Oh wow, if we did that, then the EU and much of Asia would follow in retaliation. So companies operating in the USA would have to pay taxes to the USA, China, the EU, on all their worldwide income, insane.
Let’s not forget the problem that not all tax systems are very compatible, they all define income differently, some of them rely more on taxes that aren’t income based.
Agreed, trying to get the whole world to agree on a single tax rate (0 or otherwise) is unrealistic, and completely ignores the sovereignty of countries to design their tax system as they please. What needs to happen is a modernized way to calculate which percentage of global profits from each company are taxable in which country, and then leave it up to each country how to tax that (or not). The current system lets companies cook the books in a way where they can effectively relocate their profits to any country they want.
What you're suggesting is a territorial tax system, versus the a worldwide tax system such as the one the US currently has. Using a worldwide system is actually very rare--only six OECD countries implement worldwide taxation rather than territorial. Part of the reason America-based companies seem to be trying so hard to avoid American taxes is because they are, compared to the other nations they operate in, much worse.
I don't think it's fair to assume harmonized tax rates are mutually beneficial. Taking Ireland as an example, how many of the companies that shifted profits there for favorable tax treatment would continue to do that if they had to pay the same as they would in the US? My guess is relatively few would remain. So Ireland would likely lose revenue without that discount as an incentive drawing in these companies.
I see your objections. My idea is you could base it in the US possibly or have more than one and have them just work out the global earnings using GAAP and apportion it to the various countries by how much they sell there so you get a earnings figure for each country. The countries could then use that to come up with a tax demand at their chosen rate and the company could either pay up or face sanctions in that country. So it doesn't require anything like a world government, just some accounting and possibly trade agreements.
I honestly don't believe that a country would stop having companies, or not have access to certain products because of such a tax. Remember your country would have no corporate income tax, it's the consumers of your product who are effectively paying the tax. Only companies not making a profit would take issues with such a scheme.
Take Q8, they own gas stations in Denmark. Apparently they've made no profit in Denmark, EVER. That is of cause a blatant lie. They've just moved the profit abroad. Taxing the revenue, directly at the pump, would either drive a lying company out and make room for more honest ones, or they would start paying their share.
There's ALWAYS someone who see an opportunity. Coca Cola leaving because they refuse to pay your tax? Fine Pepsi will swoop in that same day.
What you're suggestion is that companies will only ever operate in countries that makes it possible to be creative with taxes.
How could you cut off City of London Corp from international financial circuits. Or the Netherlands, which is one big tax paradise even though it may seem it is not. Luxembourg? Don't think that tax heavens are some remote, distant islands governed by some petty lord.
Taxation is really hard to enforce in the modern World. The biggest problem is that small, local companies cannot compete with big ones because they don't have resources to overcome taxation.
For me it make sense more sense to abandon corporate tax at all and make sure that all the resources, public services that company uses in a given country are paid by the company. If company uses trucks, it should pay for roads, etc.
I don't think that Facebook that operates from US and uses US resources and services should pay CIT tax in, say, France. If it uses internet infrastructure, just make Facebook to pay for it fair amount and that's all.
Like tax world wide profit at a rate proportional to revenue in each country?
ie. if 10% of your revenue happens in country A, then 10% of your world-wide profit must be taxed in country A at whatever corporate tax rate country A offers.
This could also be structure as: If 10% of your revenue happens in country A, then 10% of your wold-wide profit must be taken out in country A.
Or something similar... perhaps just make it easier to prosecute profit exports for tax evasion purposes.
IMO, I would rather see resource based taxing, as companies will find a to optimize taxes no matter what.
We have a global economy but not a global tax system or a global set of rules. That's the essence of the issue here I think.
What also happens is countries upping one another with lower taxes and exceptions to attract big companies hoping to get some (small) benefit from it.
If we got rid of corporate taxes altogether it would be different, and it would likely "provide a level playing field for all companies". And I'm not sure why companies that are not multi-national can't afford to do this too.. if their corporate taxes are absurdly high like they are here in the U.S., they are free to offshore their operations just like U.S. companies do, or lobby their government to reduce or eliminate corporate taxes altogether. In that respect, the playing field is level because the global economy is now the playing field.
This doesn't solve the globalization problem. Say..an American company such as Walmart goes to a country, kill all their local competition with lower price, and make a ton of profit and then distribute them amongst Walmart shareholders in the U.S.
Sure those shareholders will pay cap gain or personal income, but now since you eliminated corporate tax completely, the net tax revenue of the country wal-mart operates in is no diminished.
This is a great idea to increase the wealth gap between U.S. and the rest of the world, for good or bad. Considering how many international conglomerates are U.S. based.
The time has probably come for better global tax rules for multinational companies. It's tricky because you need multiple governments to agree but even so.
That -sounds- simple, but it isn't, and in reality any company would easily bypass that by simply creating other companies to take some of the revenue. They already do that to avoid international taxes. As an example, the US charges tax on all income coming to a US company so companies have entities in countries like Ireland and Luxembourg to keep that money out of the US government's reach.
So Apple might have $100B stuck in Ireland, unable to bring it to the US, but it doesn't matter, that money still counts for their shareholders.
And it's the same thing here. If you try to tax $10B they'll just have 100 companies all making $9.9B/yr, in a variety of different countries, completely separate from each other, and you're back where you started.
And while this would be extremely complicated/expensive for them to manage, it'd be profitable because the alternative is to get a 100% tax on those profits.
Taxes aren't easy. And calling a company that sells phones a "society-destroying problem" is a bit hyperbolic, don't you think?
This feels like a battle between governments, and I’m glad to hear OECD are involved.
Corporation tax feels like it should be agreed between nations, not between individual nations and corporations. The Google multinationals of this world expect to pay a certain amount in corporation tax but right now too much of that is concentrated in the US and Ireland. Of course the US government is tied — it doesn’t want to give up the giant share of the pie it currently has, and would lose out on if some of that went to Spain instead.
It’s right that it should be a shared source of revenue between all countries in which the multinational operates, but I think a new kind of tax is the wrong way of going about it when corporation tax reform could solve the same issue and be more generally useful.
Payroll tax — a significant source of government tax revenue spread around the world, when a corporation has expanded worldwide — is distributed fairly in this way already.
There's already an established principle of double taxation treaties between countries so worst case the company would pay max((country.tax_rate for country in company.operating_countries)).
It's also worth noting that there has been and is a strong effort to harmonize accounting across countries (eg GAAP). Countries might tax differently but that really doesn't matter since you're just slicing up the same pie differently.
Don't get me wrong: this isn't simple. For one thing, once a company likes Apple gets into a position of choosing how to divide up $20B in taxes between countries, this gives them a lot of power. Countries will try and incentivize them to pay taxes to them instead of someone else.
Again there is precedent for this sort of thing and arrangements can be treated by the like of the EU or even the WTO as unfair tax subsidies. But it could get complicated. Like what if Ireland decides to exempt Apple from sales taxes and the UK decides to exempt Apple from payroll taxes to incentivize them to pay taxes their instead of somewhere else?
This is one reason why it'd be important to, at the same time, establish a minimum baseline for what taxes a multinational owes in each jurisdiction. The fact that a company can do billions of pounds in business in the UK and report all that income Ireland thus paying a few million pounds in taxes each year is ridiculous.
How about this for an idea: establish how much revenue comes from each country based on the source so if someone in UK hands you money then that money is attributed to the UK. Divide that by total global revenue and then at least that percentage of profit has to be taxed in that counry.
The reason why is you will end up with every country in the world taxing each company on their worldwide income. Any company operating in more than one country will be taxed out of existence.
It is not that hard to determine where the income is earned provided countries share data.
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