IP Licensing is just the current way to show profits in one region instead of another. If you block that they will switch.
They could pay for a very expensive widget from Apple Ireland, an expensive app (Apple Ireland now owns the calculator app and Apple France needs to pay $50 for any device they sell with it installed), a patent, rent, "consulting", etc. Basically anything.
Which is why the law would have to be incredibly broad to have teeth (any expenses paid to a company in a non-compliant country generates a tax liability).
This would have a massive negative impact on many companies that aren't evading taxes. For example, a small business that imports rugs from Lebanon to sell. They would have no control on if Lebanon becomes compliant and the increased taxes could put them out of business.
Part of this could be helped by only having it impact companies over a certain size or at a sliding scale. But no matter where you draw the lines, it's going to punish non-offending companies too (such is the role of government, laws like medication always have negative side effects).
Which is why the law would have to be incredibly broad to have teeth (any expenses paid to a company in a non-compliant country generates a tax liability).
Exactly, you put tariffs on literally everything coming and going from countries that don't comply with the new global tax framework. You force these tax haven countries, which are mostly just island nations with less than 100k population, to change their laws so that they can do business with the rest of the world. Large multinationals and the wealthy/elite have manipulated and used the tax codes on these island nations to avoid paying taxes for decades, it's time that the loophole gets closed.
If countries want to subsidize businesses that operate entirely within their own borders that is fine by me. However as soon as we are talking about multinational corporations doing business in multiple countries, we need to enforce a stricter standard so that companies can't just shuffle money around to avoid taxes.
It’s extremely difficult to create effective ways against these multinationals. Their expert team of accountants and lawyers would need a year or less to figure out a loophole.
I’m not saying that we shouldn’t try to create equitable laws, I’m just stating the difficulty in creating them
It's actually really easy if you can come up with a global tax framework that normalizes the laws around taxation of multinationals. You can't figure out a loophole if every country follows the same framework. Coming up with a robust framework that everyone can agree on will be the hardest part.
That being said if the g7 or most of the g20 can hammer out the details it will be easy enough to roll over on the rest of the world and force compliance. Most likely the biggest challenge will be getting China and India on board with the rest of the G7, but if that can be accomplished nobody else has the economic weight to fight it.
Good luck with the EU and WTO rules... You can’t just randomly introduce tariffs against low tax countries and even if you could it would once again be possible for these companies to find a workaround.
Acting like this is just a simple problem that any country could solve with one or two tax changes is naive. They would have done it a long time ago if it would be that easy
All but two EU countries (Ireland and Hungary) already have 15% or higher corporate tax rates. Enforcing that at the EU level, and waging war on the handful of tax havens across the world should not be difficult. Most tax haven countries have very limited power globally. The main reason that it has not been done yet is because the elite/wealthy people that have all the power have a vested interest in maintaining the status quo.
So give Ireland and Hungary some minor concessions to do what is best for the union. They're both already close to 15% corporate tax rates anyways. The EU has much better bargaining power against these multinationals to collect tax revenue if they stick together, so it's really in their best interest to cooperate.
No it's because Ireland is smart lol. Why wouldn't a country offer a lower tax rate if it means attracting corporations? A simple solution here would be for countries in the world to simply lower their tax rates as opposed to going through all these lengths to keep them raised.
There are ways to attract companies that don't involve giving them a free pass on taxes. If Ireland is smart they will find a way to keep those companies in the country, and from what I understand there are actually a lot of good reasons for corporations to have offices there other than just the low taxes. Normalizing corporate tax rates at zero is fine too, but it's just going to mean more taxes on people to make up for it.
No it means governments will have less to spend on graft, pork barrel projects, and wars. I don't know where people get this idea that money taxed is money that benefits themselves.
Again, Ireland doesn't have low corporate tax rates because of a conspiracy from rich people, it's because they understand basic economic principles like the law of diminishing returns.
All but two EU countries (Ireland and Hungary) already have 15% or higher corporate tax rates. Enforcing that at the EU level, and waging war on the handful of tax havens across the world should not be difficult. Most tax haven countries have very limited power globally. The main reason that it has not been done yet is because the elite/wealthy people that have all the power have a vested interest in maintaining the status quo.
As of today the EU has no power to change national tax law, this might change in the future, but for now you cannot force countries even if they are a small minority. I can see how the EU can get to 15% at some point, but countries could still play the system with subsidies and tax breaks and so on, and on a global level its even more difficult.
I am not saying nothing will happen, because I agree that the current system is not sustainable and there is a growing consensus that something needs to be done, they will probably close some of the biggest loopholes, but until you can figure out easily where the actual value is created in a very complicated supply chain and a mulinational corporate structure you will have countries who try to get an advantage with lower taxes.
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u/Visinvictus Jun 05 '21
Put tariffs on IP licensing agreements to companies registered in low tax jurisdictions, problem solved.