It'll still be possible to game that system because there information needed to enforce it should be given by the company itself.
The game of where to put the profit and where to put the loss by big corporation with multiple companies registered around the world is the way effective taxes are lowered now. Apple has been doing that for years and the bigger the company the easier is to do it.
The easiest way to avoid paying this is to shift the profits to another "consulting", "licensing", "distribution" deal. You pay this company almost all your profit and put the expenses in your P&L. Now you need to pay the tax only to what you've chosen to pay. Even with GAAP standards there are ways to do it. The "transfer pricing" quagmire exists for a reason, it's almost impossible to claim that this/that "licensing" deal isn't priced properly.
It looks like this is a populist move to claim "we're taxing the rich", but it won't work as expected unless all the information from all the countries goes into 1 centralized place to be analysed. In Germany there is lot's of bad decisions and this is one of them. (like the one to shut down their reactors and burn coal instead).
I hope they realise that every tax levied on a corporation will simply get passed on to the consumer eventually. I don't think these additional taxes make any sense along with a personal income tax. It should be one or the other.
Remember that companies are taxed on their surplus, not their income. So this means that these kinds of taxes are not a extra cost that is evenly distributed among all companies, companies with low or no surplus will pay little. Up-coming competitors (with low surplus) get an advantage, increasing competition.
If the companies could simply increase their prices 15% today without loosing to competition with others, they would already have done so.
No, because that’d be an independent increase. In this case shareholders are arbitraging their capital against central bank interest rates. So parent holds.
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.
The logical extension of this argument seems to be that the most consumer friendly policy would be to not tax corporations at all. I’m not sure I would agree with that.
I personally would. Corporations are not people and shouldn't be treated as such. Taxing personal income after receiving dividends or salary seems like a much better option all-around.
Or, don't tax people's income; just tax corporations on profit/revenue.
The wealthiest 0.1% have negligible income; the middle class bears the brunt of taxation. All companies run on corporate welfare. They refuse to do anything without significant funding from Govt. Big 3 Auto got many bailouts, $250B in profits but don't have any money to build charging stations/network or invest in making an EV that people would like to buy. Big Telcos took 100s of billions for broadband access, which they never delivered. Oil companies get trillions in subsidies every year[2].
Middle class pays all the taxes, both direct and indirect. Indirect taxes are inflation, people's hard-earned-and-saved money loses 98% of value in a few decades, thanks to Govt printing massive amounts of money and giving it to Corporations (privatizing profits and socialize losses). And we also pay for substantially degraded quality of life from externalities, pollution (air pollution kills 10M/year [3]), PFAS, climate change, lead, etc.
And no, the top 1% is not wealthy, its the top 0.1% that matters. Media talks about the top 1%, these are usually people who worked their ass off sacrificing everything for 2+ decades to get to a decent income but, but thats temporary. Most of them are going to fall out of that income bracket, with layoffs, with burnout, the sacrifices made catch up to you, you either get physical or mental health issues.
[1] Profits at the “Big 3” auto companies—Ford, General Motors, and Stellantis— skyrocketed 92% from 2013 to 2022, totaling $250 billion. Forecasts for 2023 expect more than $32 billion in additional profits: https://www.epi.org/blog/uaw-automakers-negotiations/
If there is a personal income tax, then yes, there shouldn't be any corporate tax at all. It doesn't make sense. It's just double/triple taxation then. Money is only ever useful to a human at the end of the chain. Corporations and any other legal entities are fictions we create. There's no point taxing these intermediaries as long as every individual is being taxed on their income.
Both sides are taxed - consumption and production.
Both can be balanced out by tieing things, not to arbit rates pulled out of someone's ass, but to land and energy use. The biggest users of the planets resources need to be taxed the most.
Well, wouldn't they have a hard time finding suitable markets, if about every large market adopts those taxes? The USA already has them. It is an OECD initiative.
Russia, China and almost the whole of African, Asian and Middle Eastern states are not OECD members. Most South American and Eastern European states are applicants. The corporations could try to sell their stuff and avoid this tax in the Middle Eastern states that are not under sanctions and possibly India and Pakistan. The rest are either under sanctions, export restrictions, too poor or too small to bother with or they'll have a hard time getting their profits out of.
Just speculating, but perhaps share prices would drop until the returns per dollar invested recovers to the desired level. So it might be like a one off shock to investors who hold shares now, since the new equilibrium has shares priced lower to get the same returns as before the tax.
If that's what you want, why not just tax the money when they take it out of the corporation, instead of while within it?
If that company is spending 10 million on a factory, instead of taking out that 10 million to pay bonuses to Executives, you should encourage the former and discourage the latter. If you tax something you get less of it and if you subsidize something you get more of it.
It should be neither. Taxes should be a service fee proportional to your usage of a government service. Income shouldn’t even be part of the equation. The USPS charges more if you want to ship heavier packages, not if you get a raise. Personal vs corporate is irrelevant. Pay your fair share.
That works for things that only benefit the person directly using the service, and shipping packages would probably be one of those. It doesn't work if you get indirect benefits from other people using the service. For example, how would you quantify how much you use of, say, a government funded mental healthcare system when your neighbour uses it to get a handle on their life and stop flinging garbage over your fence every evening? Or of law enforcement apprehending a burglar a few blocks away who may or may not target your home next if they were left to their own devices?
That’s correct, you pay for what you use and don’t pay for what you don’t. It’s irrelevant as to how much something someone else chose to do benefitted me. My lemonade stand doesn’t owe the cinema you decided to open up next to me any money. The only case where you ever have a right to force me to pay you is if we both voluntarily entered an agreement to transact. The “indirect” talking point is something some people like to say so that they can arbitrarily increase someone else’s tax burden by claiming they benefited from an infinite list of things without needing to quantify anything. Simultaneously they can arbitrarily decrease their own tax burden by choosing a threshold of income above their own at which they decide these “indirect benefits” come into play. I’m not interested in that argument. Pay your fair share.
> My lemonade stand doesn’t owe the cinema you decided to open up next to me any money.
Generally, if a private cinema opens up and stays open, it's because they've determined that they profit enough from their direct patronage that it's worthwhile. Since there's already enough incentive in place for this cinema to exist, I don't think it's necessary to get surrounding businesses to fund them. Although in an ideal world, they should get something for indirect improvements to surrounding businesses, but the issue is that there's no way to actually quantify how much benefit you get from it. The current system works well enough in this case.
On the other hand, if you open up a cinema that operates at a loss while propping up surrounding businesses by bringing people in, then your lemonade stand definitely owes them. If you have two competing lemonade stands in the area that only exist because of that cinema and one of them decides to fund the cinema to keep it running, then it increases operational expenses for that one lemonade stand, allowing the other to outcompete. It's a prisoner's dilemma problem. Everyone paying means everyone wins, while if one person doesn't pay, then they win regardless of what everyone else does. Pay your fair share.
I find it hilarious that you decided to respond to a single sentence out of my comment, and then proceeded to say exactly what I claimed you would say in the rest of my comment. If you can quantify the "indirect benefits" I get from services you chose to use without my input, then you can quantify the indirect benefits a lemonade stand gets from the theatre that opened up next to it. Stop trying to have it both ways.
If AMC opens a theatre next to a kid's lemonade stand at a loss, indirectly benefiting the stand, do you believe he owes AMC money? I'm looking for a yes or no answer, or I'll answer for you. An essay that runs around the question is not an option. If you truly believe the fair share includes "indirect benefit" then your answer should be a yes.
They shouldn't be surprised if corporations leave their market. I'm philosophical about this. The world is moving toward smaller more fragmented economies. On the negative side, supply chains will have to adjust and the world economy will become less dynamic. On the plus side, local economic ecosystems will develop. Diversity.
> They shouldn't be surprised if corporations leave their market.
This is really just basic math. If your country isn't a larger percentage of their market than this would increase their global tax rate, staying in your country would cause them to lose money.
It's also not obvious how they would expect to enforce this, or prevent it from leading to restructuring. If a German company buys widgets from China for $9 and sells them for $10, 90% of the revenue is going to China, but the Chinese company has no operations in Germany. If that means the foreign company (and so 90% of the revenue) isn't subject to your jurisdiction, that's what everybody is going to do. If you try to collect the tax at the border, all you've done is switched to VAT and you might as well do it formally instead of doing something unnecessarily complicated but equivalent.
And it creates a new arbitrage opportunity where some country nominally taxes you at a particular rate but then you get the money back or some other equivalent value using whatever means causes it to not be considered taxable income.
The most interesting part to me is that Germany is attempting to tax worldwide income. The USA does this of course, although there are tax treaties that can reduce US taxes on some foreign earnings. The USA can get away with this because most companies simply can’t exit the US so there will be assets to seize and so on. On the other hand Amazon or Google or even Apple could just nope out of Germany and preserve their rest of world income.
I think Amazon and Apple noping out of Germany and EU would be a huge opportunity for new businesses to get a foothold. It would be great to get some competition back in the marketplace.
I keep hearing “this is an huge opportunity” on every such discussion, and I keep wondering if people who say this are delusional or just clueless. You are NOT going to just magically get a new mobile os and a hardware maker from this. That is the sort of thing that needs billions in capital and a decade of work. Nobody will invest that, cause with Apple gone, the politicians who “took our iPhones away from us - their constituents” will be gone soon, and then so will the law. Thus there won’t BE a decade to develop a euroPhone and euroPhoneOS. And people who’d invest billions know all this. And won’t waste the billions…
Maybe. It could just mean that other players adapt to the new laws and eat their lunch because even if the profits made with the new laws may become less on a percentage basis, there is still a sh*t-ton of money on the table.
Also, I'd still rather this than the policy of 'let the big corporations do whatever they want and don't pass laws they don't like'.
The game of where to put the profit and where to put the loss by big corporation with multiple companies registered around the world is the way effective taxes are lowered now. Apple has been doing that for years and the bigger the company the easier is to do it.
The easiest way to avoid paying this is to shift the profits to another "consulting", "licensing", "distribution" deal. You pay this company almost all your profit and put the expenses in your P&L. Now you need to pay the tax only to what you've chosen to pay. Even with GAAP standards there are ways to do it. The "transfer pricing" quagmire exists for a reason, it's almost impossible to claim that this/that "licensing" deal isn't priced properly.
It looks like this is a populist move to claim "we're taxing the rich", but it won't work as expected unless all the information from all the countries goes into 1 centralized place to be analysed. In Germany there is lot's of bad decisions and this is one of them. (like the one to shut down their reactors and burn coal instead).