I didn't even need to click the link to know that Ireland was gonna be one of the three.
It's like they have a vested interest, or something.
It's like they have a vested interest, or something.
The effective tax rate is far lower than this, but also, most countries have an effective tax rate for megacorps far lower than what they advertise once exemptions, subsidies and tax-breaks come into play.
That's not the case in other EU countries.
Speaking as an Irish resident, I can tell you that this is effectively untrue. Indigenous businesses, or even businesses small enough to not get the sweetheart treatment of the relevant authorities definitely do not get equal treatment. The difference is vast.
GP was indicating that Ireland has one of the lowest standard corporation taxes at 12.5% available to everyone, not that there aren't even better effective rates offered to larger corps & multinationals.
Are you referring to the non-trading income corporation tax rate, or is there something else going on? If something else, that sounds an awful lot like corruption
> Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or operation of the competence of the European Union in relation to taxation.
It's legally binding, and ensures that Ireland retained the right to set our its corporation tax rate.
All the other EU nations at the time (some have joined since) unanimously ratified the Irish Guarantees, so if anything, it's rich of them to now complain about an agreement that they willingly and knowingly signed up to.
The EU allows for free cross boarder trade and movement of assets within the EU. Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there. It's an automatic incentive.
There are rules here because otherwise it would be a race to the bottom. Each country wants Amazon, Google, etc for their employees' income tax.
The whole EU loses out from one state giving multinationals preferential treatment.
Some people seem to assume that high corporate income tax rates are a good thing, but there's really no proof of that. We would all be better off if every country eliminated corporate income taxes entirely, and made the change revenue neutral by increasing taxes on high income investors and employees. This would encourage economic growth by eliminating resources wasted on tax accounting and avoidance.
Zero Corporation Tax allows multinationals to make huge profits and just chuck the money back home, even if that's outside the Union. Yeah, they're probably paying tax on it somewhere, but it's not taxed in the place it was earned. That's the problem here. Countries are losing cash and tax revenue to this.
Your trickle-down economics is similarly unproven.
I'm not sure this is true any more, at least not everywhere
"Amazon has become the first technology company to abandon controversial corporate structures that divert sales and profits away from UK in the face of a clampdown imposed by George Osborne.
From the start of [May 2015] the online retailer has started booking its sales through the UK, meaning resulting profits will be taxed by HMRC [the UK tax authority]. The group made $8.3bn (£5.3bn) of worldwide sales from British online shoppers but for 11 years all these internet transactions have been booked in Luxembourg."
source: https://www.theguardian.com/technology/2015/may/23/amazon-to...
But there are still lower tax areas. This is still an issue that is not simple to unravel because flat tax was not a founding part of the EU, something we figured out after the fact.
Amazon, Ebay, and Google all put the vast majority of their earnings through secondary states within the EU, not the main markets. I'm not sure what Apple do these days, but they've just paid a couple of ~£200m in extra tax found from an audit. The others "claim" they are going to rectify this, but it's all face-saving. They're all lying tax cheats.
Their UK businesses are tiny. Warehousing and marketing.
For examples of the same mechanism: Amazon's HQ2 farce aptly shows what happens when jurisdictions cannot effectively coordinate and are forced undercut each other. Is there any doubt that Amazon would settle in some city and hire people and pay taxes without their little version of Hunger Games? So the net effect is simply some city being marginally better of but forgoing the jackpot that would usually come with being chosen, and therefore those citizens having to pay instead. Plus the harm that comes from Amazon making decisions based on money alone, to the detriment of other factors such as quality-of-life for its employees.
That's why any trade deal includes provisions prohibiting subsidies not covered by a few narrow exemptions: they distort the competition and simply lead to losses in a zero-sum game between nations and private corporations.
Not from the economical standpoint.
What's really good is that this creates a system where it's not only nonexistent, but it's also not even possible at all. It's like what Typescript/a linter does to Javascript: the EU greatly discourages entire classes of problems threatening the life/well-being of its citizens.
The leverage against foreign countries is a real pragmatic thing, though, not some ideology. Why else do you think Trump celebrated Brexit, and actively tries to break up different unions that we've spent years building, like NATO? I'm not saying that he's the devil, even though I'm not a big fan, but I understand that he's doing it to have his way with less opposition. Divide and conquer?
Every person has their breaking point where mere pragmatism no longer holds sway. Peace, but at what cost?
Seeing so many people discussing this under wrong assumptions, even on HN, makes me sad and makes me think there's a very low ceiling on tax complexity, above which people lose track completely. This means we'll never be able to fix tax. Only tax lawyers will ever even begin to grasp it. It's also a pretty good argument against direct democracy as well as an argument for abolishing the corporate tax completely.
Besides, it's not like your alternative is any more appealing anyway. I'm not so sure about the absolutism of saying "oh, it's not perfect, so let's just abolish it completely to make sure countries get even less to subsidize healthcare and education".
Before implicitly calling other people braindead next time, maybe consider that none of us are 100% right and we are all just having a discussion.
For example:
Hungary 9%, Bulgaria 10%, Lithuania 15%, Romania 16%, Croatia 18%, Poland 19%, Czech 19%, Slovenia 19%, UK 19%, Estonia 20%, Finland 20%, Latvia 20%
Even Denmark is at 22% and Norway is at 23%, traditionally high tax countries.
Outside the EU in Europe you have Montenegro 9%, Macedonia 10%, Bosnia 10%, Serbia 15%, Georgia 15%, Albania 15%, Belarus 18%, Russia 20%, Armenia 20%.
Another decade of rate competition and the EU average might be down to something close to 18%.
The real unusual stand-outs these days are the high total rate nations, like France, Belgium, Greece and Germany, rather than the low rate nations.
Q: How many companies would site a corporate office in Luxembourg if there were no tax advantage?
That's not to diminish Ireland's accomplishments in the least. The combination of a well-educated population and speaking (something akin to) the English language alone made them predestined to catch up eventually. Being able to engage with their former enemies in the Good Friday Agreement was also exemplary and undoubtedly returned fantastic dividends, both economically as well as morally.
But to deny that being part of the world's largest free trade block was an essential part, or to insist that when Ireland joined 40 years ago the EU was expecting, and motivated by, any short-term financial interests just seems...unnecessary petty?
Because there's nothing dishonorable in that story. Nor are those two aspects contradictory.
Germany does pretty well with an origin story far darker: not only to have started far lower than Ireland has ever been, and receiving far more support at a time where the idea of short-term returns were laughable (the Marshall Plan). But to have caused that same miserable situation pretty much single-handedly, and being the recipient of gratuitous support by essentially the same countries they had devastated in that mad crusade less than a decade prior.
+ "permission to screw over the other countries they're in economic union with by acting as a tax haven for transactions that occur in those other countries"
It's not even that in this case, because it's not like there are serious European competitors to these companies (except maybe the odd Samwer clone here and there) that could even be protected. This is purely an attempt to rip these companies off, because the governments can.
I find it interesting that the companies are often portrayed as smart for doing this, but politicians are jealous and incompetent. Almost like we worship businesses and malign government. I wonder whose interests that viewpoint supports.
...well they did create these tax loopholes in the first place. That’s pretty much the definition of incompetence.
So are you arguing that corporations should pay more tax than they are legally required as a gift of charity to countries? If so, how much? What if a competitor decides to pay less?
Megacorps have been systematically screwing people for several hundred years. By comparison, most of the book of Exodus is a story about government systematically screwing people. People seem to prefer the devil they don't know right now. The arc of progress is long.
One could argue that the statist systems in Scandinavia work quite okay... don't you agree?
How about you share how you think this could work? While I agree for more competitiveness for my country, history has shown me repeatedly that low taxes isn't actually working out that great.
Equating low taxes with increased competitiveness is to me dishonest as a generality. I'm certainly not opposed to admitting that it can work in some cases, but I can't agree to this as a general rule.
“It just remains for me to offer Paschal a beer in a Dublin pub, and then I think we’ll be able to move toward a decision,” he said, referring to his Irish counterpart, Paschal Donohoe
I'd be interested to here their objects if anyone can point at a fuller article or discussion of the issues.
>“A digital services tax deviates from fundamental principles of income taxation by applying the tax on gross income, i.e. without regard to whether the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena Andersson, and her counterparts from Denmark and Finland, Kristian Jensen and Petteri Orpo, said in a joint statement on Friday.
https://www.reuters.com/article/us-eu-digital-tax/nordic-cou...
It's either disguised as loan interest repayment or licensing fees, but the goal is tax avoidance.
You as a person don't have a clear "profit" to tax. I would argue that the system of deductions is the nearest equivalent to taxing your individual income on your profits.
For the year, you spend $1,000,000 paying for fuel, convenience store supplies, electricity, wages, etc. You get $1,050,000 in revenue from your customers, for a fairly realistic margin of 5%.
Now let's say you run a software business. You pay $500,000 in electric bills, computers, wages, etc, and collect $1,000,000 in revenue for a margin of 50%.
Would you rather live in a society where the gas station pays MORE tax than the software business? This would be the case if you taxed revenue instead of profit. If the revenue-tax rate were 4%, the owner of the gas station would be left with $10,000 at the end of the year, and the owner of the software business would be left with $460,000. Bringing these numbers back into normal, profit-based terms, the gas station owner would be paying an effective tax rate of 80%, with the software business owner paying an effective tax rate of 8%.
If businesses were taxed on revenue instead of profit, low margin businesses and capital intensive businesses would be punished disproportionately. Businesses often face unplanned expenses or loss of revenue. This would have the effect of forcing businesses to raise prices to compensate for the increased risk, and would force lots out of business. This reduced economic activity would be bad for consumers, producers, the government, and society as a whole.
Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties.
I do get tax credits for some essentials but it's relatively speaking a miniscule amount.
There's an interesting formula for a progressive tax regime if anybody wants to take it up ...
Taxing only your disposable income would mean that a person living in a mansion would pay much less than someone living in a small home, which is weird; arguably, the extra niceness of the house is "profit", whereas the shareholders don't usually benefit from paying more for their inputs (some exceptions notwithstanding).
Oh! What's the name of this country?
In my country all taxes are applied before you get to see the actual money.
Just as weird as a corporation with billions in revenue paying a zero or negative tax rate? Or weirder?
You are being a little bit funny here. This paragraph basically proves the OP's point.
Because companies would never abuse the taxation rules, of course. They would never cheat by shifting money around in opaque ways so as to lower the profits they have to report for taxation purposes. Clearly, that's why they can be trusted to be taxed on profits rather than revenue, but mere mortals cannot.
/sarcasm
I think in your gas station example, the net effect of a 4% tax on revenue would naturally be a 4% increase in the sales price of goods. Or, the gas station would go out of business...
I actually don't think a flat revenue tax would necessarily overall be better than the current system where taxes are based solely on profits, precisely because of examples like the one you give. It seems like some sort of combined model of a revenue tax and profit tax may be the way to go. Which is incidentally where the EU was going with this particular proposal.
The degree to which businesses generate expenses is the majority of the degree to which they take on risk. It's pretty well understood that most economies are already too risk-averse. We should not further punish those willing to take risk.
The thrust of my argument is focused around the fact that low margin businesses would have an EXTREMELY high sensitivity to variable cash flows. I should have focused more on how unfair this is to small businesses, which already are a risky proposition. It is strange to me that multiple people have replied without having any acknowledgement of this.
The benefits of taxation must be balanced against the potential for abuse and the damage it does to the businesses that are taxed.
Taxing revenue would likely have less potential for abuse, but I would argue the damage it would do to the economy would be much larger than the benefit this may provide.
That is the thing. Maybe a person could do that if the rules let them, but businesses are already doing it, at scale. I think that either businesses should not be able to do it, or normal people should be able to do it. As for the "low margin business" example, I see no reason for the government to support any particular kind of business over another under a capitalist system.
I don't think that is actually the closest you could get, even ignoring that you're asserting two wildly different things should necessary be equivalent. But even so: Do you literally never take any deductions at all? Never expense anything? No mortgage or whatever? Have zero capital gains income of any kind an in turn never have any losses of any kind there? You just add up all income sources and simply pay the top rate off the sticker price and ignore all the rest? I mean, it's not impossible or illegal to do such a thing and pay more if you want to, but I think you'd be somewhat in the minority there. Even personal income taxes at least haltingly, imperfectly and politically try to take somewhat into account that there are certain expenses necessary for humans to live or that further societal goals and that if after paying those someone has little left over then the tax system should take that into account.
>why should I as a person be taxed...[differently from business]
Humans and businesses aren't the same thing, businesses (like government) are a tool composed of and serving humans. It is a structure for dealing with and directing flows of capital towards human decided ends, and all money that goes through it ultimately ends up in the hands of humans as income upon which it is taxed there too anyway. A "business" has direct societal costs in terms of corporate law and such, but it does not need to ever use an ambulance or get housing or food support or whatever. Taxes on business, separate from the humans that compose said business, should be for dealing with business specific requirements, cost internalization, and so on. It makes absolutely no sense to simply tax a business the same as a human, not even if you are simultaneously proposing not taxing any of the humans involved. If it's done be prepared for perverse consequences. If a business has high revenue with genuinely 3% margins that still represents a huge amount of money flowing from and too various humans (including all the employees, all suppliers and contractors, their employees, and on), "revenue" is still taxed somewhere. But if you then simply slap a tax on the revenue again and make the margin go negative now the business dies, simple as that, and all the flows cease. Is that actually your intention? Why not just seize it then and take it all for the government directly?
If you want to argue that the income flows going to humans are themselves ultimately not taxed fairly, that is not merely doable but I think fairly widely agreed at this point. And if you want to argue that specifically and properly assessed business income taxes should not be possible to evade as so many do sure, that too happily seems to be inching forward. But you seem to be going a lot more radical and just throwing out everything.
Well, welcome to a part of the world were software development doesn't necessarily mean big money. I don't own a house (I share a room with my SO in an apartment with other two people and a dog), and I don't have anything invested because I don't have money to invest, so no capital gains of any kind. The only expenses I could deduct are for prescriptions and my glasses, which I don't do because the burden is too high for the kind of money I would get (think <100€ per year) and I don't buy drugs often anyway.
> if you then simply slap a tax on the revenue again and make the margin go negative now the business dies, simple as that, and all the flows cease. Is that actually your intention?
No, I was just asking why am I not taxed based on what I earn minus rent, food and transportation.
> Why not just seize it then and take it all for the government directly?
Why not, indeed? I mean, I get that a lot of people in here are libertarian, but that doesn't mean it's the only way. I'm not actually advocating for State ownership, I'm just saying it's not necessarily impossible to have such a system.
with our lives now largely tracked electronically, that’s becoming less true (but is still at least an undue burden for the ~40% of the population who are poor or near poor).
As an individual taxpayer you can deduct certain expenses from your revenue when calculating your taxable income, just like a business. But businesses do generally have a broader set of deductible expenses.
What accounting standard means that business is making a profit in the EU?
What effect would a tax purely on size (income rather than profit) have on the world economy, if everyone were to adopt such policies? It would discourage large companies and encourage small ones.
It seems like employees do better when there is a bigger and more diverse marketplace for work, ie, many smaller companies. So they would win out, hopefully.
Customers may or may not do better. It would encourage companies to keep prices low to reduce gross income, and give an advantage to incumbents in the same marketplace. But one Amazon with it's fulfillment centers, delivery networks, etc, is more efficient than two overlapping half-sized Amazons. Twice the delivery trucks means twice the delivery costs and pollution.
Overall I'd be for such a system, provided it were not too onerous and didn't target specific companies.
How so? Your argument makes 0 sense because the tax is proportional regardless of size. What it will encourage is high margin business and it will discourage low margin business. Larger businesses are able to increase their margins because of increased efficiencies.
What I'm saying is that if there were a small additional tax on giants based purely on their company value or gross sales, it would 'level the playing field' for incumbents who don't have the efficiencies of scale that the big companies have, which I think is beneficial to society.
I would be concerned if low profit margins is a problem.. companies with a low profit margin is the reason we can afford so much stuff.
Google and Apple would be fine. Amazon would be toast. Your local supermarket would be toast (avg grocery store margins are 1%). Any startups that are just scraping by, no matter how small, would be toast.
You would basically crank up the difficulty level of business across the board. This would generally help successful incumbents by making life punishingly difficult for challengers, who have to climb up through a period of unprofitability.
It is a terrible idea.
There are so many ways a company can legally and artificially lower its profit numbers.
Because it is generally in everyone's best interest for companies to invest in themselves rather than increase margin at all costs. Growth is good. Many companies would simply go under if you tax them on revenue.
>There are so many ways a company can legally and artificially lower its profit numbers
Then you try to cut those off as much as possible. Like most things in the real world, there's no perfect solution, but we weigh the pros and cons and make a decision.
Given our current economic situation and our effect on our environment I'm not convinced that it is that simple.