Paradise Papers (& Panama Papers)

TheBigBean

The budget contains a withholding tax on royalties to low tax jurisdictions

pinno

TheBigBean wrote:

The budget contains a withholding tax on royalties to low tax jurisdictions

Yay!

Government 1 - Stevo666 0

pinno

There's more, there's more:

http://www.telegraph.co.uk/technology/2 ... crackdown/

Government two - Stevo666 "it's all legit even the HMRC thinks so" nil

pinno

From the Tory graph - a rightiebollox paper, not even a leftiebollox paper:

'Unfair advantage'
The increased tax income from multinationals should raise £285m in 2019-20, but that amount is expected to fall in each subsequent year to £130m in 2022-23.
The Budget statement said the payments would be due "even if the group has no taxable UK presence under current rules".
It added: "It will prevent multinationals from gaining an unfair advantage by locating an IP [address] in low or no tax jurisdictions and so will level the playing field."

pinno

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

rjsterry

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

In the context of a £34bn tax gap, I think it's fair to say it's largely symbolic, not that symbolic changes are unimportant in politics. It rather proves my point about tax policy being swayed by public opinion however well informed that opinion is.

rick_chasey

rjsterry wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

In the context of a £34bn tax gap, I think it's fair to say it's largely symbolic, not that symbolic changes are unimportant in politics. It rather proves my point about tax policy being swayed by public opinion however well informed that opinion is.

Given it’s decided by the government that’s how it should be.

rjsterry

Rick Chasey wrote:

rjsterry wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

In the context of a £34bn tax gap, I think it's fair to say it's largely symbolic, not that symbolic changes are unimportant in politics. It rather proves my point about tax policy being swayed by public opinion however well informed that opinion is.

Given it’s decided by the government that’s how it should be.

Of course, but it does put the onus on politicians to lead public opinion rather than following it and dancing to the tune of whatever sh**stirrer wants to make a name for themselves.

rick_chasey

https://ftalphaville.ft.com/2017/11/23/ ... avoidance/

More evidence and thoughts on the cost of tax havens. This time, US corporates avoiding paying US tax.

Stevo_666

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

RJS beat me to it. There already is withholding tax on royalties to non treaty countries anyway, they're upping the rate.

Not that it affects me.

rjsterry

Stevo 666 wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

RJS beat me to it. There already is withholding tax on royalties to non treaty countries anyway, they're upping the rate.

Not that it affects me.

Do you think there is likely to be further tightening of the rules here and in other jurisdictions? Comparisons have been made with the Snowden files: initially there was a lot of bluster about it all being absolutely fine, but pretty soon the political mood changed.

pinno

Stevo 666 wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

RJS beat me to it. There already is withholding tax on royalties to non treaty countries anyway, they're upping the rate.

Not that it affects me.

Does that mean it's a draw?

Stevo_666

Pinno wrote:

Stevo 666 wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

RJS beat me to it. There already is withholding tax on royalties to non treaty countries anyway, they're upping the rate.

Not that it affects me.

Does that mean it's a draw?

Nope, I was never playing them in the first place on this one.

Stevo_666

rjsterry wrote:

Stevo 666 wrote:

Pinno wrote:

I can hear him say 'pittance' but I guess Brexit is putting the squeeze on everything.

RJS beat me to it. There already is withholding tax on royalties to non treaty countries anyway, they're upping the rate.

Not that it affects me.

Do you think there is likely to be further tightening of the rules here and in other jurisdictions? Comparisons have been made with the Snowden files: initially there was a lot of bluster about it all being absolutely fine, but pretty soon the political mood changed.

Possibly - although as mentioned, most countries already have a suite of defensive measures in place so I don't expect a deluge. Some it is likely to be largely symbolic or wanting to look like they are doing something regardless - like the UK royalty withholding tax rate hike.

rick_chasey

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

kingstongraham

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

Not really.

There was Kansas where the governor ran on a platform of eliminating corporate and income taxes, and won, eliminated corporate taxes and had to close schools because there was no money. And lost jobs, presumably because it made it a less nice place to live.

So after 5 years both Republicans and Democrats have joined to override the governor's veto and have abandoned these policies.

https://www.economist.com/blogs/democra ... -failure-0

Stevo_666

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

pinno

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Maybe that is a contributing factor in the rising global gulf in inequality.

If corporate tax is reduced, perhaps it prevents an organisation moving their production/HQ abroad. It may allow then to give pay rises to their employees but it will certainly assist in strengthening dividend yield/share value.

Now, how much of the world's population are shareholders?

rjsterry

Pinno wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Maybe that is a contributing factor in the rising global gulf in inequality.

If corporate tax is reduced, perhaps it prevents an organisation moving their production/HQ abroad. It may allow then to give pay rises to their employees but it will certainly assist in strengthening dividend yield/share value.

Now, how much of the world's population are shareholders?

Anyone with a pension?

@Stevo: Presumably there is some similar competition on employers' NIC or equivalent, as this would be a pretty big chunk of any large employer's costs.

Stevo_666

rjsterry wrote:

Pinno wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Maybe that is a contributing factor in the rising global gulf in inequality.

If corporate tax is reduced, perhaps it prevents an organisation moving their production/HQ abroad. It may allow then to give pay rises to their employees but it will certainly assist in strengthening dividend yield/share value.

Now, how much of the world's population are shareholders?

Anyone with a pension?

@Stevo: Presumably there is some similar competition on employers' NIC or equivalent, as this would be a pretty big chunk of any large employer's costs.

Beat me to it on the pension point. Although Pinno is deliberately ignoring the job generation aspect of tax competition which was implicit in my post above (as to generate wage/payroll taxes you need to create jobs...).

On the payroll tax competition point, there is some but Id have to look harder for that. One example was Macron offering to cut income tax rates for bankers if they relocated to Paris as a bit of Brexit related opportunism.

It is in any event less prevalent than the corporate tax competition which seems to be the established 'loss leader' (in very simple terms think pile of cheapo baked beans in the entrance to Tesco which entice shoppers in, but once they're in, they end up paying for other stuff).

There has also been a deliberate shift away from raising revenue via profits taxes to raising it by indirect taxes like VAT, payroll etc. I can post that PwC tax contribution survey again of you want - clearly shows the pattern.

Quite often the CT rate can yield more corporate tax alone (as in the UK recently), but more importantly it also raises the total tax take because of other taxes - the Tesco analogy above.

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Tax competition doesn't "attract investment & jobs".

Attracting investment & jobs through lowering tax is tax competition. Not the same thing.

If you take a holistic view, what does tax competition generate?

Is it efficiencies within state gov'ts, that otherwise wouldn't be pushed for?

Is a global lower tax environment specifically for people and firms big enough to enjoy the advantages of choosing where they are taxed actually beneficial to the broader global economy?

That's what I'm asking.

I'm not asking why a single nation ought to reduce its tax.

surrey_commuter

Stevo 666 wrote:

rjsterry wrote:

Pinno wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Maybe that is a contributing factor in the rising global gulf in inequality.

If corporate tax is reduced, perhaps it prevents an organisation moving their production/HQ abroad. It may allow then to give pay rises to their employees but it will certainly assist in strengthening dividend yield/share value.

Now, how much of the world's population are shareholders?

Anyone with a pension?

@Stevo: Presumably there is some similar competition on employers' NIC or equivalent, as this would be a pretty big chunk of any large employer's costs.

Beat me to it on the pension point. Although Pinno is deliberately ignoring the job generation aspect of tax competition which was implicit in my post above (as to generate wage/payroll taxes you need to create jobs...).

On the payroll tax competition point, there is some but Id have to look harder for that. One example was Macron offering to cut income tax rates for bankers if they relocated to Paris as a bit of Brexit related opportunism.

It is in any event less prevalent than the corporate tax competition which seems to be the established 'loss leader' (in very simple terms think pile of cheapo baked beans in the entrance to Tesco which entice shoppers in, but once they're in, they end up paying for other stuff).

There has also been a deliberate shift away from raising revenue via profits taxes to raising it by indirect taxes like VAT, payroll etc. I can post that PwC tax contribution survey again of you want - clearly shows the pattern.

Quite often the CT rate can yield more corporate tax alone (as in the UK recently), but more importantly it also raises the total tax take because of other taxes - the Tesco analogy above.

you know I am broadly in agreement but your reasoning is utter tosh.

Payroll taxes are difficult to avoid whereas profits are easy to divert when the taxation system is decades out of date.

ie Google/LinkedIn pay taxes on hundreds of sales people in the UK yet book their sales to Ireland

TheBigBean

Surely a company just pays corporation tax in a low corporate tax jurisdiction and then outsources the work to a low income tax jurisdiction?

rick_chasey

Why is it so difficult to identfy the value add of tax competition to compensate for the lost revenue to gov’ts?

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Tax competition doesn't "attract investment & jobs".

Attracting investment & jobs through lowering tax is tax competition. Not the same thing.

If you take a holistic view, what does tax competition generate?

Is it efficiencies within state gov'ts, that otherwise wouldn't be pushed for?

Is a global lower tax environment specifically for people and firms big enough to enjoy the advantages of choosing where they are taxed actually beneficial to the broader global economy?

That's what I'm asking.

I'm not asking why a single nation ought to reduce its tax.

You seem to be taking the theoretical view that there are no national boundaries and it is all a zero sum game. Sorry but back in the real world, national boundaries exist and countries do compete on tax grounds. I can dig up more examples on top of the ones I have already provided - which I notice you have not challenged. Or the point that once invested and incremental business and jobs are generated, other tax revenues are generated.

As for the zero sum point, many corporates have decent sized cash piles and if the return on investment is good enough they will invest. I have seen myself a couple of examples where the tax incentives offered tipped groups into investing cash into business investment that may have other wise stayed on deposit.

I can remember multiple examples in my career where we have put investment and created jobs due to tax competition. And not just seen - I have been active in the decisions. But after reading your post, maybe I'm just imagining it all?

Stevo_666

TheBigBean wrote:

Surely a company just pays corporation tax in a low corporate tax jurisdiction and then outsources the work to a low income tax jurisdiction?

Why do you assume that? You are probably aware of the anti avoidance rules that are standard in OECD countries and many other economies around needing appropriate substance to generate the level of profits in very low tax jurisdictions - that generally means staff and premises etc. I can explain more if you want.

One recent example - I was in Poland earlier this month sorting out some things on our new shared services operation. Why are we there? Main reasons are a good supply of good value educated labour and low tax rate. No disconnect there.

Stevo_666

Surrey Commuter wrote:

Stevo 666 wrote:

rjsterry wrote:

Pinno wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Does anyone have any evidence to support the overall advantages of tax competition?

This example don't look particularly positive.

It attracts investment/jobs etc and overall can raise tax revenues as the attracting factor (often corporate tax) is more than offset by wage taxes, VAT etc. There are a couple of examples in this Wiki link, one from the US and one from Europe (Ireland). There are plenty more given enough time to search.
https://en.wikipedia.org/wiki/Tax_competition

Maybe you can explain why if its not a good idea than why are most countries competing on tax? I posted the downward trends in corporate tax rates as an example a few pages back - which is happening in nearly all of the advanced economies and quite a few others. Your thoughts?

Maybe that is a contributing factor in the rising global gulf in inequality.

If corporate tax is reduced, perhaps it prevents an organisation moving their production/HQ abroad. It may allow then to give pay rises to their employees but it will certainly assist in strengthening dividend yield/share value.

Now, how much of the world's population are shareholders?

Anyone with a pension?

@Stevo: Presumably there is some similar competition on employers' NIC or equivalent, as this would be a pretty big chunk of any large employer's costs.

Beat me to it on the pension point. Although Pinno is deliberately ignoring the job generation aspect of tax competition which was implicit in my post above (as to generate wage/payroll taxes you need to create jobs...).

On the payroll tax competition point, there is some but Id have to look harder for that. One example was Macron offering to cut income tax rates for bankers if they relocated to Paris as a bit of Brexit related opportunism.

It is in any event less prevalent than the corporate tax competition which seems to be the established 'loss leader' (in very simple terms think pile of cheapo baked beans in the entrance to Tesco which entice shoppers in, but once they're in, they end up paying for other stuff).

There has also been a deliberate shift away from raising revenue via profits taxes to raising it by indirect taxes like VAT, payroll etc. I can post that PwC tax contribution survey again of you want - clearly shows the pattern.

Quite often the CT rate can yield more corporate tax alone (as in the UK recently), but more importantly it also raises the total tax take because of other taxes - the Tesco analogy above.

you know I am broadly in agreement but your reasoning is utter tosh.

Payroll taxes are difficult to avoid whereas profits are easy to divert when the taxation system is decades out of date.

ie Google/LinkedIn pay taxes on hundreds of sales people in the UK yet book their sales to Ireland

You are assuming too much. Where did I say that ease of avoidance was not a factor? It is simply the nature of these taxes and countries have realised it is easier to tax what is less mobile, but you still have to bring the investment in to generate the less mobile taxes. And that investment 'pot' is mobile.

As for the Google/LinkedIn point - that is back to transfer pricing, of course I'm sure you know that if your understanding of tax isn't tosh

Stevo_666

Rick Chasey wrote:

Why is it so difficult to identfy the value add of tax competition to compensate for the lost revenue to gov’ts?

Why are the majority of countries doing it then? You still haven't answered that question.

Even the last bastions of high tax, US, Japan and France are cutting corporate tax rates now Maybe you know something they don't?

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

Why is it so difficult to identfy the value add of tax competition to compensate for the lost revenue to gov’ts?

Why are the majority of countries doing it then? You still haven't answered that question.

Even the last bastions of high tax, US, Japan and France are cutting corporate tax rates now Maybe you know something they don't?

Why are they all doing it?

Because it's a race to the bottom. A bit like armament before WW1. Why were they doing it? Because everyone else was.

IT doesn't mean it's an optimal outcome. It's a bit like raising tariffs but in reverse. If everyone does it, everyone loses out. If no-one does it, no-gov't loses out.

briantrumpet

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Why is it so difficult to identfy the value add of tax competition to compensate for the lost revenue to gov’ts?

Why are the majority of countries doing it then? You still haven't answered that question.

Even the last bastions of high tax, US, Japan and France are cutting corporate tax rates now Maybe you know something they don't?

Why are they all doing it?

Because it's a race to the bottom. A bit like armament before WW1. Why were they doing it? Because everyone else was.

IT doesn't mean it's an optimal outcome. It's a bit like raising tariffs but in reverse. If everyone does it, everyone loses out. If no-one does it, no-gov't loses out.

Stevo looks at this as a benign competition for individual countries to attract investment & workforce.