130 countries back deal on global minimum tax for companies

Watch ol' Mitch McConnell shoot it down for the US.

Countries led by France have already started imposing unilateral digital taxes aimed at U.S. tech giants such as Amazon, Google and Facebook; under the deal, they would agree to withdraw those taxes, regarded as unfair trade practices by the U.S., in favor of the global approach.

Do not let this money fall into a fiscal black hole. There are multiple proposals for digital taxes, taxing the use of our data, and taxes on passive rentier income to be used to fund a broad based UBI. With the pandemic recession the timing is perfect.

The fact that tech giants are breathing a sigh of relief over this deal tells you all you need to know. It's a complete farce. Global tech companies will still be able to reduce their corporate tax burden to near zero through complex schemes which transfer all of their valuable patents, software, and other IP to offshore entities. The licensing fees and royalties they pay to use these assets will still be deductible expenses when calculating corporate profits. Even if these offshore companies are hit with a 15% tax, there's no guarantee that you or I will ever see a single extra penny. It could just end in a windfall for the Cayman Islands or Bermuda, because 15% is still lower than the average corporate tax rate in most OECD countries .

Countries led by France have already started imposing unilateral digital taxes aimed at U.S. tech giants such as Amazon, Google and Facebook; under the deal, they would agree to withdraw those taxes, regarded as unfair trade practices by the U.S., in favor of the global approach.

This was the better plan (and you can be sure of that by the fact that it was opposed by the tech giants and their US backers). We should have a simple tax on the sale of digital goods/services within each country where these goods and services are sold. We don't need an army of tax inspectors to calculate global profits or chase down offshore companies in the caribbean to verify whether or not they've paid 15%.

Under the deal, countries could tax their companies' foreign earnings up to 15% if they go untaxed through subsidiaries in other countries. That would remove the incentive to use accounting and legal schemes to shift profits to low-rate countries where they do little or no business, since the profits would be taxed at home anyway.

It's totally unworkable. Who bears the burden of proving that some offshore company based in the Cayman Islands is a Facebook or Google subsidiary, or that it has profits, or that it hasn't paid at least 15% on these profits? This information isn't readily available. Even if it was, what stops the Cayman Islands from inventing some clever scheme where they nominally charge 15% but then kick back the money through technology investment grants or something? Does the deal cover that eventuality? I don't think so.

In the end we will be back at the status quo. Tech giants will continue to decide how much tax they want to pay and which country will get the money.

Still sceptical. Easy to say, hard to implement. Countries will squabble endlessly over who is due the money

Under the guise of big corporations paying their fair share, ultimately you will end up paying.

In the end we will be back at the status quo. Tech giants will continue to decide how much tax they want to pay and which country will get the money.

So what is your solution to the problem?

So what is your solution to the problem?

As I said, the French-style taxes levied directly on the sale of digital goods/services/ads is a much better solution than trying to chase down and tax profits.

Attempting to tax profits is a losing game when profits can be easily obscured and shifted through clever accounting and corporate structures, all of which are legal. Unlike profits, a sale (and the tax due on every sale) is much harder to deny or avoid. If a consumer in France buys a Netflix subscription or an Uber ride, these companies cannot avoid the tax by pretending the sale took place in the Bahamas. That is the difference between taxing sales and trying to tax profits.

Taxing profits works well when we're dealing with traditional businesses like shoe factories that produce tangible goods, because it's relatively easy to determine exactly what the revenue and expenses are. It doesn't work well in a digital economy where global companies are selling infinitely reproducible goods and their most significant expenses are IP royalties and software licensing fees paid to webs of offshore companies.

130 countries back this ruling? What this ruling does is actually hurt the smaller countries in favor of the bigger economic powers. If the tax haven countries lose some of their ability to grant those services, companies will reduce their operations in those areas essentially taking money away from these countries that were being exploited by the bigger companies. Now instead of being exploited by companies they are once again exploited by bigger countries.

Huh?

Yellen said lower rates deprived countries of money

Huh? Lower rates and broader based taxes are good for getting more money, not less.

The whole premise of this global tax cartel seems to ignore the body of knowledge that the OECD has previously built up over the years, and Yellen has gone fruit loopy.

Such tax avoidance practices cost countries between $100 billion and $240 billion in lost revenue annually, according to the OECD.

Not even enough to pay for a single US stimulus package.

Huh? Lower rates and broader based taxes are good for getting more money, not less.

It is a story often told but in fact there is no evidence in any country that lower tax rates ever resulted in higher tax revenues. I am an economist by training with undergraduate and a post graduate degree in the subject. A fellow named Art Laffer first proposed this notion that lowering taxes raises revenue. His analysis has been disproven many times over the decades but some politicians and pundits have latched on to this idea and it have become received wisdom among many. However the econometric data shows this has never happened in the real world. The experience of Kansas during the George W Bush administration is illustrative. The governor was an ardent fan of cutting taxes to increase revenues. It ended up putting the state deeply in debt and unable to fund many routine state funded government operations.

Watch ol' Mitch McConnell shoot it down for the US.

God, I hope so!

The the true face is coming up.. global techs tax? but something going under the table for Biden family ..

https://asia.nikkei.com/Politics/International-relations/US-China-tensions/Biden-revokes-WeChat-and-TikTok-ban-but-orders-security-review

in fact there is no evidence in any country that lower tax rates ever resulted in higher tax revenues

Oh, Is that so.

I am an economist by training with undergraduate and a post graduate degree in the subject

There are numerous instances dating back decades, that Dr, Google could additionally teach you of.

A fellow named Art Laffer first proposed this notion that lowering taxes raises revenue.

He didn’t propose or invent it. He described what was known, on a napkin, and got his name on it as a result.

Google will also show you a few JFK speeches about income tax cuts and you’ll find he too knew about it the ability of lower rates to increase tax revenues more than a decade before the Laffer Curve got its name. JFK was by no means the first either.