To answer Nick Shaxson’s question

The tension at the heart of it all is this: when a multinational from one country invests or sells in another, which nation taxes its profits?

None.

Don’t tax profits, tax incomes. Companies are legal persons, not natural ones. There’re only us natural persons here to be actually taxed – any tax lightens the wallet of a live human being. So, tax the people, not the fiction.

Problem solved.

And to give an idea of Shaxon’s academic rigour on the subject:

These profit-shifting shenanigans cost the US an estimated $100bn a year,

Well, no, not really. The reference is to this paper. By, yes, K. Clausing again. Which is based upon 2017 tax year numbers. The American corporate tax system has already been changed by Trump – for the 2018 tax year – which massively changes how it all works.

What is it toads do?

12 comments on “To answer Nick Shaxson’s question

  1. Ok, but do you tax the dividends at the point of issue (in the country where the company is incorporated); or do you tax the recipient (in the country where they live)? If the former, how do you avoid double-taxation when the recipient is a another company, possibly overseas?

  2. “If the former, how do you avoid double-taxation when the recipient is a another company, possibly overseas?”

    By not taxing dividends received by companies. Which here in the UK you don’t, in most cases, provided no tax deduction for the dividend is allowed in the territory from which the dividend is paid to the company paying the dividend.

  3. If dispatching with Corporation tax, then tax the divs at the point of issue (as a basic level withholding tax). Otherwise forriners will escape tax free, with the locals having to cover their butts. As Andrew says, they can claim any double deduction relief in their own habitat if they live somewhere koshe.

  4. There’re only us natural persons here to be actually taxed – any tax lightens the wallet of a live human being. So, tax the people, not the fiction.

    The fiction has to pay its phone bill, even though the actual wealth to pay it can only come from real people. So why not tax the fiction, simply as a tax point for any real people who might otherwise avoid paying? Genuine question, not taking a position.

  5. Presumably, Tim. So I guess it comes down to taxing the sending of profit (easy target) rather than taxing the receiving of profit (maybe difficult or impossible target). What’s the difference?

  6. We know who people are, we know where they are. They’re easier to tax.

    Don’t forget, all this complaining is happening because the companies have made it difficult to know where they are.

  7. “We know who people are, we know where they are. They’re easier to tax.”

    Well sometimes. Collect alcohol duty from the brewer, fuel duty from the oil co, let them recover it from people: the company is too big to hide.

  8. Isn’t this the trade-off between efficient taxes and keeping the goose quiet while its plucked?

  9. I can think of places ( e.g. IoM ) where the main rate of corporate tax is zero and even income tax allowances are transferable between couples.
    None of these places are schitholes on average. Of course, correlation ain’t causation but I’d rather not take my chances with places that incentivise family units breaking up and also corporates shifting profits somewhere else, thanks

  10. @Tim Worstall

    It would be useful if you wrote a full “Why it’s wrong” article about:

    UK Digital Tax

    US Threatens Tariffs If Johnston Implements £500m Big Tech Tax

    The UK and US were on a collision course over digital tax after Washington threatened retaliatory tariffs if the British government did not back down on plans to impose the levy from April.

    A spokesperson for prime minister Boris Johnson said the British government, which is set to start talks with Washington over a post-Brexit trade deal next month, would go ahead with plans to introduce the new tax. The US claims the levy unfairly discriminates against technology companies including Google and Amazon.

    “We have consulted extensively on our digital services tax and have sought to design it in a proportionate way,” the spokesperson said.

    The UK’s stance contrasted with that of France which this week appeared to have struck a compromise with the US over plans by Paris to introduce a similar tax. Washington has threatened to place tariffs on $2.4bn of French goods such as wine as early as this month if Paris did not back down.

    Steven Mnuchin, the US Treasury secretary, warned in Davos that plans by other European countries, including the UK and Italy, would have serious repercussions if they did not back down.

    “They’ll find themselves faced with President Trump’s tariffs. We’ll be having similar conversations with them,” he said.

    The UK government has repeatedly said it would introduce such a tax in April. It hopes this will raise almost £500m a year and has included the revenues in public finance projections.

    It comes as Mr Johnson’s new government prepares to start trade negotiations with Washington next month after the UK has left the EU in the hope of securing a fast-track deal.

    Mr Trump made an oblique reference to further trade wars to threaten other countries in his appearance at the World Economic Forum in Davos. Speaking about his phase one trade deal with China, which left tariffs in place but ended the escalation of the trade war, he said: “These achievements would not have been possible without the implementation of tariffs, which we had to use. We’ll be using them on others too.”

    The UK has drafted the legislation for the tax which will be levied at 2 per cent of revenues from UK users for companies that have more than £500m in digital revenues worldwide and over £25m from UK activities.

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