Germany approves global minimum corporate tax
reuters.com
reuters.com
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).
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/
[2] https://www.imf.org/en/Blogs/Articles/2023/08/24/fossil-fuel...
[3] https://www.nytimes.com/2022/07/08/opinion/environment/air-p...
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.
So it is impossible that the profit for owners/shareholders/etc. will sink instead of prices rising?
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.
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.
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.
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.
I don't see where I'm trying to have anything both ways. I said that you can't quantify this, and that's the entire problem with making people pay for exactly what they use.
> 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.
Yes. If the two businesses coexisting means that everyone gains more in aggregate than if neither businesses were to exist, then we want incentives in place to encourage them to exist. There's no incentive for this AMC to exist if they gain nothing from it.
> 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 thought it would've been clear that my elaboration of your example is meant to address this point without having to quote it, but I guess it wasn't. Sure, that's a possible reason for holding this position, but the existence of short-sighted greedy people does not make the benefits to society any less valid. I presented you with an example of how the benefits can manifest. If you want to debate against this point, some questions you can answer include: Do you understand how this extrapolates to more complex settings like the society we currently live in? Do you agree that these benefits exist? If not, then why? Do you believe there are better ways to encourage this kind of outcome? If so, what are they? Saying "Yeah, but some people only want what's good for society because they benefit from it" is not a good argument against it because the entire point is for everyone to benefit from it. I hope that we can at least agree that we want to build a society with the incentives set up such that we all work together in achieving something that is greater than the sum of the parts, and that is capable of ensuring a minimum quality of life for everyone. If not, then the we just want different things from our society and the discussion is pointless.
In any case, to more directly address this point in case it wasn't clear enough, everyone gets indirect benefits regardless of how much income you have. So with that in mind, since we can't quantify the benefits, the most fair solution is to just have everyone pay the same amount. Now one of the services we want to exist is a social safety net, which means providing assistance to those in the lower end of the income range. We can have a system that has everyone pay into it equally, then pay out again based on need, but considering that the segment of the population that this directly serves are those who wouldn't be able to pay into it, you get the same end result (monetarily) whether you give them a bill they can't pay alongside money to pay said bill, or if you reduced their tax burdens. Then on the upper end of the income spectrum, you can afford to pay a lot more into these services without a significant negative impact on your quality of life, and in doing so, you could significantly increase that of many others. So it's consistent with the goals of increasing everyone's quality of life. It has nothing to do with how much indirect benefit you get from these services.
That said, we're now talking about merits of a progressive tax system. I didn't want to expand too much on this originally because it is completely tangential to the original discussion. As a reminder, I was telling you that a lot of services, if set up to be pay-per-use, would not work because you get a prisoners dilemma scenario. Would you like to refute this or provide alternate solutions?
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.
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'.
[0] https://www.pwc.com/us/en/services/tax/library/corporate-boo...