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40% of multinational profits are shifted to tax havens each year

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Re: 40% of multinational profits are shifted to tax havens each year

#151

Post by mcv »

IAmEveryone wrote: post #123
mcv wrote: post #72

Earlier quoted context omitted.

They wouldn't get to deduct the costs of importing those raw materials, but they would get to deduct the costs (labour, probably) of refining them and making something out of those raw materials. And if they sell back to the country they imported raw materials from, they get to deduct the raw material costs from those profits (assuming that country uses a similar scheme). But you're right, for a company that makes th…

That's totally unworkable. That banana you buy in the supermarket is imported and sold with a gross margin in the low single-digits. Taxes the revenue at income tax levels would effectively raise prices by the tax rate, i. e. 30% or so. If the supermarket doesn't buy the banana directly from the plantation, that tax would accrue at every step of the chain . You'd effectively be prohibiting trade and people would swit…

Many products already have a VAT tax of 20%, and that doesn't seem to stop them. True, bananas would probably get more expensive, but again, countries could mitigate this through trade deals with countries they believe have a fair tax system.

But it's true, local products would have a significant fiscal advantage over products from other countries, especially products with complicated supply chains across many different countries, some of which countries are tax havens that the target country doesn't consider having a fair tax system.

The change would probably be a shock to many companies, but it'd also make it impossible for companies to shift their profits to tax havens.

Re: 40% of multinational profits are shifted to tax havens each year

#152

Post by mcv »

occamrazor wrote: post #141
aembleton wrote: post #51

Earlier quoted context omitted.

That's why I think corporation tax should be applied to UK Sales - UK Costs. - Buy in the branding from the US? That can't be deducted. - Import from China? Can't be deducted. - Employ more people. Deductible - Buy more from UK suppliers. Deductible. Now go on and export more with that. Those export sales won't affect your tax.

VAT works approximately like that (except for the fact that salaries are not deductible)

That's pretty much my inspiration for this. Except I've been wondering if VAT wouldn't be fairer if salaries and other local costs would be deductible.

Re: 40% of multinational profits are shifted to tax havens each year

#153

Post by mcv »

throwaway34241 wrote: post #138
mcv wrote: post #11

Corporations being able to book their profits wherever they find it most convenient to book them, is utterly unreasonable. They make their profits in specific markets, and should be paying their taxes there. Profits made from selling in the US should be paid in the US, profits made from selling in Germany should be paid there. The problem is, profits are the end result of a lot of complex corporate operations across…

I can't upvote this enough, you've just described the actual solution to this problem recommended by economists (which of course no one is interested in). It's a bit depressing to have it be almost totally absent from the conversation even on HN. It's called a border adjustment tax, you tax at point of sale and deduct domestic factors of production. So the tax is on what's remaining (profits and foreign production co…

> "For the foreign part apparently the currency exchange rate appreciates to cancel out the tax so it doesn't actually have a protectionist effect, although that's certainly not obvious to non-economists."

I'm particularly interested in this part, because this does seem to be the weakest part of my idea. Do you have any links with more information?

Re: 40% of multinational profits are shifted to tax havens each year

#155

Post by rayiner »

tapland wrote: post #99
rayiner wrote: post #88

> This shifting reduces corporate income tax revenue by nearly $200 billion, or 10% of global corporate tax receipts. To put that into perspective, the OECD has $50 trillion in GDP, and raises over $17 trillion in tax revenue. So we are talking about 1.2% of total tax revenue. Even taxing all multinational corporate profits at 50% with no tax havens would only add up to less than 5% of all tax revenue. I wonder what…

Because a yearly tax rate isn't a flat fee and yearly rates compound. For example, from the widely shared article from business insider the other week. If there was a 3% tax on money past $1B Jeff Bezos wouldn't have beat $86B in fortune, but he's at $160B today. That's a 100% increase caused by what you call a 'rounding error'. Over not-even-that-many-years.

The vast bulk of taxes in the OECD are payroll and income taxes, which do not compound yearly. Taxes on property account for just 2% of tax revenue in the OECD: https://www.oecd.org/tax/tax-policy/revenue-statistics-highl....

As to Jeff Bezos--what is the point of taxes? Raising money to pay for public services, or trying to make Jeff Bezos have less money? I'm in the former camp. I don't care how much money Jeff Bezos has, I care about raising revenue to pay for public services.

Estimates are that an 8% wealth tax would raise between $60 billion and $430 billion annually: https://www.manhattan-institute.org/issues-2020-taxing-the-r.... Total U.S. government spending (at all levels) is somewhere between 12 and 86 times as much as what an 8% wealth tax would raise. (Of course, an 8% wealth tax would be completely insane and we would never do it. Sweden and France topped out at 1.5% before they realized it was a stupid idea and ditched it.)

I don't see the point of doing battle with billionaires (and potentially driving them all to Canada, or Sweden, or France) to maybe optimistically collect 8% more tax revenue, and realistically more like 1-3%. We could raise $500 billion+ (an extra 10% of revenue) by adopting a Canadian style VAT. Which has the major advantage that it's not insane and everybody else in the OECD has one.

Re: 40% of multinational profits are shifted to tax havens each year

#156

Post by aembleton »

occamrazor wrote: post #141
aembleton wrote: post #51

Earlier quoted context omitted.

That's why I think corporation tax should be applied to UK Sales - UK Costs. - Buy in the branding from the US? That can't be deducted. - Import from China? Can't be deducted. - Employ more people. Deductible - Buy more from UK suppliers. Deductible. Now go on and export more with that. Those export sales won't affect your tax.

VAT works approximately like that (except for the fact that salaries are not deductible)

It does work approximately like this, but this way it would be taxing the value added from imports and profits. Value added by paying someone for labour wouldn't be included as the government will get money for that through income tax.

Re: 40% of multinational profits are shifted to tax havens each year

#157

Post by aembleton »

danaris wrote: post #64
aembleton wrote: post #51

Earlier quoted context omitted.

That's why I think corporation tax should be applied to UK Sales - UK Costs. - Buy in the branding from the US? That can't be deducted. - Import from China? Can't be deducted. - Employ more people. Deductible - Buy more from UK suppliers. Deductible. Now go on and export more with that. Those export sales won't affect your tax.

Unfortunately, that would make some entire categories of business non-viable. Any business that relies on importing raw materials would be hit with punishing taxes—unless their margins were huge, or their local & labour costs were orders of magnitude higher than their import raw material costs, they would likely not be able to operate. Effectively, you would be taxing them on revenue, rather than profit.

For those businesses that import raw materials, and sell on in the UK for a small margin then yes they would be unviable. They would have to increase that margin.

If they are exporting, then this would not affect them.

If they are selling on for a large margin, then they would be able to absorb at least some of the tax.

Re: 40% of multinational profits are shifted to tax havens each year

#158

Post by aembleton »

IAmEveryone wrote: post #123
mcv wrote: post #72

Earlier quoted context omitted.

They wouldn't get to deduct the costs of importing those raw materials, but they would get to deduct the costs (labour, probably) of refining them and making something out of those raw materials. And if they sell back to the country they imported raw materials from, they get to deduct the raw material costs from those profits (assuming that country uses a similar scheme). But you're right, for a company that makes th…

That's totally unworkable. That banana you buy in the supermarket is imported and sold with a gross margin in the low single-digits. Taxes the revenue at income tax levels would effectively raise prices by the tax rate, i. e. 30% or so. If the supermarket doesn't buy the banana directly from the plantation, that tax would accrue at every step of the chain . You'd effectively be prohibiting trade and people would swit…

Only if every step of the chain is in your country. This tax would only affect the sale of goods in your own country, not those that you then go on and export.

Yes, it would increase the price of bananas in the UK as we currently don't tax food. But, it might make an apple relatively cheaper. That would then help to keep money in the UK as it could be grown here; employing people in the UK who then pay tax here.

Re: 40% of multinational profits are shifted to tax havens each year

#159

Post by apta »

disintegore wrote: post #62
systemtest wrote: post #3

I am fairly certain 40% of all citizens would shift their income to a tax haven if possible.

This is a good point, actually. Attributing the blame to an extreme minority of people (billionaires) is counter-productive. The problem is not their individual moral failings (however numerous) but the system that permits them to exist and incentivizes their parasitic and exploitative practices.

> parasitic and exploitative practices.

Like taxes.

Re: 40% of multinational profits are shifted to tax havens each year

#160

Post by apta »

tw04 wrote: post #33
exabrial wrote: post #6

Earlier quoted context omitted.

That's exactly how I feel about it. I don't think "paying" taxes are something that is honorable. The money is removed from you forcefully.

Surely you have an alternative method of funding government then?

There are historic (and present) examples of governments that do not tax their citizens and residents. The government should be engaging in business/trade/stock market/etc. and not steal from its citizens.
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