[dkjaudyeqooe]

This is a kind of "market will solve all" naivety.

In a functioning market, this might work, but it overlooks the ability of corporations to game the system via one or two self-interested jurisdictions.

The key problem is that corporations can avail themselves of the public goods (infrastructure, public education, public order) and then use accounting maneuvers to shift profits to jurisdictions that will not tax them.

Some jurisdictions don't provide much in the way of public goods (small island states) or see an opportunity to raise some modest taxes on money they would otherwise never see (eg the Netherlands).

So you end up with the (individual) taxpayers of some countries subsidising these corporations, other countries profiting modestly and the corporations keeping most of the tax money.

Is this what an efficient market would deliver? An unfair and unsustainable situation? According to your theory the countries should compete with each other until their taxes are very low and their subsidies are very high, because that would reflect "efficiency". But what is the incentive for countries to do this? A rational country in the this market would set taxes to balance out the public goods provided. But because of profit shifting this is impossible, no matter how efficient they are. Yellen's plan is a rational response to this.

[CryptoPunk]

>>The key problem is that corporations can avail themselves of the public goods (infrastructure, public education, public order) and then use accounting maneuvers to shift profits to jurisdictions that will not tax them.

Countries can easily tax income generated by foreign corporations within their jurisdiction.

What you and Yellen are advocating risks imposing on the entire world an economic and tax system that may be far from optimal, to address a risk that can be mitigated through numerous other methods.

[sgeisler]

Exactly this. Just tax the value added in your country if you are so inclined (or even better the resources used to do so like land, infrastructure use, …). If you find out that's not so much you have deeper problems.

Why would e.g. an integrated software/hardware business pay significant taxes in the US if their value chain isn't strictly bound to it?

Sure, if developers live and work there you can tax their income to a certain degree before they leave and work remotely. Hardware is built abroad anyway (and probably taxed there), you can only levy import taxes at your own detriment. But if the business is successful most of the added value comes from the integration of these aspects and that can happen wherever because it's an idea not bound to a place to be executed. If something doesn't require physical presence taxing it becomes very hard and morally dubious (on what grounds would you tax it all if e.g. only 10% of your profits need physical infrastructure that is funded through these taxes?).

Globalization means that a society's most successful people aren't stuck with it any longer. They can go where they aren't seen as subjects to milk to keep the less productive happy. I don't owe my country of origin anything, they need to be competitive to keep me as I can take my business everywhere. In that sense directly investing in your population's higher education might be misguided to some degree because it creates more people capable enough to leave with the acquired knowledge, increasing the tax burden, making the country less competitive.

[KorematsuFred]

> but it overlooks the ability of corporations to game the system via one or two self-interested jurisdictions.

This is a feature of the market system and not a bug.

> Some jurisdictions don't provide much in the way of public goods (small island states) or see an opportunity to raise some modest taxes on money they would otherwise never see (eg the Netherlands).

Again, this is a feature and not a bug.

> So you end up with the (individual) taxpayers of some countries subsidising these corporations, other countries profiting modestly and the corporations keeping most of the tax money.

I do not understand the use of the word "subsidy" here. Corporations are keeping the money they have earned themselves is not a subsidy. Not to mention all the money that corporations earn eventually belongs to the individuals who receive them in the form of dividends or capital gains.

> A rational country in the this market would set taxes to balance out the public goods provided.

There is zero restraint on what is a "public good". Governments like to take over everything and control everything. Without corporations being able to influence policy and be able to move their money abroad we would end up in pretty bad state like California where you spend billions of dollars on a high speed train that goes from nowhere to nowhere and will never really complete to transport anything useful.

I am not sure why leaving more money in hands of people like Joe Biden or Donald Trump should be seen as anything but pure evil at this point.