G7: Rich nations back deal to tax multinationals • Hacker News Board

Re: G7: Rich nations back deal to tax multinationals

#271

Post by throwkeep » Sat, Jun 05, 2021, 2:50 PM UTC

lanevorockz wrote: post #149

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…

More taxes is always good, can’t wait for 100% taxes so I can use my gucci bag voucher while playing ps5 at home

The absurdity of this comment is actually useful because it forces you to question how much is too much.

Re: G7: Rich nations back deal to tax multinationals

#272

Post by etherael » Sat, Jun 05, 2021, 2:52 PM UTC

toyg wrote: post #250

etherael wrote: post #230

Earlier quoted context omitted.

It's one thing to get G7 to agree on something when they're literally in the same club, another to get their client states that might previously have been attractive options like Ireland or Estonia to get on board to some degree. But jurisdictions that are much more independent and less prone to leverage like Georgia or Malaysia on the other hand I just don't see it. And that's before you get off into the weeds of ju…

Low-tax countries in the EU are being ruthlessly isolated already. This has been happening for some 15 years now, and accelerated after Brexit; covid might well be the nail in the coffin. I am also sceptical of your claim that jurisdictions like Georgia and Malaysia are "less prone to leverage" - their proximity to large adversaries actually makes them more dependent on soft-power diplomacy to maintain big friends. O…

> This has been happening for some 15 years now, and accelerated after Brexit; covid might well be the nail in the coffin.

Estonia will be a useful barometer to keep an eye on for this in the future, but since their tax rate is actually basically in line with this floor anyway it may well be that this just doesn't affect them at all.

> their proximity to large adversaries actually makes them more dependent on soft-power diplomacy to maintain big friends.

Georgia already has recent experience with such relationships not keeping the bear at bay so may well view the extra capital from remaining an attractive tax friendly jurisdiction as more useful than bowing to parties who have already failed them in the recent past.

Malaysia seems even less likely to buckle to the "international order" as they have neither the cultural homogeneity nor the magnitude of the threat that Georgia has.

> You put your money into China, you can't pull it out ever again; you put your money into Russia, and tomorrow it might well be Putin's money.

When what your money gets you is absolutely nothing, one parasite is just as bad as another in the long run, it just becomes a question of which one costs you more. Russia and China have to restrain themselves in the looting sector less and less to the extent that their US & EU competition go all out in order to look like better alternatives.

And then, there's the implications of an extortion war across the global economy providing capital flight impetus to push the cryptosphere to obscene heights and complete inability to tax in a worst case scenario.

I think the fundamental fact of the issue will remain that as long as it's a forced payment not linked at all to delivery or quality of goods or services, all rational parties will be forever motivated to avoid it to the maximum extent possible, as it resolves to nothing more complex than "burning money" given what it actually buys you.

Time will tell I guess.

Re: G7: Rich nations back deal to tax multinationals

#273

Post by another_poster » Sat, Jun 05, 2021, 2:53 PM UTC

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…

All taxes are avoided (or illegally evaded) to some degree, and the most taxed (i.e. the wealthiest people and firms) will always have the largest incentive to avoid taxes. To reduce the incentive to avoid taxes, countries often tax capital (or labor) at multiple stages but with lower rates (e.g. a corporate tax, dividend tax, and sales tax). As you point out, the corporate tax is redundant to other forms of taxation, but the redundancy lowers overall taxation rates and hence tax avoidance. So it's a feature not a bug of modern taxation.

Some interesting alternatives to corporate taxation have been proposed[1][2], and I think they merit consideration for their potential to remove disincentives to invest or hire labor. I personally like Michael Pettis's argument that continued economic growth depends on increasing economic demand through redistributing wealth from capital (or more generally the wealthy) to labor [3], so I am skeptical of reforms that stop taxing capital.

[1] https://cdn.americanprogress.org/wp-content/uploads/issues/2... [2] https://taxfoundation.org/value-added-tax-revenue-neutral-al... [3] https://foreignpolicy.com/2020/09/29/capital-flow-united-sta...

Re: G7: Rich nations back deal to tax multinationals

#274

Post by tw04 » Sat, Jun 05, 2021, 2:54 PM UTC

IanCal wrote: post #253

mrgordon wrote: post #214

Earlier quoted context omitted.

You’re ignoring that the companies can just keep lots of cash without distributing it to individuals in order to avoid taxation under your system. So for example the company can rent houses, cars, and airplanes for every employee to ensure there is not much money left to be taxed as income. On paper they look like corporate expenses but it’s really just a way to distribute money without it being taxable.

> You’re ignoring that the companies can just keep lots of cash without distributing it to individuals Nobody benefits from a company growing indefinite wealth without distributing it to actual people. > So for example the company can rent houses, cars, and airplanes for every employee If they could do this, all companies would do this already to avoid taxes. In reality, this is dealt with by (in the UK) considering…

That is completely avoided if the person makes less than 12k/year though. So there is already a loophole, there just hasn’t been enough incentive to use it yet. Although I’d question if that’s why some executives take a $1 salary and the rest in stock. All of their benefits are now tax free*.

yes I realize it’s nuanced and depends on country.

Re: G7: Rich nations back deal to tax multinationals

#275

Post by PragmaticPulp » Sat, Jun 05, 2021, 2:55 PM UTC

PaulRobinson wrote: post #240

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…

If you’re going down this route, many will argue that all forms of income tax are equally “wrong”. Henry George - a 19th century political economist - proposed exactly this, and suggested the only thing that should be taxed should be land: impossible to hide from a tax inspector, potentially a waste to the public commons if useful land that could be exploited isn’t and you can even protect land you wish to keep prist…

> Henry George - a 19th century political economist - proposed exactly this, and suggested the only thing that should be taxed should be land

That may have made sense in the 19th century when agriculture dominated the economy, but it’s irrelevant today.

At scale it becomes a tax on how space-inefficient your business is. Bad news for farmers, great news for the business running a 1000-person operation out of a skyscraper. You could of course start trying to change taxation rates based on various factors to compensate, but those factors reduce to proxies for revenue, which puts us back to square one.

19th venture taxation theories don’t translate to modern multinational trade with digital commerce.

Re: G7: Rich nations back deal to tax multinationals

#276

Post by ipaddr » Sat, Jun 05, 2021, 2:57 PM UTC

runarberg wrote: post #198

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…

I’m of the opinion that there should only be income tax (paid as a function of standard deviations from from the mean wage on the logistical curve). And all personal profits should be considered income, including sold shares, paid dividends, earned interest, etc. However I can see how that system would be abused. E.g. instead of buying that yacht from your personal money (which you need to pay 70% tax on when you tra…

Capital gains is much lower in the US compared to other countries, your idea floats the value at your current tax bracket.

It could work but where do royalities fit in? Estate taxes?

Re: G7: Rich nations back deal to tax multinationals

#277

Post by yojo » Sat, Jun 05, 2021, 2:57 PM UTC

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…

Here’s a different lens: tax is a mechanism for determining who pays for shared infrastructure and social services.

Any entity that has to pay obviously has other ways they can more productively (as seen from the entity level) deploy the cash.

But ideally we are not optimizing for a single entity or class of entity, we’re trying to optimize at the societal level.

We know that corporations can bear some burden, because we are taxing profits. I couldn’t tell you whether this is an optimal place to tax, but it intuitively feels reasonable - corporations are large non-governmental concentrations of wealth and power. This seems like a valid pool to tap for funding the state, and better than many alternatives (e.g. taxing the poor and powerless).

Re: G7: Rich nations back deal to tax multinationals

#278

Post by riffraff » Sat, Jun 05, 2021, 2:58 PM UTC

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 does not address the issue this new tax agreement is supposed to tackle: that big companies produce income in country X but shift profit to country Y where it is taxed less, effectively extracting wealth from the first.

If you only taxed dividends the problem would not go away.

Re: G7: Rich nations back deal to tax multinationals

#279

Post by sbacic » Sat, Jun 05, 2021, 2:59 PM UTC

ggm wrote: post #22

the-dude wrote: post #4

The cynic in me thinks this is primarily good for the Rich nations (G7), otherwise they would not have closed the deal. Somehow, this deal will be used to keep unincumbents out.

I'd ask some economists if thus is net negative or net positive for developing economies. If the principle is you pay tax in the economy you supply service, then a lot of service is supplied over mobile devices to emerging economies. Maybe their tax revenues will rise?

> Maybe their tax revenues will rise?

I think it will depend on whether these services will even _be_ supplied there. More likely than not, companies will just pass over the opportunity to provide services to smaller and poorer countries due to higher fixed costs of doing business there offsetting the benefit of low per-unit costs inherent to digital services.

Re: G7: Rich nations back deal to tax multinationals

#280

Post by ipaddr » Sat, Jun 05, 2021, 2:59 PM UTC

heliodor wrote: post #260

runarberg wrote: post #198

Earlier quoted context omitted.

I’m of the opinion that there should only be income tax (paid as a function of standard deviations from from the mean wage on the logistical curve). And all personal profits should be considered income, including sold shares, paid dividends, earned interest, etc. However I can see how that system would be abused. E.g. instead of buying that yacht from your personal money (which you need to pay 70% tax on when you tra…

How about the self-sustaining farmer who doesn't need to work in society? Completely capable individual, has a certain way of life, and suddenly they don't need to contribute? How about the person who has so much wealth that they will never need to work in their life? Government is labor that benefits the people. The only way an individual can escape the duty is if they are incapable or if society deems that they des…

They would pay property taxes at the city level and other fees still.