Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

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> You don't just roll into a country, make billions of dollars, and expect to pay no tax in perpetuity.

The reason this policy is being pushed, is because some nations have benefitted a lot from US tech companies, eg Ireland, while others eg France and Germany, are jealous that they're not getting their spoils (while simultaneously seeing no large domestic tech company creation). France and Germany have vast influence over the EU, they regard it as their little fiefdom of power. To watch Ireland become richer and richer and richer by the year, as their GDP per capita just keeps soaring ever higher, drives those sleepy giants crazy.

GDP per capita

Ireland: $68,000

Germany: $44,000

France: $39,000

It's pretty obvious what's going on.

Ireland's economy has tripled in size in 17 years.

France's economy hasn't net expanded since 2006.

Germany's economy hasn't net expanded since 2007.

I seriously doubt France and Germany - both high corporate income tax nations - want to see a bunch of Irelands further sprout up in the EU, pulling even more economic benefit away from the power duo in the EU.

Why don't Germany and France offer the same as Ireland?

1) It's a race to the bottom. If Germany or France lower their taxes, Ireland will go even lower.

2) It works for Ireland to have low taxes, because they are a small country collecting the tax for the entire profits in the EU. Even if their tax rate is low, they still get a sizable benefit. This can't work for the big countries.

1) Why would Germany and France care? They have not been collecting taxes anyway, race to the bottom until Ireland can't anymore.

2) It works for Ireland because other countries prefer not to engage. If Germany had the same tax rate it wouldn't work for Ireland anymore right? As what is now Ireland only revenue would be split between the two or more countries.

When this happen wouldn't Ireland have to raise taxes if it wanted to keep the same money?

It appears to me that this would achieve an stable and healthier equilibrium after some time.

If all tax rates are lowered to ireland’s rate then there won’t be enough tax revenue to fund the existing social infrastructure.

If lower taxes were always better why have any taxes at all?

That's my point, isn't it?

Ireland can't win a race to the bottom, and it will have to have higher taxes if others will lower theirs.

So all other countries have to do is lower taxes to force Ireland to raise its own, and reach a new higher taxes equilibrium, that is beneficial to all countries.

Isn't that what others are arguing for?

How is this strategy working for OPEC?

Can you elaborate on that?

I'm not sure how this is comparable.

Ireland's low tax works for Ireland because it has no competition, so it gets the "market" all to itself. If competition arrived, Ireland would have no option but to raise taxes to make it up for it - as it needs this funds. It would essentially force Ireland's hand on this issue.

On the OPEC side they have external and internal competition. Sometimes they can make it work because demand is higher than what external competition has to offer and what internal competition need, but if external competition has enough supply or internal competition need more than they are getting, it does not work anymore (and the price drops because of extra supply).

Admittedly, my reply was lacking necessary detail. The parallel I was trying to draw with OPEC is that, in order for a cartel to work effectively, each member has to adhere to the rules established by the cartel, sometimes to the short-term detriment of any individual cartel member. With OPEC, this means strict controls on the output of oil. In good times, each member seems to keep production in line with the OPEC established standards, but the minute any stress is added to the system (primarily dropping oil prices), all bets are off and we see individual members increasing their production to maintain short-term cash flow - you essentially said this same thing in your comment.

It seems like your proposal would establish a cartel-like structure related to corporate tax rates. I was trying to point out the inherent fragility of this type of arraignment, especially in the EU where there are many stressors between member countries.

Thanks, I see the similarities now.

I think the system will work only as far as you have power players that are able to punish everyone who gets out of line - by racing to the bottom and driving profits out as a punishment [1].

That's exactly what I think complaining countries should do. They're not getting any revenue now, so they are able to power play Ireland into fair taxation, and the system will be as stable as their possibility to do so. If you take into account that any country cheating will take revenue away from others (thus their reason for a high tax), they should always be able to counter, as they are now.

[1] https://www.nytimes.com/1988/11/03/business/saudis-use-pain-...

Not sure how Ireland is getting richer and richer on the back of this given there is very little tax.

Ireland is more than its tax revenues.

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