Paradise Papers (& Panama Papers)

rick_chasey

But even so, if every nation reduced their Corp tax rate to 0.01% who wins????

Stevo_666

Rick Chasey wrote:

You’re arguing for lower tax rates.

That’s not what I’m arguing.

I’m asking what the net economic benefit is of booking your profits somewhere else to artificially reduce your tax.

Allowing it essentially is a tax break for multinationals.

It allows multinationals who have the scale to do the shifting to pay less tax.

That’s it. And since the national corporate tax rate of nations isn’t designed to do so, it’s a costly distortion.

You need to understand I am talking about the process of shifting where you book your profits to reduce your tax bill, not the ins and outs of where corporate tax sits on the laffer curve.

I've already explained it, several times. See above. Again.

mamba80

an alternative view to stevos

http://www.theweek.co.uk/checked-out/89 ... e-tax-cuts

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

Changing where you book profits to lower your tax bill does not increase the overall tax take in the world.

It can’t be so. Otherwise it wouldn’t be lowering the tax spend by the company!!

Read the post above and try to understand. For the umpteenth time it is about more than corporate tax. RJS has tried to tell you this as well. And you need to understand the distinction between taxes borne and taxes collected by a company.

If youre still struggling after that, maybe tax shouldn't be your specialist 'Mastermind' subject :roll:

Are you capable of understanding the difference between arguing about where is optimal to place orporate taxes (the laffer curve) and the process of tax competition where tax trends ultimately to zero.

They are NOT the same thing.

Taxes trending to zero is not a way to optimise tax returns.

Tax competition forces govts away from finding the optimal tax rate on the curve and instead means they compete for sub optimal rates in order to keep any of the remaining benefits.

Stevo_666

Rick Chasey wrote:

But even so, if every nation reduced their Corp tax rate to 0.01% who wins????

There's no point me answering hypothetical questions. RJS has already explained and I have also referred to sensible management of tax rates. UK and Poland are good examples.

See also the much repeated point above that it is about much more than corporate tax rates. FFS.

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

Changing where you book profits to lower your tax bill does not increase the overall tax take in the world.

It can’t be so. Otherwise it wouldn’t be lowering the tax spend by the company!!

Read the post above and try to understand. For the umpteenth time it is about more than corporate tax. RJS has tried to tell you this as well. And you need to understand the distinction between taxes borne and taxes collected by a company.

If youre still struggling after that, maybe tax shouldn't be your specialist 'Mastermind' subject :roll:

Are you capable of understanding the difference between arguing about where is optimal to place orporate taxes (the laffer curve) and the process of tax competition where tax trends ultimately to zero.

They are NOT the same thing.

Taxes trending to zero is not a way to optimise tax returns.

Tax competition forces govts away from finding the optimal tax rate on the curve and instead means they compete for sub optimal rates in order to keep any of the remaining benefits.

What part of 'it is about more than corporate tax rates' don't you understand?

rick_chasey

It’s irrelevant what type of tax it is.

Same goes for personal tax competition.

rick_chasey

Assuming everyone engages in it, tax competition much trend toward 0 because you must be cheaper than your neighbour for it to work. This is particularly relevant to taxable income streams that are easily moved between jurisdiction. Corp tax is more easily moved than most, hence it receiving the most attention.

Think we both agree 0% tax rates are not optimal for revenue.

So, you can make the case for 0% Corp tax across the globe, but that ain’t what you’ve been arguing thus far.

rjsterry

mamba80 wrote:

Stevo 666 wrote:

mamba80 wrote:

Interesting and a fair point on the EU investment into eastern european infrastructure, something your company are now benefiting from, that will now reduce long term, so maybe taxes will go up to compensate?

From my experience of the place, they have a certain amount of get up and go, which is sometimes missing from our school system and perhaps our population in general?

OK, but who do you think is paying for a lot of that infrastructure in the first place?

.

People like me who pay their taxes and have no real means to reduce it... ie PAYE.

Three things:
- personal and business taxes are very different anyway.
- large companies may save a large amount of tax through offshore arrangements, but they pay an even larger amount.
- large corporations really are A LOT BIGGER than the average PAYE person. Apple's pretax earnings are in the tens of billions. That's six orders of magnitude difference.

rjsterry

Rick Chasey wrote:

Assuming everyone engages in it, tax competition much trend toward 0 because you must be cheaper than your neighbour for it to work. This is particularly relevant to taxable income streams that are easily moved between jurisdiction. Corp tax is more easily moved than most, hence it receiving the most attention.

Think we both agree 0% tax rates are not optimal for revenue.

So, you can make the case for 0% Corp tax across the globe, but that ain’t what you’ve been arguing thus far.

No it doesn't trend to zero because there are upward pressures on rates. Below a certain point the loss in revenue from each business or individual outweighs the additional number of taxpayers moving in to take advantage of the lower rates. Only tiny island states small enough to live off the incidental income from offshore arrangements can afford to drop their rates really low, and some of those are now turning.

rick_chasey

If there is upwards pressure, why has the overall amount of tax spent by US multinationals decreased?


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

rjsterry

Rick Chasey wrote:

If there is upwards pressure, why has the overall amount of tax spent by US multinationals decreased?


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

I don't mean that the effective rate will be constant; it will fluctuate but that's not the same as tending to zero. What has happened to personal taxes over the same period? How has the number of US corporations (and hence the gross tax revenue) varied over the same period? How does that vary in proportion to the US population?

rick_chasey

They have already tended to zero in places like the bahamas etc.

The existence of those distort both FDI, tax revenues, and decrease the quality of competition, as smaller firms who cannot benefit from moving earnings between different jurisdictions (your local coffee shop) are at a tax disadvantage from those who can (e.g. starf*cks).

Even if you forget the amount the gov't would have taken as tax (and how some places in the US could really do with that level of state spending...!), that's a whole lot of earnings that now aren't being invested back into the US.

You can argue that that's the US fault for having high taxes, but, equally, they have 250m people to look after and states to run; ultimtately, places like the bahamas are making relatively small gains for what are large costs to nations like the US.

The net situation is a loss. Most people lose in this instances.

rjsterry

Rick Chasey wrote:

They have already tended to zero in places like the bahamas etc.

The existence of those distort both FDI, tax revenues, and decrease the quality of competition, as smaller firms who cannot benefit from moving earnings between different jurisdictions (your local coffee shop) are at a tax disadvantage from those who can (e.g. starf*cks).

Even if you forget the amount the gov't would have taken as tax (and how some places in the US could really do with that level of state spending...!), that's a whole lot of earnings that now aren't being invested back into the US.

You can argue that that's the US fault for having high taxes, but, equally, they have 250m people to look after and states to run; ultimtately, places like the bahamas are making relatively small gains for what are large costs to nations like the US.

The net situation is a loss. Most people lose in this instances.

I'm not sure it's fair to blame the poverty of, say, rural Alabama on tax rates in the Bahamas. As I indicated earlier, there is a historic deep cultural mistrust of government intervention in pretty much anything in the rural US. Of course the existence of jurisdictions with artificially low tax rates doesn't help, but the US government is not about to start a Scandi-style welfare state however much tax is diverted back to the US.

As someone else posted before, the small island very-low-tax jurisdictions are starting to move away from that model anyway as it is not serving their interests particularly well.

Some links with graphs that show the evolution of the US tax system.

https://en.m.wikipedia.org/wiki/Income_ ... ted_States

https://www.usgovernmentrevenue.com/revenue_history

And an interesting post on why the high US corporate tax rate is pushing people to set up businesses in other ways that allow earnings to be passed through and taxed as personal income. This is leading to a declining number of US corporations.

https://taxfoundation.org/america-s-shr ... te-sector/

Stevo_666

rjsterry wrote:

Rick Chasey wrote:

They have already tended to zero in places like the bahamas etc.

The existence of those distort both FDI, tax revenues, and decrease the quality of competition, as smaller firms who cannot benefit from moving earnings between different jurisdictions (your local coffee shop) are at a tax disadvantage from those who can (e.g. starf*cks).

Even if you forget the amount the gov't would have taken as tax (and how some places in the US could really do with that level of state spending...!), that's a whole lot of earnings that now aren't being invested back into the US.

You can argue that that's the US fault for having high taxes, but, equally, they have 250m people to look after and states to run; ultimtately, places like the bahamas are making relatively small gains for what are large costs to nations like the US.

The net situation is a loss. Most people lose in this instances.

I'm not sure it's fair to blame the poverty of, say, rural Alabama on tax rates in the Bahamas. As I indicated earlier, there is a historic deep cultural mistrust of government intervention in pretty much anything in the rural US. Of course the existence of jurisdictions with artificially low tax rates doesn't help, but the US government is not about to start a Scandi-style welfare state however much tax is diverted back to the US.

As someone else posted before, the small island very-low-tax jurisdictions are starting to move away from that model anyway as it is not serving their interests particularly well.

Some links with graphs that show the evolution of the US tax system.

https://en.m.wikipedia.org/wiki/Income_ ... ted_States

https://www.usgovernmentrevenue.com/revenue_history

And an interesting post on why the high US corporate tax rate is pushing people to set up businesses in other ways that allow earnings to be passed through and taxed as personal income. This is leading to a declining number of US corporations.

https://taxfoundation.org/america-s-shr ... te-sector/

Similar to what I was going to post, in terms of the US having the highest corporate tax rates in the developed world (around 40% for federal and state combined) which has several impacts:
- Driving US multinational group activity offshore - e.g. to UK, Ireland where the after tax return can be up to 50% higher without any avoidance, just by basing activities there. This effect has tended to increase over time as other countries become more competitive in this area.
- Providing a larger incentive to avoid US tax than if the rates were reasonable
- Forcing US MNC's to keep profit in overseas subsidiaries due to the punitive domestic tax regime if they are repatriated (no exemption for dividends from overseas as in almost all other developed countries)
- Distorting the corporate landscape as you note above with lots of 'pass though' entities.

To be fair to Trump, the current US tax reforms should go some way to addressing these issues.

Also once the investment goes, its not just the CT that is lost, all the other taxes go as well. Hence the need to compete as in nearly all other walks of life.

The small islands are only a small part of the global tax landscape all things considered. Likewise, corporate tax gets the headlines and the most indignant outbursts but it is not the biggest issue. See this recent breakdown of UK tax revenues to put it into perspective:

Stevo_666

Also Rick, would you care to have a crack at this since the 'Trumpet Major' has ducked it?

Stevo 666 wrote:

If commercial companies competing for business all colluded to fix their prices at a high level that would be an illegal cartel and would attract massive punitive fines from the EU or various national governments. Are you saying that cartels are OK if it is the cost of tax that is being fixed? Should governments somehow be exempt from their own rules on price fixing?

bompington

I'd never quite realised that NI is such a huge proportion. Isn't it about time for a bit of honesty (I know, not asking much...) and just call it 46% income tax?

rick_chasey

Stevo 666 wrote:

Also Rick, would you care to have a crack at this since the 'Trumpet Major' has ducked it?

Stevo 666 wrote:

If commercial companies competing for business all colluded to fix their prices at a high level that would be an illegal cartel and would attract massive punitive fines from the EU or various national governments. Are you saying that cartels are OK if it is the cost of tax that is being fixed? Should governments somehow be exempt from their own rules on price fixing?

Yes, because it's not the same is it.

States are not free enterprises.

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

Also Rick, would you care to have a crack at this since the 'Trumpet Major' has ducked it?

Stevo 666 wrote:

If commercial companies competing for business all colluded to fix their prices at a high level that would be an illegal cartel and would attract massive punitive fines from the EU or various national governments. Are you saying that cartels are OK if it is the cost of tax that is being fixed? Should governments somehow be exempt from their own rules on price fixing?

Yes, because it's not the same is it.

States are not free enterprises.

Wrong. You can't have different rules just because their legal forms are different. And it would encourage states to be lazy, not control costs and simply milk tax payers.

Anyhow, what you are envisaging is simply cloud cuckoo land as countries will never collude in that way. Nice bit of theory but back to the real world again...

rick_chasey

States not being companies isn't just a "legal form" thing.

They're entirely different. They have entirely different objectives and purposes.

Stevo_666

Rick Chasey wrote:

States not being companies isn't just a 'rule of law' thing.

They're entirely different. They have entirely different objectives and purposes.

True, they are different but they still should not collude to overcharge.

Anyhow, you're still missing the point that what you want is utter pie in the sky as long as countries exist and are free to set tax laws to suit their needs. Got any real issue to debate rather than pure theory?

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

Stevo 666 wrote:

Also Rick, would you care to have a crack at this since the 'Trumpet Major' has ducked it?

Stevo 666 wrote:

If commercial companies competing for business all colluded to fix their prices at a high level that would be an illegal cartel and would attract massive punitive fines from the EU or various national governments. Are you saying that cartels are OK if it is the cost of tax that is being fixed? Should governments somehow be exempt from their own rules on price fixing?

Yes, because it's not the same is it.

States are not free enterprises.

Wrong. You can't have different rules just because their legal forms are different. And it would encourage states to be lazy, not control costs and simply milk tax payers.

Anyhow, what you are envisaging is simply cloud cuckoo land as countries will never collude in that way. Nice bit of theory but back to the real world again...

http://www.bbc.co.uk/news/business-36049817

http://economia.icaew.com/news/june-201 ... ance-rules

https://www.ft.com/content/274cd10a-4a0 ... 42b9791d43

Some 70 countries will sign a pact on Wednesday to crack down on international tax avoidance, with changes that backers say will increase the worldwide corporate tax take by up to 10 per cent.

Countries including the EU’s 28 members, India, China and Australia — but not the US — will sign a pioneering agreement in Paris that will make changes to thousands of treaties to halt abuse by companies and improve dispute resolution.

rick_chasey

Stevo 666 wrote:

Rick Chasey wrote:

States not being companies isn't just a 'rule of law' thing.

They're entirely different. They have entirely different objectives and purposes.

True, they are different but they still should not collude to overcharge.

?

"over charge". How on earth is that even something that can be applied to states and tax?

Government isn't a business. It's objective is not to make profit.

rick_chasey

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

rjsterry

Rick Chasey wrote:

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

Nobody has said it is so great, we are arguing about how much of a big deal it is, particularly in relation to other causes of lost revenue.

rick_chasey

rjsterry wrote:

Rick Chasey wrote:

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

Nobody has said it is so great, we are arguing about how much of a big deal it is, particularly in relation to other causes of lost revenue.

Stevo has, more or less. That’s the argument.

The “it’s a big deal/small deal” argument is just irrelevant to the argument of the benefit or otherwise of tax havens.

rjsterry

Rick Chasey wrote:

rjsterry wrote:

Rick Chasey wrote:

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

Nobody has said it is so great, we are arguing about how much of a big deal it is, particularly in relation to other causes of lost revenue.

Stevo has, more or less. That’s the argument.

The “it’s a big deal/small deal” argument is just irrelevant to the argument of the benefit or otherwise of tax havens.

I really don't think he has. I think he's argued that they are a natural result (sometimes to an extreme degree) of different states competing for business. Clearly they benefit the businesses that use them (although I don't think to the extent that some believe) and as with pretty much all human activity of any kind there are negative effects as well. What is so special about the existence of offshore tax arrangements and why should governments looking to increase revenue focus on them rather than the much more significant losses previously discussed? This is before we get into a discussion on whether, having reduced their tax gap by whatever means, governments would then choose to spend that extra revenue on alleviating current social problems or something less beneficial to society as a whole.

Stevo_666

Rick Chasey wrote:

Stevo 666 wrote:

Rick Chasey wrote:

States not being companies isn't just a 'rule of law' thing.

They're entirely different. They have entirely different objectives and purposes.

True, they are different but they still should not collude to overcharge.

?

"over charge". How on earth is that even something that can be applied to states and tax?

Government isn't a business. It's objective is not to make profit.

Governments can still over charge. And they do.

It's really very simple, so I'll explain it one more time in a different way then leave you to your imaginary theoretical world where governments charge whatever they want and everyone happily coughs up the money.

Anti cartel rules are designed to stop consumers being overcharged,p co services and goods put simply. Governments provide services to its citizens and charge for it by way of taxes. No difference between that and other service providers. So if governments collude to keep their charges (taxes) high, that is a cartel like any other.

Again back in the real world, tax competition keeps them honest.

Here's an article on tax cartels:
http://oecdinsights.org/2015/03/23/oecd-and-beps-defending-the-tax-cartel/

Stevo_666

Rick Chasey wrote:

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

As you can see from my link above, the OECD has become an extension of high spending governments who do like having to compete and prefer to overcharge their taxpayers as that's a bit easier for them. Some governments are like businesses in that they will try to stifle competition. Wrong for both businesses and governments.

Another longer one here:
https://taxlawjournal.columbia.edu/article/cartelizing-taxes-understanding-the-oecds-campaign-against-harmful-tax-competition/

Stevo_666

Rick Chasey wrote:

rjsterry wrote:

Rick Chasey wrote:

I mean, if companies shopping around for tax using brass plates is so great, why does the OECD make a thing about it?

http://www.oecd.org/ctp/aggressive/

Nobody has said it is so great, we are arguing about how much of a big deal it is, particularly in relation to other causes of lost revenue.

Stevo has, more or less. That’s the argument.

The “it’s a big deal/small deal” argument is just irrelevant to the argument of the benefit or otherwise of tax havens.

We have had the conversation before about when the largest leakage occurs. Unfortunately you still seem unable to grasp prioritization which is an essential skill in business and tax. There are bigger issues, for example:
http://www.bbc.co.uk/news/business-42143849

Interestingly the whole Paradise Papers leak is starting to look like a leftie conspiracy, implemented by theft of private data:
http://www.telegraph.co.uk/news/2017/11/25/guernsey-finance-chief-claims-release-paradise-papers-ploy-influence/