In ideal world that might work, but in reality, the countries that can afford to set low corp taxes do it, and the countries that can't don't. As usual, the rich get richer, and corporations get bigger
This would make total sense if the entire world were under one tax system. Taxing corporations is a way of of taxing the dividends of shareholders outside your country, whose income you can't tax individually.
I don't see this resulting in lower taxes. Countries with higher corporate tax rates have their current corporate tax rates for a reason, and this makes them more competitive (by setting a higher floor) which means less incentive to lower the rate.
That's not how things actually work. If it was, every nation but one would lose all of their corporations to that one country with the lowest rate.
The decline in the benefit of a lower corporate tax rate accelerates as you go lower. For example, going from 35% to 25% might reduce your corporate inversions by 75%. Going from 35% to 10% might reduce your inversions by 85%.
The challenge is to find the level where you gain the most as a nation overall. If you have something to offer other than just the low tax rate, it will never make sense to chase toward zero. The closer you get to that ideal level, the more other factors come into play to your nation's benefit in regards to keeping companies. The US has vast benefits for a company like Pfizer that would compensate for N% additional tax rate.
You have the opposite of that at the moment. Big companies can shift their profits around the world to avoid corporation tax but small ones have no choice but to pay it.
Over a hundred countries agreed to a 15% global minimum corporate tax rate starting this year. It's not nearly enough, but it's a start, and it shows we can tax rich people and corporations.
I think this is the best way to tax corporations. Corporations can move around where they produce goods, but it's much harder to move where they sell them.
Point to the fact that global corporations spend a lot of effort making sure they get away with paying less than they should. If there was a fair taxation of corps at the level they should be taxed, they would be paying more. Obviously the corporations keep getting bigger and richer, and the 1% wealthier, yet we see countries struggling with welfare state. Doesn't seem right.
I think this is good idea and thinking far into the future. With corporations constantly paying an lower tax rate than individuals and being able to move HQ to countries that offer a bigger tax break is leading to corporate taxes being deferred to the individuals. Prisoner's dilemma. This I hope will break that cycle and corporations can finally pay their fair share of the taxes.
Trying to tax multi-national corporations is futile and encourages huge amounts of rent-seeking. We should just go to a low flat corporate tax rate (say 10%). To offset that we should stop taxing capital gains at a lower rate and crack down on tax avoidance by high-income individual taxpayers in the US.
A corporation can run their activities from Bermuda or wherever they want, but corporate executives and shareholders aren't going to move to a shitty low-tax jurisdiction if we up their rates.
I think you are misinformed about the level of corp tax in most poor countries. Twenty countries have corp tax less than 15%, of which about half are poor. 15 have no corporate tax and are either rich or are just unambiguous tax havens.
Average corp tax in Africa and South America is 28%, Europe and Asia are 20%.
Well this creates the incentive that corporations try to minimise their employees, or try to shift employment to low tax/low cost countries. Now that very well be desirable for corporations and people who derive income primarily from capital, but it is not desirable for society. The whole idea behind corporate tax is that they should be taxes on the profits they make, where they make them.
This sounds like a good idea for the current, somewhat dystopian world we're living in, but have you ever thought about whether huge corporations are even a net positive in the first place?
I think that even if taxing corporations doesn't make sense in terms of tax revenue, it makes sense in terms of stopping companies from growing too large
Imo corp tax should be nil until you get to about 1m profit, and then brutally progressive after that. Small businesses are great, and companies that benefit the consumer by being large can be public-owned and both compete internally and internationally.
That isn't the point. There are lots of countries with high corporate income taxes on the domestic level.
By the way, the consumer only ends up paying the tax if the taxed corporate income is necessary for a future investment or production process. If the corporate income is paid out to owners and investors then the consumer carries none of the cost.
The point is that all countries should equalize their tax rates so that the differences between tax optimized international companies and unoptimized local companies shrinks.
Its becoming clearer that the world is shifting towards coordinated world-wide tax rates, similar to how central banks are coordinated. Modern trade is complex and almost always multinational. Clear and easy tax rates will actually allow anyone to enjoy fair taxation, instead of the current unequal situation in which megacorps can use complex schemes to drastically reduce their rates, while normal businesses can't.
Incidentally , the most unequal territory in terms of shifted profits is Europe. An EU-wide corporate tax of 20-25% would be good for business
Here is even simpler idea to make that feasible: Start actually taxing the corporations in a way that can't be trivially avoided. And don't tax them less than your own citizens. Maybe tax a bit of income on top of revenue. Maybe tax a bit more if income per employee is on high side.
Why is low corporate taxes a bad thing? I want countries to compete on efficient government and low taxes. Otherwise it’s an endless cycle of stealing from private enterprise until there is nothing left.
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