[ujjain]

I am worried that this tax is partially based on jealousy and envy. I'm not so sure we should create a very complex tax system to specifically target companies and industries we feel deserve to pay more. Eventually this will end up a very complex tax system where nobody feels they are treated fairly.

If tax avoidance is legal, is it really tax avoidance? We've had leftist and rightist governments for 30 years saying they want to close tax loop holes, but they seem to be unable to create a system that works and successfully makes large corporations pay tax on profits.

I agree that it's messed up that Facebook and Apple make all their profits on tax havens, but I'm concerned that we are a bit too narcissistic by believing we can create a complex tax system that will solve this.

Humans have a dark side and seem completely unaware that their believes are driven by self-interest, envy and hate rather than making systems that work.

[rayiner]

Large corporations do pay taxes. Walmart's average tax rate is consistently around 25-30%: https://csimarket.com/stocks/singleProfitabilityRatios.php?c.... Proctor & Gamble pays 20-25%: https://csimarket.com/stocks/singleProfitabilityRatios.php?c.... Exxon's is 20-40%: https://csimarket.com/stocks/singleProfitabilityRatios.php?c....

Compare Alphabet, which has ranged from 8-25% in the last four quarters: https://csimarket.com/stocks/singleProfitabilityRatios.php?c....

Companies that produce physical goods in specific geographic locations and sell them in other specific geographic locations cannot play tax games the way tech companies (which sell intangible goods and services created from intangible inputs) can.

[jayalpha]

"Companies that produce physical goods in specific geographic locations and sell them in other specific geographic locations cannot play tax games the way tech companies "

Apple can produce an iPhone in China, sell it to Apple HK and Apple HK exports it to Apple US. The main profits can be made this way in HK tax free. (Not sure about apples actual setup. Just an example).

The same way imported iphones lead to an increased trade deficit between China and the US. The profits are made by US companies, the tiny profit for assembly is made in China. This phenomenon is known as "dark matter" in accounting.

[delinka]

In the US, it's "avoidance" (legal) vs "evasion" (illegal). I think those are terms even the IRS uses (I'm looking for a reference...)

In any case, loopholes are entirely the providence of complexity. We need a simple, non-regressive tax scheme that eliminates subsidies for companies. Maybe start with "40% tax" at the top and above (define "top") of income and profit. For individuals and families, turn it down from there down to poverty level (define "poverty level"). For companies, there's no poverty level. Individuals and families get to reduce their taxable income based on children, educational expenses, and medical expenses. Companies get to reduce their taxable income by spending money on valid expenses (paying employees and offering perks, office equipment and supplies, vehicles as necessary to operate the business, etc) - do away with accrual accounting.

[AnthonyMouse]

> I agree that it's messed up that Facebook and Apple make all their profits on tax havens, but I'm concerned that we are a bit too narcissistic by believing we can create a complex tax system that will solve this.

The fundamental problem is assigning a jurisdiction to the "profit" from a supply chain that snakes through twelve different countries.

When you pay $50 for a widget, 100% of that is somebody's profit. The retailer sells for $50 and buys for $40. The wholesaler sells for $40 and buys for $30. The manufacturer sells for $30 and pays $20 in salaries and other expenses. The factory employees are paid $20 but pay $15 for rent and food. The landlord and the farmer are paid $10 and $5 and either keep it as profit or have their own expenses that somebody else profits from.

There was originally $50 and, at the end, there is still $50. Somebody has it. It's somebody's profit.

But when the same entity has operations in multiple countries, the "profit" doesn't have a specific country. A US-based company pays $20 to manufacture something in China and sells it for $50 to a customer in Austria. Their total profit was $30, but did they make $10 in each country, or $20 in China and $5 in each of the others, or $25 in the US, $5 in China and nothing in Austria? The assignment is almost totally arbitrary. And when it's completely normal for many types of operations to have single-digit profit margins, that much difference in the arbitrarily assigned price can easily wipe out all the "profit" in any given country.

The answer is to forget about "profit" -- it's all profit. You need to tax the thing that actually happens in your country. If the product is sold there, that's sales tax (or VAT). If the company has a facility there, property tax. If the company employs workers there, payroll taxes. Companies can't avoid this and still do that thing in your country. You can't assign "sales to customers in Austria" to Luxembourg the same way you can assign profits.

Naturally everybody hates this, because countries want companies to sell products and build facilities and hire workers in their country, and don't really want to discourage it (or raise costs / lower wages for their citizens). But you can't tax a company that has no interaction with your country at all. All you can do is tax the interactions it actually has.

Trying to abstract those interactions into "corporate profit" only serves to give the companies an excuse to shuffle the "profit" into a jurisdiction with lower taxes.

[JumpCrisscross]

> Eventually this will end up a very complex tax system where nobody feels they are treated fairly

The irony to this is Europe’s richest families pay close to nothing in taxes. (It’s why these loopholes stay open.)

[ericd]

What loopholes do they use to pay next to no taxes?

[JumpCrisscross]

> What loopholes do they use to pay next to no taxes?

Principally routing investment gains through a series of entities, each which assesses transaction expenses, until no taxable gains are left. Luxembourg, Andorra and the Isle of Man are favourites for extracting income. The fixed cost of this plumbing is high, so it only makes sense if you’re investing €10+ million at a time. But it surprised me when I first saw how complicated simple European transactions were compared to American ones. (The former would route through a menagerie of family trusts, companies and other entities. The latter, at worst, would route through a Delaware LLC or Cayman LP.)

[ericd]

Thanks for the overview. That does sound kind of like a nightmare to do anything with. I wonder if the tax savings are really worth the increased friction in every deal... I guess above a certain deal size it becomes worth it.

[jayalpha]

They don't have a lot of income. Their companies have. The companies can be hold, to some degree, in offshore jurisdictions, by trust funds or low tax countries (Liechtentein, Andorra, Isle of man etc.).

Many countries have some kind of exemption for specific taxes. E.g. tax all your IP royalties in a Luxembourg company with 5%. Lawyers at Deloitte and other companies working 24/7 to find such loopholes and find solutions for their clients.

[DrNuke]

> I am worried that this tax is partially based on jealousy and envy.

It is an attempt to keep part of the local wealth local. Big corps siphoning local wealth towards fiscal havens, in that depleting territories, concur to social mayhem and the rise of populism. Re-investing part of the profit locally for the communities, would also make the general public more sympathetic.

[thatoneuser]

I think it’s very irresponsible to look at the overwhelming success and subsequent market exclusion that tech companies are enjoying and say it’s jealousy and envy to make them pay up. These companies in the last couple decades went from nothing to the wealthiest in the world. Trillion dollar market caps. The companies are worth more than majority countries. Why shouldn’t they pay back?

If you want to talk about self-interest, point the finger at the tech giants.

[blfr]

Taxes were always paid by those who could bear them. Nobility and landowners in the past, AmaGooBookSoft today.

It could well be motivated by envy. But it can't be any other way because you can only effectively tax people who have the money.

[analog31]

Right. It reminds me of the famous quote from bank robber Willie Sutton. When asked why he robbed banks, he answered: "Because that's where the money is."

If you have a flat tax on everybody, you simply can't raise enough money to run the government. It has to be at least roughly proportionate to something related to the amount of money that people have. It also has to be available to the government that needs it.

[petre]

Yes, a flat tax (percent) is proportional to the amount of income one earns. So if you earn ten times your neighbour, you pay ten times the amount of tax. The problem is once it passes a certain threshold, well off people will employ tax consultants and lawyers to avoid paying taxes, bribe politicians to obtain asymetric advantages etc. Increasing taxes "proportionally" (progressively) would only have the adverse effect: wealthy people would only be more likely to avoid paying taxes, some would even flee their tax jurisdictions. It would only impact the middle class, which is getting poorer as we speak and we'd end up with feudalism. That's why tax the rich doesn't really work. You are taxing the ones that are already good at tax avoidance.

[analog31]

In my view, you've hit on the main issue, which is that "tax avoidance" is coupled with "democracy avoidance." Notably, the rich have disproportionately higher power over government policy, which they use to their benefit. Democracy avoidance includes measures to limit the effect of elections on policy, such as voter suppression, gerrymandering, and so forth.

This is one reason why I'm not worried about letting the rich leave the country. How would it be a net loss? Their wealth is primarily hoarded rather than spent, and they use government policy against us. They would still need our markets if they did want to do something productive. I've heard New Zealand is nice.

[petre]

Unfortunately I don't see any solution to this problem other than doing away with career politicians and swirching to time limited mandates. Career politicians eventually go corrupt. Rich people's capital run investments. The wealth is not hoarded, it's almost always invested, otherwise it's eventually lost. Without the rich and investments, your country could look like Mongolia and you could ride a horse to work and live in a teepee, which is not necessarily bad, just different. Yes, New Zealand is a nice place to live but it's economy is dwarfed by the US economy and so are the money making opportunities there. It's not even in the G20 and it's main exports are agricultural products, fish and machinery.

[ewgoforth]

Actually the peasants were taxed to pay the nobility, not the other way around.

[blfr]

Peasants were obligated to provide some services to the nobility, and sometimes taxed in nature, but real taxes were either from monopolies or the landowners.

It's like saying that really consumers are being taxed here because they are the ultimate source of revenue for Apple. True but you can shift the distribution of this burden between consumers and Apple's owners.

[wukerplank]

Looking at the middle class, this is still (or again) true.

[davemp]

> Humans have a dark side and seem completely unaware that their believes are driven by self-interest, envy and hate rather than making systems that work.

There have been a few flawed but widely successful attempts at this style of system. Namely USA style governance systems. I’d even say modern ML comes from a similar, humble insight.

[lettergram]

> Humans have a dark side and seem completely unaware that their believes are driven by self-interest, envy and hate rather than making systems that work.

I think very few people push themselves to self reflect. There’s the philosophy of objectives in, which one of the core tenants is that everyone is greedy and that that’s alright. With that acceptance, we can start understanding why we do what we do and what motivates us. Even a parent running into a burning building to save a child is “moral” because it’s the self-interested act of not wanting to live with themselves after the child [potentially] dies.

When we look at taxes, a simple tax code could be a percentage of revenue made in said country is multiplied by the tax rate. I.e. Facebook had $X million ad dollars spent in country, X * (tax rate) = amount owed.

This makes it clear to all parties involved. Although it doesn’t take into account operating costs, which he been the challenge so far. Either way, it’s admitting everyone needs their “due”. Not trying to target companies, but generally a Flat rate across the board.

[zzzcpan]

Taxing foreign tech companies is protectionism [1], not envy or jealousy.

[1] https://en.wikipedia.org/wiki/Protectionism

[sgift]

Protectionism implies non-foreign tech companies don't have to pay that tax. I don't see anyone suggesting that.

[Eridrus]

They aren't explicitly writing it in, but they're adding revenue requirements that make this only apply to foreign companies.

[larrysalibra]

Exactly. The cost of this protectionism will be borne by consumers in these markets in the form of increased prices and the benefits accrue to those that own companies in the protected market.

[drinchev]

Totally agree. I believe that having a specific category of tax for a specific type of company is something that goes hand in hand with nationalizatio. What is worrying is that these companies probably doesn’t have lobbies in all world wide government, which means that they are not able to avoid signing such bills. Most of the other ( automotive in Germany, banks everywhere, etc. )have some government handles which makes them out of that scope.

[briandear]

If everywhere had a flat 10% tax, there’d be a lot less tax avoidance and likely a net gain in tax revenues for most countries. That 10% number, I made it up, but it’s illustrative. My point is that when a country feels entitled to 30% or more, that’s a large enough number that it drives avoidance. In my personal life, I don’t sweat a 8% sales tax, but a 20% tax? That would affect my buying decisions.

[petre]

Most governments will naturally rise taxes until a revolution happens. The threshold is around 45% if we look at the recent Paris yellow vest protests. Some governments (republicans?) are smart enough to cut taxes before that happens. I agree 20% sales tax is outright theft. Switzerland has low sales and corporate taxes but high income and property tax. They're doing fairly well for a small country.

[jjtheblunt]

totally agree, and it's not even subtle.