Germany Urges Global Minimum Tax For Digital Giants (yahoo.com)

Germany is backing a global minimum tax rate as Europe looks to levy tax notably on U.S. tech giants. "Europe is trying to devise a strategy to tax profits from the likes of Google, Amazon, Facebook, Apple and digital platforms such as YouTube and Airbnb which currently manage to keep fiscal exposure to a bare minimum," reports Yahoo News. From the report: "We need a minimum tax rate valid globally which no state can get out of (applying)," Scholz, a social democrat in conservative Chancellor Angela Merkel's coalition government, told the "Welt am Sonntag" weekly. Digital platforms "aggravate a problem which we know well from globalization and which we are trying to counter -- the shifting of profits to fiscally beneficial regions," said Scholz. Scholz explained he had launched an initiative designed to help states react to so-called fiscal dumping in support of embryonic OECD plans designed to fight tax transparency and cross-border tax evasion. "We require coordinated mechanisms which prevent the displacement of revenues to tax havens," said Scholz. A March proposal by the Commission includes introducing a tax as a bridge measure until such time as the OECD can roll out a measure which can be applied globally.

Comments

First you need to understand what is going on

[OMG]

Please, do understand what "Double Irish" means concerning taxes:

https://en.wikipedia.org/wiki/...

Double Irish:

        Adobe Systems
        Airbnb
        Apple Inc.
        Facebook
        General Electric
        Google
        IBM
        Microsoft
        Oracle Corp.
        Pfizer Inc.
        Starbucks
        Yahoo! ...

Re:The US will never agree to this

[ShanghaiBill]

EU does not need to ask permissions how to tax countries selling to their consumers.

Yes they do. It is a blatant violation of WTO rules to tax American products differently based on their origin. So they have to craft this carefully so that only American companies pay the tax and no European companies are inadvertently snagged, without explicitly saying that is their goal. One way to do this is to penalize "bigness", but that is clearly a contrived distinction, so expect this to be vigorously challenged by the US in the WTO courts.

Scholz's words will come back to haunt him. He is basically admitting to designing an illegal tax policy. It is hard to claim you are not intentionally targeting Americans when you have already clearly stated that you are.

Re:In other words, "We can't compete."

[Wycliffe]

Nations, provinces, counties, and cities all have to compete with each other to get people to live, work, visit, or operate a business there. If you are incapable of offering an attractive proposition of benefits vs. costs, then they won't come to you.

The solution is to make yourself more attractive, not to require all your competitors to place the same onerous burden on the people or businesses you aren't attracting.

This is a race to the bottom at best but it's really worse than that. Global companies aren't creating shell companies in obscure countries because these countries are out competing other countries with quality but rather because they managed to find a country that is willing to look the other way because they are getting 1% of a bunch of cash that they wouldn't get otherwise.

The correct solution isn't a global tax but rather to charge taxes based on sales in that country. We already do this with physical goods in the form of either sales tax or import taxes. If Germany wants to tax the iphone or facebook it should tax the company based on the amount of revenue that company is receiving from its citizens.

Re:The US will never agree to this

[AmiMoJo]

Didn't read the first sentence of the summary, huh?

It doesn't matter if the US agrees or not. What Germany is proposing is that the EU implements a minimum global tax rate for companies that do business in the EU. So if the minimum global rate is say 10% and the US levies 15% all is well. If the US only levies 5% then the EU will collect the other 5%. Numbers made up.

This has nothing to do with the US though. This is about tax havens and companies funnelling profits out of the EU. They use bullshit like ridiculous licencing fees to a holding company in the Cayman Islands to claim that their EU operation is making no profit and only has to pay a tiny bit of tax there, but the EU will just tax them based on global income instead.

Wasn't that the point of the EU

[rsilvergun]

to make a large enough organization to tell the US to go fuck themselves? Funny how there's this campaign backed by billionaires who make liberal use of tax shelters to kill the EU...

There is more to understand going on here

[Solandri]

Try bumping your thinking up one more abstraction level. Who pays corporate taxes? Corporate taxes are taken out of profits. Profits are distributed to shareholders. Shareholders wishing larger distributions (higher profits) insist on lower employee wages and higher prices for products. So corporate taxes are paid for via (1) higher product prices, (2) lower employee wages, and (3) lower shareholder distribution.

There's no need for corporate taxes if you just tax those three directly. (1) can be replaced by a sales tax. (2) can be replaced by an earned income tax. (3) can be replaced by a unearned income tax (interest on savings, distributions). None of these can be thwarted by the Double Irish. (1) yields tax revenue in the country where the sale occurred. (2) yields tax revenue in the country where the company is operating (has employees). (3) yields tax revenue in the country where the owners reside. All bases are covered. The only difference is in the bookkeeping.

The only reason the Double Irish works is because corporations can exist simultaneously in multiple countries. People can only exist in one country at a time, so they can't pull off a Double Irish. So it's easy to eliminate this problem - eliminate corporate taxes and shift them to sales, earned income, and unearned income taxes. The only problem is that a large number of people mistakenly think that corporate taxes have no impact on people, and so feel taxing corporations is preferable to taxing people.

There is no difference - no matter what you tax, in the end a person somewhere pays for it. Taxes are an assignment of a percentage of the country's productivity to the government coffers. And since the only source of productivity is people (everything a company does is done by its employees), in the end all taxes are paid for by people. Get yourself over the notion that corporate taxes are necessary and the Double Irish problem vanishes. Corporate taxes accomplish nothing which cannot be accomplished with different taxes.

US is a high tax country. Ireland is the target

[raymorris]

Germany is complaining about countries with LOW corporate tax rates. The US has HIGH corporate tax rates.

Germany's corporate tax rate is about 15%.

The US corporate tax rate was 35% federal plus average 5% state = 40%, among the highest in the developed world. That's why most large "American" companies have their official tax headquarters and much of their operations in Europe - they'd rather pay 15% tax rather than 40%.

The tax Cuts and Jobs Act (TCJA) reduced the U.S. rate from 35 percent to 21 percent. Plus 5% state, so now it's 26%, still almost double the German rate.

The target of this is Ireland. Though their nominal rate is 12.5%, they allow BER that results in an effective rate around 1%.

The US would LOVE for Europe to have higher rates, similar to the US, so that "American" companies like Dell, Apple and Amazon would have less incentive to pay their taxes in Ireland, instead paying them in (and to) the US.

The problem is, most every country other than the US recognizes that receiving tax revenue is a good thing, and having people invest in factories, fabs, etc is good for your country. As Barak Obama said "if you want people to do less of something, tax it". The US taxes investment. They have high taxes on factories, fabs, development centers - companies - because apparently they want people to do less building of companies in the US. Other countries aren't so stupid. They WANT companies like Dell, Google, and Apple to put their operations in their countries, so they don't tax the hell of that like the US does.

Re:US is a high tax country. Ireland is the target

[Tom]

and having people invest in factories, fabs, etc is good for your country

That's why the Cayman Islands are full of factories, fabs, etc...

Tax havens don't work by attracting actual companies with actual headquarters and actual production. Many years ago a journalist went to the Cayman Islands to find all those corporate headquarters. He found one building where a hundred or so international corporations share one office. The kind of corporations that have their own streets named after them in their actual corporate locations.

This is all about money and nothing else. Pure money. Not money tied to any productivity, but the same kind of money you use in speculative derivate finance products. Money completely removed from any economic effect.

Time for pro-freedom anti-greedom taxation?

[shanen]

So far everything I have seen in this discussion (both above and below this 'insertion point' for this comment') has been mindless regurgitation of stupid lies and complaints about the lies. Just the place for an appeal to first principles in search of a well reasoned debate. ROFLMAO.

What we have now are tax systems that reward corporate cancers for becoming as huge and cancerous as possible. Insofar as there is any pretense of justification, it always comes down to "bigger is better", so the profits MUST increase.

I regard that as an insane anti-solution in search of a real problem. There will NEVER be any profit that "solves" the fake problem because there is always a larger number. Cancers always kill their hosts. In this case, corporate cancers will eventually kill the societies that are hosting them. Or maybe they already have, and we're just walking dead and about to discover that our extinction is the natural resolution of the Fermi Paradox.

Strangely enough, I think there is a solution, and the Germans seem to be on the right track. However I think it is better if your think in terms of pro-freedom anti-greedom taxation. As market share increases, so should the tax rate on your profits. This is NOT a penalty for success, but rather an incentive to split the company into competing companies that will take the good ideas into different directions, while simultaneously giving us MORE choices and MORE freedom. The basic objective (per my sig) should be to make sure there are around 3 to 7 choices in play for each shopping decision, not the 1 or 2 choices that the profit maximizers demand.

What we have now is a pro-greedom taxation system. America just has the greediest and most dysfunctional version of it.

Time's up, so I bid you ADSAuPR, atAJG.