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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

#11

Post by nopassrecover »

patd wrote: post #7
amelius wrote: post #6

Earlier quoted context omitted.

> Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country ?

Because in practice if you make 1 million in a country, you’ll claim 1 million in expense in another country (with little to no taxes) for things like IP, trademark, etc.

Restrict expense claims of that nature and/or tax on revenue and minimum expected profit for large companies?

Re: G7: Rich nations back deal to tax multinationals

#12

Post by trainsplanes »

greenwich26 wrote: post #10

Why are governments allowed to collude like this? Isn't this the same idea as price fixing? Exploiting their monopoly (governments' monopoly on the right to do commerce) to unfairly raise prices (taxes)? The world needs at least somewhere where you can opt-out from Western neoliberalism and socialism.

There are some countries that you can move to that are generally free of the laws of western nations.

For some reason, people from “western neoliberal and socialist” countries generally don’t move to them, though.

Re: G7: Rich nations back deal to tax multinationals

#13

Post by bodono »

gostsamo wrote: post #8
bodono wrote: post #5

The US tax code is absolutely riddled with tax loopholes. Many of these loopholes were designed to act as an incentive, such as tax breaks for hiring former felons, building factories in certain locations, investing in R&D etc etc. Major corporations often pay far lower than the US corporate tax rate precisely because they respond to these tax incentives (and sometimes abuse them, but that's a different story). Does…

This is a minimum with the corporate tax rate in the US being above that. Therefore, the difference between them minimum and the official value is the incentives margin that the government can use to nudge corporations in the desired direction.

Yes I understand that, but I believe that many corporations today pay even lower than a 15% effective tax rate. I suppose you're saying that these loopholes will be closed up to that minimum?

Re: G7: Rich nations back deal to tax multinationals

#14

Post by spywaregorilla »

greenwich26 wrote: post #10

Why are governments allowed to collude like this? Isn't this the same idea as price fixing? Exploiting their monopoly (governments' monopoly on the right to do commerce) to unfairly raise prices (taxes)? The world needs at least somewhere where you can opt-out from Western neoliberalism and socialism.

Collusion between governments isn't illegal, and there is no governing body that would prevent this. At best there are economic treaties between countries.

This applies only to "global companies with at least a 10% profit margin". By definition, you're already playing ball with all of these actors if you're a global company.

Re: G7: Rich nations back deal to tax multinationals

#15

Post by Naga »

amelius wrote: post #6
orf wrote: post #2

Summary: > Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. > Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits. Good. It’s a shame that Biden had to back down from the initial 28% because of do…

> Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country ?

It's complicated. "Money they made in their country" is hard to define. Large companies abuse intangible assets to shift profits around, but it's hard to say at what point abuse starts. For example, Google USA sells advertising to its clients. But, the assets it is selling are actually owned by Google Ireland. Google Ireland charges Google USA a license fee of 100% of the revenue they made. Suddenly, Google USA has net profit of 0 and Google Ireland has a large net profit.

This at the same time happens frequently, but also some amount of intercompany shifts in profit are reasonable. Google Ireland might be the actual owner of the asset. Company ownership might be fuzzy as well - maybe foreign subsidiary is only partially owned by the parent and partially owned by another company. Drawing the line can be very hard. Do we make it so companies are not allowed to sell or transfer assets overseas?

Probably the best solution is a minimum tax worldwide. This reduces the incentives to shift profits around, since the tax rates are the same everywhere.

Re: G7: Rich nations back deal to tax multinationals

#16

Post by jabl »

patd wrote: post #7
amelius wrote: post #6

Earlier quoted context omitted.

> Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country ?

Because in practice if you make 1 million in a country, you’ll claim 1 million in expense in another country (with little to no taxes) for things like IP, trademark, etc.

AFAIU proposals for taxing companies wherever they do business rather than where they are headquartered often involve paying MAX(X% of profits, Y% of sales), precisely to avoid these kinds of shenanigans.

Re: G7: Rich nations back deal to tax multinationals

#17

Post by lixtra »

patd wrote: post #7
amelius wrote: post #6

Earlier quoted context omitted.

> Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country ?

Because in practice if you make 1 million in a country, you’ll claim 1 million in expense in another country (with little to no taxes) for things like IP, trademark, etc.

Of course it could be argued that the second company is also making the money in the first country where it’s IP, trademark etc. gets used and has to be taxed there.

Tax authorities already try to control for arbitrary cross country bills that try to shift profits (at least in some jurisdictions). The downside is more bureaucracy and unproductive friction of course.

Re: G7: Rich nations back deal to tax multinationals

#18

Post by Zenst »

orf wrote: post #2

Summary: > Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. > Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits. Good. It’s a shame that Biden had to back down from the initial 28% because of do…

> Good. It’s a shame that Biden had to back down from the initial 28% because of domestic opposition.

It's a compromise/balance and as we know of many taxes - easier to raise them than to get them inplace too start with.

Biggest issue in all this would be that it will need the weight of those supporting it to peer-pressure the other countries to join. So Ireland, Luxenburg and other corporate tax over-friendly countries need to come onboard and that will be easier to achieve with a lower bar of 15% than to go in hard at 28%.

Also when negotiating, there are always compromises and by going in high at 28%, left a lot of room to compromise had he gone in at 15% inititialy and with 15%, whilst far from what people demand, it is better than currently and good foundation start.

Far more important though is the second aspect: "Secondly, the rules will aim to make companies pay tax in the countries where they are selling their products or services, rather than wherever they end up declaring their profits."

That is far more important IMHO as currently see countries seeing their taxes due being off-shored and lost - that in itself is the bigger issue and this addresses that aspect.

Re: G7: Rich nations back deal to tax multinationals

#20

Post by naveen99 »

Naga wrote: post #15
amelius wrote: post #6

Earlier quoted context omitted.

> Firstly, the G7 want a global minimum tax rate so as to avoid a "race to the bottom" where countries can undercut each other with low tax rates. Why is this necessary, if countries can just tax companies based on the money they made in their country ?

It's complicated. "Money they made in their country" is hard to define. Large companies abuse intangible assets to shift profits around, but it's hard to say at what point abuse starts. For example, Google USA sells advertising to its clients. But, the assets it is selling are actually owned by Google Ireland. Google Ireland charges Google USA a license fee of 100% of the revenue they made. Suddenly, Google USA has n…

A 100% license fee seems like a non arms length transaction at a non market rate.
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