This is likely one of the best agreements in decades. Will increase tax collection by decreasing incentive to avoid taxes. Little burrocracy, huge increase.
Previous mesh of transfer prices and other meassures added huge amount of burrocracy on a lot of companies, yet still did not make much difference for the biggest avoiders.
Some economists say that corporate taxes distort capital allocation.[0] A minimum global tax rate removes the ability for a country to decide for themselves whether they want this or not. Estonia, for example, is worried that their tax system has to change as a result, because they don't charge a corporate tax on money that's reinvested or retained.
Edit: apparently Estonia is banking on an exemption for reinvestment.
[0] https://ec.europa.eu/economy_finance/publications/economic_p...
It's not a high rate; 15% is low - is there a lower income tax rate for any entity?
It's important because societies need money to operate, including many things on which businesses depend such infrastructure; a good legal system; a healthy, educated, and prosperous population; security; stable, well-regulated markets; etc. If they don't pay their share, then others must or societies lose valuable things.
Ultimately, corporations are groups of people. Why isn't it sufficient to tax the money when the owners of the corporation are trying to cash out through dividends or in some other way? Why does it have to be taxed every year like income? Why is it necessary to tax money that the corporation would otherwise invest in R&D?
Yes, that is why the legal structure exists: They've always been 'fictional persons'. That's what a corporation is: A separate entity where money can be pooled and personal liability (and taxes) limited, with it its own rights and privileges. It's fundamental to a corporation.
> Ultimately, corporations are groups of people. Why isn't it sufficient to tax the money when the owners of the corporation are trying to cash out through dividends or in some other way? Why does it have to be taxed every year like income? Why is it necessary to tax money that the corporation would otherwise invest in R&D?
That's called a partnership, and you are free to setup your business in that way. I'd talk to a lawyer first; there might be a reason that every major business is setup as a corporation - there must be something they like about it.
Why must I personally pay taxes on money I'd use to invest in other things? All money in the economy is productive, yet we must tax something. Why does the corporation get off free while, requiring me to pay more?
It's not evil. Taxes are not evil at all. I want a functioning government, including the services it provides.
There's a trendy concept that all taxes are evil, but rationally that doesn't hold any water at all.
> definitely not all money is productive and it can be easily wasted on worthless products and services. Taxing the tools to create value is not the same as taxing for example vodka.
This undermines the free market, and basic freedom. I judge for myself, knowing my situation, the best place to spend my money. Sometimes vodka has the highest ROI, and don't forget that the money goes to the store which then spends it again. Macroeconomically, even if I gave the liquor store owner money for nothing, I haven't burnt the money. It's in new hands ready to be spent again (and the rate of transactions has a major impact on the economy).
But yes, we still can make some judgments about what to tax, and investment in fact often gets a tax break.
"This undermines the free market (...)" - yes taxes obviously affect the free market. They are often meant to skew (regulate) it, like tax that targets unhealthy products eg cigarrets.
Also, the way we spend money is not neutral to the economy. By buying one product over another we send an important signal about what is valuable. If we, as a sociaty choose junk, we will get more junk, if we choose good products, we will get even better products in the future.
I recommend you read about "the broken window fallacy", since it is related.
Always have been, legally. That’s the defining feature of the corporate form, as opposed to classic partnerships.
> Why isn’t it sufficient to tax the money when the owners of the corporation are trying to cash out through dividends or in some other way? Why does it have to be taxed every year like income?
Its the insurance premium for the liability shield that comes with the corporate form.
Corporations are treated the same as people in some legal contexts.
This is more practical than having two parallel sets of laws to keep in sync. It does not mean corporations are people.
Because failing to tax capital formation in situ leads to all sorts of abuses.
Exhibit A: The entire security-based lending industry [0], which allows you to realize the benefit of appreciated stock price while retaining stock ownership and without triggering a taxable event
[0] https://www.investopedia.com/terms/s/securitiesbased-lending...
That's why these countries offer a 0% tax rate. Because that's the only attraction they can provide.
This is a law that benefit the big rich countries.
Yes, there are plenty of entities that pay no tax. There'd be a great number of clubs for example. Churches, charity and trusts often get some sort of exemption too depending on country and circumstance. The only reason it might seem like all entities pay taxes is because once something is taxable it has to be given sharp, forceful boundaries otherwise it disappears and gets renamed.
I don't actually mind a 15% global minimum, to me that seems like it can only hurt poor countries in theory so if they want to sign up for it that is their problem. But companies are part of the things societies need to operate. A society with no Apple had to wait another decade - maybe more - to see real smartphones. A country without an Amazon has measurably worse logistics & distribution than one that does. It is not at all obvious that companies should be taxed. All they do is work to benefit consumers (within a moral-less, economic understanding of the word benefit).
Excellent point.
> companies are part of the things societies need to operate
Agreed, and so are individuals, and in fact individuals are what society exists for. Companies have no special place or status - they idea that they are somehow superior to rather inferior to real persons, is shocking.
> All they do is work to benefit consumers
The theory is that all they do is work to benefit their shareholders, to maximize profit. Certainly, they do many things that provide no benefit to their customers; as a simple example, Apple could charge much less, benefiting consumers, be just as effective (they don't need trillions of dollars of assets), but that would reduce profits for shareholders. Capitalism, for good or ill, benefits the capital-holders.
If we ignored 2nd order effects yes. In practice, no. This is the only way for other phone companies to realise that their products are bad and that they need to improve. We can observe that when Apple came in to the market and started selling their phone at absurd volumes and profit margins, the other phone OEMs moved like lightening to catch up. The market for mobiles completely reformed in a few years.
If Apple had charged razor thin margins, it would have been much less obvious how much value was being created, and Apple wouldn't have had the cash reserves to reshape the market as fundamentally as it did. Consumers would have been much worse off. Since nearly nobody is forced to buy an iPhone, all that money that Apple has represents at least value created in the past and that value probably wouldn't exist had Apple been forced to go slowly and work with slim profits.
One of the fun observations of economics is while capitalists would like very high rates of profit they can't actually achieve them long term in a relatively free market. Other capitalists will figure out what is valuable, muscle in and bring the rates of profit down to a return consistent with the risk.
If Apple charged less, they's have even more market share, reducing competitor profits even more. Other companies would get the message.
It seems quite reasonable to speculate that the margins they were charging on phones were just too low to attract capable people. Apple smelt blood and took on pretty much an entire industry, and attracted the focus of the likes of Samsung, Google, Microsoft, Huawei. Prior to that it was the focus of, y'know. Nokia. Who turned out to be way out of their depth when serious people got involved.
If they'd gone with a lets just not make money strategy, the market just wouldn't have the sort of energy behind it that it actually attracted. It would have taken a lot longer to figure out what was going on.
There's also the issue of resources. How is it that a corporation can own the oil under my land? Why should that common resource be controlled by some private entity rather than being used for the common good?
There's a balance in all things and attempting to boil this down to "there are two kinds of people" is reductive and unhelpful.
Personal income tax is not a solution for wealth inequality. The problem as stated is not what rich people are selling, it's what they own.
Because US persons do as well.
> the USA IRS is always looking over their shoulder and they aren't in the USA making money
No the IRS wants you to pay the difference between local taxes and US taxes, no matter where you live and work.
And, btw, this applies to any US person, not just US citizens. A green card holder or temporary worker in the US inherits a rental property from a relative? Pay taxes on the rental income. Never mind that that property never had anything to do with the US.
> the "money" gets taxed multiple times
Yes, money does get taxed multiple times. I don't see how that matters.
paid to whom?
I ask because I have read that (for example) a U.S. company may pay the U.S. taxes of less than 1% on foreign income, but that's because that income was generated by (example) a German subsidiary which fully paid taxes in Germany, where it was earned.
Point is, taxes internationally are really a mess.
> these narratives sometimes look scandalous when they're actually following tax laws of foreign countries "correctly".
It could be both; nobody said it was illegal. Following the law doesn't make something right - many horrible things are illegal; the law isn't designed as optimal behavior. And in many situations, they write the laws for themselves.
Regardless, clearly they need to pay their share, and their share is more than 1%.
It was less of a problem when steel needed to be bought here, and goods needed to be sold here. Can't very well claim that here is actually there.
But with intangible goods, you can! Who's to say what the fair price of using Google Nigeria using Google's brand is?
Which led to a game of "Where to put the profits, without being too obvious about it?" Which led to a race to the bottom in tax rates to attract business.
Effectively, this base rate is good for major developed countries (who typically didn't need to have the lowest rates), international businesses (who had to play convoluted shell games, without ever knowing the true rules, to stay competitive), and even smaller or developing countries (who now don't have to cut their own throats to attract businesses).
Which is probably why an agreement happened. Nobody liked the old game, but it was a competitive necessity.
> Which is probably why an agreement happened. Nobody liked the old game, but it was a competitive necessity.
Also a good explanation of how regulations benefit businesses. Unregulated markets are highly inefficient, diverting many resources to that kind of BS. Also, most people actually don't like cheating each other, even if it's legal, and want to operate in places where there's not competitive pressure to do it. (Of course, not every regulation is beneficial to everyone.)
I always felt like we were being ruled by donkeys...