
The missing profits of nations - kooow
https://voxeu.org/article/missing-profits-nations
======
flexie
And this is where the main issue is. Local newspapers, local advertising
companies, global search companies that could have been; all of them are
competing with Google on vastly unfair terms. Google is not paying tax. The
others have to.

~~~
dzink
True, though small companies can be held as LLCs or taxed as SCorporations if
they have less than 100 investors, and they wouldn't pay corporate taxes
anyway. At that point taxes on gains trickle to the owners/partners and are
taxed at personal tax rates. C-Corporations pay taxes twice (Corporate taxes,
then taxes on distributions as salaries or dividends).

~~~
rbranson
Employee salaries are tax deductible in the US.

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Hermel
Large companies should be taxed where the value is created. And because that’s
hard to measure, cost should be used instead. So if Google spends 60% of its
budget in the US, 60% of its profits should also be attributed to the US.

(Side note: the alternative of taxing profits where the revenue is generated
does not make much sense as this would be equivalent to a sales tax.)

~~~
kyrra
All large multi-national corporations do this. For example, NYT did a piece
about Apple doing it[0]. Wikipedia has a list of companies that used the
Double Irish setup[1]. The double-irish has been closed (via regulation) and
most companies will be moving off of it by 2020.

[0] [https://www.nytimes.com/2017/11/06/world/apple-taxes-
jersey....](https://www.nytimes.com/2017/11/06/world/apple-taxes-jersey.html)

[1]
[https://en.wikipedia.org/wiki/Double_Irish_arrangement#US_mu...](https://en.wikipedia.org/wiki/Double_Irish_arrangement#US_multinationals_using_Irish_tax_schemes)

~~~
soneil
They'll figure out an alternative. eg, Liechtenstein only has 2.5% corporate
tax rates for IP & royalties. So create a shell there, sell it your IP, and
then license it back.

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dzink
Technically the FAANG profits are somewhat reflected in the stock price. With
their 20-50% in annual gains, holding stock in some of these allows you and
retirees and other US stockholders to partake in the gains. The stock growth
then rewards tax shifters vs non-tax shifters. This is essentially a wealth
shift from tax global tax revenue that gets distributed by politics to global
shareholders who are able and aware enough to invest in US fast-growing
corporates (while possibly bubbling stock prices a bit).

------
derefr
Question: why isn’t there an international entity that is to tax-law
normalization as WIPO is to IP-law normalization, that could—like WIPO—punish
offending non-members by requiring members to impose trade sanctions on them?

The big players (none of which are tax havens) certainly would have an
interest in building it, and in giving it power.

~~~
jeffreyrogers
Because the tax havens are small countries that don't export much so trade
sanctions wouldn't have much effect.

~~~
derefr
Sorry, trade embargoes, not trade sanctions. Attempt to make their imports
more expensive, regardless of who they’re importing from. As if there was a
global empire attempting a trade war with them.

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woodpanel
Yes, foreign direct investment is a poor measure in many regards and using
foreign affiliates statistics instead seems very helpful. But referencing
controversial Piketty doesn't help in advocating for their policy suggestions.

I would have liked to see an exploration of how high-tax countries encourage
those differences in "Pre-tax corporate profits (% of compensation of
employees)" and how the taxing of individuals has changed in the same time.

Germany for example has a progressive income tax capped at 42% yet while
incomes rose over the decades, the tax exemption limits did not, effectively
reducing the salary needed to reach that cap from 24-times-the-mean-wage two
2-times-the-mean-wage.

------
WalterBright
I'd tax pollution and resource consumption, not profits.

~~~
beerlord
Land is another good one to tax. It can't move or be hidden.

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tcfunk
Maybe this is a silly question, but why don't we just lower the corporate tax
rate significantly (maybe 10 or 15%), and make the use of tax havens illegal?

I'll bet 10% of $17bil is still quite a bit more than whatever Google paid in
US taxes that same year. Is it because "making the use of tax havens illegal"
is hard/impossible?

~~~
dbatten
Yes, making the use of tax havens illegal is very hard. It's basically a giant
game of whack-a-mole, where the corporations have more people with stronger
incentives working to get around the tax laws than the government has trying
to write new ones.

Here's a fun explanation of the kinds of hoops corporations will jump through
to dodge taxes:
[https://en.wikipedia.org/wiki/Double_Irish_arrangement](https://en.wikipedia.org/wiki/Double_Irish_arrangement)

~~~
grasshopperpurp
>where the corporations have more people with stronger incentives working to
get around the tax laws than the government has trying to write new ones.

If the penalties were harsh enough, wouldn't it change this dynamic?

~~~
freeone3000
The problem isn't that large companies are doing illegal things with taxes and
aren't getting caught for tax evasion, it's that they structure arrangements
in such a way that are legal but problematic, and as soon as a problematic
method of doing business outlawed, a new one is put into place.

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DomreiRoam
It seems that multinational uses price transfer to move profits from high tax
country to low tax country. Would it make sense to tax trademarks, patents,
goodwill from abroad to reduce this abuse?

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dang
Editorializing titles like this is against HN's guidelines
([https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)).
When accounts do this, they eventually lose submission privileges. If you'd
read the guidelines and follow them when posting here, we'd appreciate it.

(Submitted title was 'Don't be taxpayer – Google Alphabet made $19.2B in
revenue in Bermuda'.)

~~~
eecc
Also because the original title is a smug pun on “the wealth of nations”, Adam
Smith’s essay that (neo)liberists trump around like Mao’s Red Book... Smith
argued that letting capitalism loose would benefit us all - the wealth in his
title - yet there seems to be quite a bit of it missing ;)

~~~
ralusek
Are you suggesting that capitalism has not benefitted us all?

~~~
dang
Please don't do generic ideological arguments on HN. There's nothing new in
them.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

Edit: also, could you stop posting unsubstantive comments generally?

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nautilus12
This is disgusting. Literally stealing from the pockets of the american
people. It doesnt matter that its technically legal. This news should bring
outrage.

~~~
dang
Maybe so, but please don't post unsubstantive comments to HN.

