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?
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?
“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.
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.
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.
We’re taxing the profit – the bit the fiction sends off to other people, right?
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?
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.
“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.
Isn’t this the trade-off between efficient taxes and keeping the goose quiet while its plucked?
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
@Tim Worstall
It would be useful if you wrote a full “Why it’s wrong” article about:
UK Digital Tax
No, don’t tax income. Fuck income tax