amplifying instability both reduce growth, job security, upward mobility etc. So much for understanding business.

It's also ridiculously harmful to the "food chain" because it would tend to destroy independent supply chain companies, and prevent new ones from being competitve.

The GP proposal takes the legally required minimum profit margin from every individual company in a supply chain, so the total tax taken is the required margin multiplied by the number of companies in the chain. I.e. more companies in a supply chain == proportionally more tax. This creates an extreme pressure to merge small supply chain companies into a giant conglomerates that pay less tax for the same task. I say extreme because it is: Merging brings a benefit of 10-100x tax saving.

If you like giant conglomerates that's fine, but if you want a food chain of independent companies, it's a disastrous policy.

The tax level in that proposal could be set low enough to allow small supply chain companies to survive without succumbing to tax pressure to merge, but if that was done, giant conglomerates would pay a tiny amount of tax, compared with small companies. There would still be a 10-100x tax advantage available to giant conglomerates. Since this entire discussion is a complaint about giant companies paying too little tax, presumably that is not the intended effect.

Some accounting could obviously be done to ensure giant companies pay a similar share to small companies in a chain doing the same thing, to remove the tax pressure to merge. But that's what we have already, that's corporation tax.

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