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EU adopts global minimum 15% tax on big business

bbc.com

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Re: EU adopts global minimum 15% tax on big business

#151

Post by yardstick »

cscurmudgeon wrote: post #139
alkonaut wrote: post #136

Earlier quoted context omitted.

If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. So if a company had $100B global revenue and $10B global profit and 0% of the profit was in France while 10% of the revenue was in France, then the company should be taxed based on the $1B profit that can be attributed to France based on revenue there. Any other scheme seems it’s prone to creative licensing…

> If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? Labor seems a better way to distribute and incentivize employment.

> if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor?

The UK gets 100% already from the income tax for their workers.

Re: EU adopts global minimum 15% tax on big business

#152

Post by jandrewrogers »

r00fus wrote: post #130
jandrewrogers wrote: post #112

Earlier quoted context omitted.

Taxing revenue has turned out to be a terrible idea every time it has been tried. It creates perverse incentives that encourage companies to be inefficient and wasteful. One of the biggest policy problems with revenue taxes is that the effective tax rate is much higher on smaller companies than larger companies. A large vertically integrated company like Apple would pay a lower effective tax rate on an iPhone than an…

Quite the opposite. You can't fake revenue nearly as much as you can fake profits. Examples are legion - look at any company in the US that pays 0% (or negative) corporate tax rate.

You are not understanding the issue. Revenue can be trivially made to disappear, and this is what actually happens when governments tax revenue.

Revenue is recognized as the size of a sales transaction. The number of sales transactions required to build and sell a given product can vary enormously based on the structure of the business, usually as a product of optimizing for efficiency and specialization. When you tax revenue, businesses have a large incentive to restructure their business to optimize for minimizing the number of sales transactions in the course of building the product, because revenue taxes essentially compound as a function of the number of transactions which is then a cost of business. The compounding is why revenue taxes are so low, usually around 1%. Being tax efficient lowers your costs more than being business efficient, leading to bloated and non-competitive companies.

I've operated a business under one of the few revenue tax regimes. The perverse incentives to verticalize the business structure are very real. Revenue taxes add up quickly.

Re: EU adopts global minimum 15% tax on big business

#153

Post by alkonaut »

cscurmudgeon wrote: post #139
alkonaut wrote: post #136

Earlier quoted context omitted.

If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. So if a company had $100B global revenue and $10B global profit and 0% of the profit was in France while 10% of the revenue was in France, then the company should be taxed based on the $1B profit that can be attributed to France based on revenue there. Any other scheme seems it’s prone to creative licensing…

> If I was trying to invent some “fair taxation scheme” I’d tax the profit based on the revenue in that country. Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor? Labor seems a better way to distribute and incentivize employment.

It’s “fair” only in that it’s understandable and somewhat enforcacble (and not possible to avoid with loopholes).

It’s not fair in the sense that the right countries necessarily get the tax money - but it’s certainly more likely than it is today.

It’s not fair in that it guarantees businesses aren’t taxed too much or too little, but it does guarantee that the profits are taxed somewhere which ends the incentive to shift the profits around.

Perhaps “fair” is the wrong word. I mean “fair” as in hard to evade overall, not fair distribution.

Re: EU adopts global minimum 15% tax on big business

#154

Post by nszceta »

Jensson wrote: post #51
dahfizz wrote: post #19

Earlier quoted context omitted.

Doesn't America already have a corporate tax rate well above 15%? What would we have to do to "adopt" these rules?

Tax companies that are currently hiding profits in tax havens. The idea is basically that companies headquartering in tax havens will get taxed anyway, until they pay 15% total global tax on those profits. No single country can do this, but when almost all countries agree to do it then companies can no longer hide.

Please educate us how companies are hiding profits in tax havens. Asking for a friend.

Re: EU adopts global minimum 15% tax on big business

#155

Post by nszceta »

Lionga wrote: post #14
oliv__ wrote: post #6

"The US has not taken steps to adopt the rules so far, despite Ms Yellen's championship of the plan." Lol, obviously. Cheering them on as they shoot themselves in the foot

US LLCs are pass trough entities and the solution of choice for digital nomads to completely avoid paying any taxes. US is still the best tax avoidance haven for most people. EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are.

One does not simply avoid paying taxes with an LLC unless your gross income is minute, tax deductible expenses are huge, or your losses are huge. IT IS NOT SOME MAGICAL LOOPHOLE. It is hard enough to stay afloat as a business without misinformation like this being spread.

Re: EU adopts global minimum 15% tax on big business

#156

Post by diego_sandoval »

zuminator wrote: post #127
djbebs wrote: post #76

Earlier quoted context omitted.

Because businesses are owned by people who in turn are taxed. In effect any corporation tax is a double tax.

That's how taxes work generally though. I already paid income taxes on my salary, but when I spend it on something I have to pay taxes again, and then the retailer has to count it as taxable income as well. Anytime money changes hands the government gets its vig. I don't see how the corporate tax is so egregiously different.

> Anytime money changes hands the government gets its vig.

And doesn't that create an artificial pressure for money to change hands fewer times (for example, in the production of a consumer good)?

Re: EU adopts global minimum 15% tax on big business

#157

Post by zeruch »

Nextgrid wrote: post #34
martinald wrote: post #25

This isn't really as big a deal as it's been made out to be, IMO. This is Pillar 2 of the OECDs tax reform for corporations. Pillar 1 is much more interesting, and would require corporations to actually book profits where they are made (so not putting everything through Ireland for example). This will have a much bigger impact imo than this 15% ruling, because right now there are a bunch of tricks you can use to get…

Out of curiosity, how do you define where profits are made when it comes to selling digital services? There is no physical movement of goods. Do you determine it based on where the software was originally written?

Depends. If it's services, I could see where the services are delivered from (e.g. location of platform or service personnel), OR where the services are destined for (client location) and commit the rev-rec there.

Re: EU adopts global minimum 15% tax on big business

#158

Post by kazen44 »

manmal wrote: post #28
Lionga wrote: post #14

Earlier quoted context omitted.

US LLCs are pass trough entities and the solution of choice for digital nomads to completely avoid paying any taxes. US is still the best tax avoidance haven for most people. EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are.

> EU does not care about good laws they care about good headlines for the news not matter how shitty the things they do are What political system could not be accused of this? Heck my small town is like that.

also, the EU has done some quite proper laws and directives.

Schengen and the entire construct of the internal market being one of the main advantages.

Re: EU adopts global minimum 15% tax on big business

#159

Post by smachiz »

Nextgrid wrote: post #34
martinald wrote: post #25

This isn't really as big a deal as it's been made out to be, IMO. This is Pillar 2 of the OECDs tax reform for corporations. Pillar 1 is much more interesting, and would require corporations to actually book profits where they are made (so not putting everything through Ireland for example). This will have a much bigger impact imo than this 15% ruling, because right now there are a bunch of tricks you can use to get…

Out of curiosity, how do you define where profits are made when it comes to selling digital services? There is no physical movement of goods. Do you determine it based on where the software was originally written?

Generally, for tax purposes, it's the address of the customer for cloud services. If they give you a NL address, you tax according to Dutch law. If they give you a DE address, you tax according to German laws, regardless of where services are actually provisioned.

It would not be that difficult to pay EU taxes based on % of revenue attributed to each country. I.e. if you made $1B, and 70% of your revenue came from The Netherlands, and 30% came from Germany, you'd pay Dutch taxes on $700M and German taxes on $300M.

Re: EU adopts global minimum 15% tax on big business

#160

Post by mpweiher »

toast0 wrote: post #54
torben-friis wrote: post #43

Earlier quoted context omitted.

Surely if, say, netflix is offered to french costumers profit is made in france?

Why should the profit be made in france if the engineering that went into delivery was made in the US, the content was made in X, the deal for the content was negotiated in Y, network source is Z (probably france, but not necessarily) VAT in France on the subscription makes sense, but figuring out where the profit lies, is more nebulous.

> engineering that went into delivery was made in the US

That's a cost, not profit.

> the content was made in X

Cost, not profit.

> the deal for the content was negotiated in Y

Negotiating the deal also sounds like a cost to me.

> network source is Z

Cost.

The profit is made where you get money, not where you spend it.

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