Completely agree on all points, especially the last one. I'd argue that it's a very vicious way to remove international competition for the US now that they have effectively developed a thriving economy. It's just a much bigger form of regulatory capture Imo and some countries might gain way more by having lower taxes than whatever they would have with a 15% tax rate.
But to be clear my comment was really just about the specific wiki article he linked to and the weird rumours that spawned around it. Otherwise I usually don't even try to comment on anything related to economics or finance here on HN anymore, it's just not the... right platform for that Imo.
With most dual taxation treaty, and automatic sharing between countries (incl. almost all those you cited, starting this and next year), that is slowly going away.
Except we're not talking about a far country in a galaxy far, far away, but a close ally that actively benefits from the advantages of being a close ally, while pulling bad tax tricks that are detrimental to the countries that allow it to thrive.
It's not about fixing the Bahamas here.
I do agree with your first sentence though, whether this is good or bad depends on the particulars.
Yeah, you have to wonder if the US cares more about this framework being in place and being able to dictate other countries policies more than actual tax rates.
That doesn't require "radical change in tax law, including breaking more than a hundred tax treaties." to fix though. Those countries can deal with it as they see fit.
One likely possibility is mention of this presidential administration changing US corporate taxation to something more focused on capital flow across borders. It's in some ways similar to a VAT- a lower possible rate, but closing loopholes that strand revenues overseas, and eliminating almost every incentive for corporations to domicile offshore or adjust the books so that US taxes are avoided.
One aftereffect of this policy, which has its fans on both sides of the aisle, is the prospect of not so much a stronger dollar, but far weaker currencies for countries that derive their survival on multinational corporations taking advantage of the current US corporate tax system.
As a result, you can still either invest in stock in XYZ in, say, Honduras, or, own stock in the US fortune 500. As many look to the future, the better, safer bet is looking more like the latter than it used to.
Wouldn't #1 result in a race to the bottom? Why wouldn't a foreign country use tax policy to lower their corp rates towards zero in order to attract foreign tax revenue? After all, some tax is better than no tax.
I think domestic tax policy is fine. International tax policy is a mess. Currently, every country has a tax treaty with pretty much every other country - This means that the number of unique international tax treaties is O(n^2) - So if you consider 100 countries which all have treaties with one anther, that represents maybe 10000 unique treaties (if you consider each direction as a separate treaty)... And each treaty is like 50 pages. That's a LOT of work - It is very easy to make mistakes or introduce intentional loopholes without being noticed.
If we had a computer program with 1 million pages' worth of code (with no source control and a highly fragmented Q/A process) then your chance of your program being buggy is extremely high.
It's baffling that governments thought that it would be better to write up n^2 unique treaties between each other instead of having a single treaty (or limited set of treaties) that applies to all (a la Kyoto Protocol or Geneva Conventions)! This is such an obviously bad idea, one has to think that it was done intentionally... Probably the result of heavy corporate lobbying.
At least now some middle-class workers are able to benefit from this mess (before remote work was possible, pretty much only corporations and wealthy people could leverage this). I've heard about regular working-class people who live in Malta and work remotely for US companies and pay almost no tax - This is because of loopholes in that specific treaty. There must be loopholes all over the place.
Right now the system is biased towards helping accountants make big bucks.
Tax heavens like law breakers may have critical roles in a stable system allowing it to adapt. But one can not let them run the show as a whole.
International trade is not a new problem. Car manufacturing has been internationally for a while. Rules for transfer pricing have been established. The challenge is with this construct of intellectual property where arbitrary valuations disconnected from any underlying real trade are easier to get away with.
It used to matter less. It matters more now and tax innovations are getting more scrutinized.
We are talking about a US tax proposal. I'll bite, what is country B you are talking about that is next door and has better services and infrastructure and lower taxes? Heck, remove the "next door" requirement you put in there and I still think your statement is indefensible.
Ideally the US begins stealing corporations and manufacturing from the rest of the world, whereas previously the flow had been going the other direction, with dozens of large companies abandoning the US for lower tax locations.
For example, the lower corporate tax rate, combined with very inexpensive US energy (cheap natural gas), makes manufacturing in the US even more appealing.
You don't have to beat all the other tax havens, you just have to get low enough to be competitive on the overall value proposition. The UK is at or going down to 17.5%, that 3.5% variance with the new US rate becomes mostly meaningless as an issue (17.5% vs 35% however is a drastic gap).
I'm not really upset about this for a few reasons:
* Taxes are excessive and out of control in the US
* Most taxes just end up in lawmaker's buddy's pockets
* Programs in the US get created, and never garbage collected
* Literally every business is doing this
Really the only thing that upsets me is that these tax havens aren't accessible to common people like me, as I'm not blood or marriage related to a US Senator or Congressional Rep.
Bluntly speaking, as a taxpayer of country A I don’t care if country B benefits. It’s okay if they do but as a taxpayer of country A I wouldn’t like my money to be spent on solving country’s B issues.
Changing our tax rates seems downright benign.
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