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Comment by seszett | Hacker News Reader

> I believe tackling such a complex issue affecting many countries on a national level is a mistake.

This sounds like the main problem here, to me:

EU law makes it easy for a company to do business anywhere in EU and only pay taxes in its headquarters, on the assumption that it doesn't matter a lot where the company pays its taxes as long as it's inside the EU. But at the same time, EU law doesn't regulate corporate tax, so some countries can easily take advantage of that by lowering them (or completely removing them) so companies will be attracted there.

They are basically living as parasites to the other countries, and the only solution to that seems to be harmonizing taxes accross the EU.

Edit: could you explain the downvote a bit? I'm curious to hear what you don't like in what I said.

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> so some countries can easily take advantage of that by lowering them (or completely removing them) so companies will be attracted there.

God forbid anyone try and make a country a good place to do business.

I'm for closing the various loopholes, because big companies should have to pay the same taxes that smaller companies do. But I am also very much in favor or countries trying to compete and improve in order to attract business.

> Edit: could you explain the downvote a bit? I'm curious to hear what you don't like in what I said.

You call other countries who don't want to import the crappy, unfriendly business climate of countries like France or Italy (where I live) "parasites".

Let's imagine the following situation. A big EU country heavilly invests in digital technologies and ensures all of its citizens have access to fiber for exemple.

This kind of investment would heavilly rely on taxes, but would also create the ideal conditions for internet giants to make lots of business.

These internet giants chose to put their headquarter in a small EU country that chose to lower the taxes to attract companies. This country doesnt care for fiber, and doesnt make investment at all, but its no big deal, it only represents a tiny part of the EU ppl.

This is a nonsense to pay taxes in a country for business made in another one. Unfortunately this nonsense is part of the UE.

Sounds like a very hypothetical idea, and a bad reason to call one country a "parasite" because they choose to make things a bit better for businesses. Note also that I'm not agreeing with the various loopholes, just the idea of lower corporate taxes.

Should other EU countries have to import Italian bureaucrats just to even the playing field some? I bet the Germans wouldn't be so competitive with the addition of a good selection of public employees from Rome.

This is hypothetical. Irish people do have network infrastructures and French people do have a huge amount of redundant/useless bureaucrats.

But still, a country lowering taxes to a point where it would attract most of the income of companies operating throughout EU is acting like a parasite, the host being the EU, the blood being the income.

Lowering corporate taxes should be made at the EU level. Because the EU was not intended as a playing field with EU countries competing against eachothers but rather as something more symbiotic where countries specificities would help compete against the rest of the world.

> But still, a country lowering taxes to a point where it would attract most of the income of companies operating throughout EU is acting like a parasite, the host being the EU, the blood being the income.

Makes for good political rhetoric, but I don't think it bears much relation to reality.

Germany for instance is not 'shriveling up and dying' because of Ireland, and neither is France for that matter.

Also, the economy is, fortunately, not a zero sum game with a fixed lump of money to go around.

You only need to look at the US as an example: California and NY are not low-tax states, and yet... and yet... there are a lot of companies and a lot of business there.

And yes, US states compete.

> You call other countries who don't want to import the crappy, unfriendly business climate of countries like France or Italy (where I live) "parasites".

You are taking this the wrong way. It's not that Ireland does not want to import corporate tax from France and Italy, it is that they substantially lowered it, expressly to take advantage of the other EU countries.

You can also see that I didn't advocate higher taxes for Ireland or lower taxes for the rest of EU, since it doesn't actually matter as long as they are the same in all EU.

> It's not that Ireland does not want to import corporate tax from France and Italy, it is that they substantially lowered it, expressly to take advantage of the other EU countries.

Good. That's called competition. They want to attract companies to their country. There are plenty of things Ireland can't compete on, like having a decent climate (IMO), so they do what they can.

> You can also see that I didn't advocate higher taxes for Ireland or lower taxes for the rest of EU, since it doesn't actually matter as long as they are the same in all EU.

Then why doesn't France lower theirs? "Harmonization" is just a way of saying "they should raise their taxes".

> Good. That's called competition.

I believe competition has no place, or should have no place, between EU countries. But that's my personnal opinion, which seems less and less shared accross Europe.

> Then why doesn't France lower theirs? "Harmonization" is just a way of saying "they should raise their taxes".

Huh, I'm not part of the Ministry of Finance, so I don't think I have to justify myself for France not lowering their taxes, but it's probably because France is more dependant now on corporate tax than Ireland was when they decided to lower them (France still has some kind of industry, while Ireland didn't then). It's not up to France (or Ireland) alone to make a decision to have the same taxes all accross EU anyway.

Harmonization means levelling taxes accross the EU, I didn't say a single word on how they should be raised. You are reading way too much in my words.

Edit: formatting (and the bit about how the EU is more than just France+Ireland).

> I believe competition has no place, or should have no place, between EU countries.

Wow.

How would you harmonize the weather between, say, Ireland and Sicily so that people wouldn't be attracted to the better weather down south?

No competition is unrealistic and unhealthy. Competition, within limits, makes people/countries/businesses/whatever improve.

It doesn't necessarily lead to a "race to the bottom". Look at California in the US, which is not the best state to do business in, with the lowest taxes. It still does pretty well, though.

> France still has some kind of industry, while Ireland didn't then

That doesn't sound fair. Did France offer to send its industries to Ireland to help out, and avoid competing?

> Did France offer to send its industries to Ireland to help out, and avoid competing?

You can read up on the history of Arianespace and Airbus to see how France did play the Europe game.

But that was in another era, at a time where EU countries were trying to integrate their economies rather than directly compete against each other.

Apart from that, the "within limits" part of your comment is exactly what I've been talking about all along our discussion.

Except that they are still doing business in the countries with high taxes; they just have their headquarters elsewhere to avoid paying the taxes.

"EU law makes it easy for a company to do business anywhere in EU and only pay taxes in its headquarters, on the assumption that it doesn't matter a lot where the company pays its taxes as long as it's inside the EU."

US states have a set of policies and compacts so that corporations doing business in multiple states pay taxes to each state divided according to a formula.

The corporation attributes income to each state in proportion to a weighted average of its sales in the state, its total employee compensation in the state, and its business capital and equipment present in the state. Then each state sets its tax rate and takes that fraction of the income attributed to the state. Over time, the states have created counting rules to prevent cheating the system.

Europe may need to organize such a system if the other nations are really tired of being scooped by ie. There's still the classic scheme of putting intellectual property in a tax haven and paying franchise fees to a foreign subsidiary there to avoid having profits. They may want to try closing that loophole, too.

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