Global minimum corporate tax rate

Wanted to get a discussion going on this. Wondering what the economics gods have to say about its validity or even its practicality. On one end, it targets the concept that neighboring tax jurisdictions are the only ones who benefit from a tax increase. On the other, I'm sure this points us towards an Orwellian society.

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Comments (97)

  • VP in S&T - FI
Apr 7, 2021 - 12:03pm

Couldn't disagree more. I think this is an inevitability, at least among g20 countries

 more technology and ability to use sanctions in an interconnected world will make this possible, and it's an obvious step for governments to take. Maybe it doesn't happen under Biden, but my guess is there will be a global minimum tax in the next 20 years with like 80%+ probability

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Apr 7, 2021 - 1:34pm

COVID-19 relief package. Which already passed and benefits middle-to-low class of Americans only 

New Infrastructure bill would be using funds from corporations and ultra-wealthy to pay for social/human/physical infrastructure, which this country is depleted of and would benefit middle-to-low class Americans. Very progressive. 

Apr 5, 2021 - 4:19pm

I can't seem to get a straight answer about what it means. Is that where there's a pact between a bunch of different countries to impose a minimum tax rate?

Array

  • VP in RE - Comm
Apr 5, 2021 - 4:42pm

I don't see this gaining any ground. If anything, this is a clear admission by Yellen that Biden's tax hike will not be good for the U.S.

  • Associate 2 in Consulting
Apr 6, 2021 - 2:03am

By raising taxes in the US, we are making the US a relatively less desirable place to headquarter and do business, i.e. other places become relatively better. Companies may choose to do less business in the US and more business in relatively lower taxed countries

Imposing a global minimum serves the purpose of reducing the difference between the US and relatively preferable countries. It's like saying "Look, we know we're about to screw this up, can you guys raise your taxes so our businesses don't leave us for you?" 

From Associated Press: "It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion," Yellen said.

  • VP in RE - Comm
Apr 6, 2021 - 9:12am

Think of it this way: let's say you start a business like a burger joint. You run the numbers on the back of the napkin and realize you have no idea what the fuck you are doing, and with your inefficient expenses and operations and lack of competence, you realize you will have to charge $50 per burger to make it work. Most rational people would scrap the idea, because why would anyone pay $50 at your burger joint, when they can pay $10 everywhere else? But you are not rational. An idea pops into your head: what if I ask all of the other burger joints to charge $50, that way it's "fair"! Hopefully they agree!

Apr 5, 2021 - 4:57pm

you think the governments of the world can successfully coordinate on this when we don't have

global functioning police

global currency

global travel system

global daylight savings time standards

global sanctions enforcement

my DMV can't even get its shit together, much less our federal government, I have absolutely 0 confidence the global powers that be could successfully coordinate on ANYTHING, and I mean ANYTHNING, including an alien invasion

Apr 5, 2021 - 5:18pm

Right. Doesn't the Republic of Ireland have its own corporate tax rates that the EU doesn't like? Or was that corrected? 

Array

  • Analyst 1 in RE - Comm
Apr 7, 2021 - 2:56pm

Yes, it's mainly France & Germany arguing for higher corporate tax rates elsewhere. It's not just Ireland opposed to this but also Denmark, Sweden and the Netherlands etc.

Apr 5, 2021 - 9:48pm

thebrofessor

you think the governments of the world can successfully coordinate on this when we don't have

global functioning police

global currency

global travel system

global daylight savings time standards

global sanctions enforcement

my DMV can't even get its shit together, much less our federal government, I have absolutely 0 confidence the global powers that be could successfully coordinate on ANYTHING, and I mean ANYTHNING, including an alien invasion

I think this is just a recommendation from Yellen. Still, in the academic world, isn't it close to progressing towards it? More than likely, nothing will actually happen for 2-4 years. But numerous studies will probably be written, which will start to form the legal framework.

Apr 7, 2021 - 5:49pm

A global police force sounds like a wonderful idea that I don't see being used to inflict oppression and tyranny at all.

"Work ethic, work ethic" - Vince Vaughn

Apr 6, 2021 - 8:17am

Lib arts major, a corporation defines the structure of the business, not the size of the business. Most corporations are nowhere near Walmart in any conceivable way.

Array

Apr 5, 2021 - 9:26pm

What's the purpose of raising corporate taxes, especially just a little bit? A tiny increase will hardly raise any money while we just printed $10 trillion in the last 12 months and are running multi-trillion dollar deficits going forward. It just seems like a punitive proposal for no real return.

Array

Apr 6, 2021 - 7:03pm

Realmadrid133

The trump tax cuts all went to share buybacks. Subsequently equity prices go up of which the rich (top 10%) owns 90% of shares. Raise taxes on corporations!

A share buyback and a dividend are differences without distinctions. 

Array

Apr 5, 2021 - 9:14pm

Countries differ in terms of their handling of corporate legal structures and tax codes by far more than the % rate. Unifying all the legislation around deductions would be a political nightmare. And when you admit that's impossible, how do you prevent the race-to-the-bottom tax havens from just offering extraordinary deduction benefits? It's super unrealistic.

Countries upset with tax havens have the right to pass legislation to tax companies operating in them even if they don't. They should start with that before trying to strongarm other nations.

  • Managing Director in S&T - Other
Apr 5, 2021 - 10:04pm

Bad for collective. But probably good for those of us in Finance. While Trump changed the rules overnight, seems Biden is looking to put in complicated across the board policies. This will just lead to more and more nations creating their own supply chains (again a win for finance folk).

Apr 5, 2021 - 10:30pm

I highly doubt other countries want the USA telling them how to run their taxes. Not gonna happen, especially after the US's recent lack of global leadership.

Apr 5, 2021 - 11:16pm

I think that it's about time we starting discussing things like this....not because it makes sense but because some ideas make no sense at all without a global one world government.

Biggest issue here is global warming. Not one of these "science is real" assholes has explained to me how we stop global warming without a world government system of enforcement and punishment. We're being told that the solution is to use less plastic straws or voluntarily reduce through the Paris accord. What a fucking joke!

To be clear, I'm not saying that we should have a one world government or that this is something worth doing. What I'm saying is that it's about time to start being honest about what it would take to enforce these ideas.  Same with global minimum corporate tax.  They're right. If you want it enforced, then you have to go global.  Totally, different question whether we should do that, but at least, some honesty is finally showing up in these discussions and it's not pretty.

Apr 5, 2021 - 11:42pm

Just to remind you all we still the corporate accounting standards are still different for US and International (GAAP vs IFRS). The boards have been trying for years but have failed. On a similar line of thought, I don't see additional corporate laws such as taxes being fully seen through. Remember a tax rate really isn't just a %, there's a whole body of tax law and tax code that would come with it. 

Array

Apr 6, 2021 - 12:21am

A corporate tax rate of 28% isn't that unreasonable. It's the "global" part I'm skeptical of. I do not trust the IMF or World Bank for anything.

"Work ethic, work ethic" - Vince Vaughn

  • Analyst 1 in S&T - Equities
Apr 6, 2021 - 3:41am

Biden said today that higher taxes don't hurt the economy. Every country should then have no issue raising taxes. Why would they need to implore other countries if there is only net benefit?

Asked whether he is concerned that the White House plan to raise the corporate rate to 28% could harm an already-fragile recovery, Biden replied "not at all."

"There's no evidence of that," the president said from the South Lawn of the White House. "Here you have 51 or 52 corporations in the Fortune 500 that haven't paid a single penny in taxes for three years."

Biden says higher corporate tax won't hurt economy (cnbc.com)

Apr 6, 2021 - 12:48pm

Biden said today that higher taxes don't hurt the economy. Every country should then have no issue raising taxes. Why would they need to implore other countries if there is only net benefit?

Asked whether he is concerned that the White House plan to raise the corporate rate to 28% could harm an already-fragile recovery, Biden replied "not at all."

"There's no evidence of that," the president said from the South Lawn of the White House. "Here you have 51 or 52 corporations in the Fortune 500 that haven't paid a single penny in taxes for three years."

Biden says higher corporate tax won't hurt economy (cnbc.com)

This is a pretty dumb take.  I mean, just on its face it couldn't be more wrong, seeing as Mr Biden was talking about the US economy and not a global one.

Most Helpful
Apr 6, 2021 - 5:20am

Mate, the EU tried to do a supranational coordination for vaccines delivery, the result is that no country in Europe has them, except the UK because they left the EU. It's like nobody learned anything from the Soviet experience. Centralized technocracy ends up being run by unaccountable liberal retards who pat themselves on the back while everyone is dying.

Can globalists please fuck off and leave the planet? Thanks!

Never discuss with idiots, first they drag you at their level, then they beat you with experience.

  • 14
  • 1
Apr 7, 2021 - 3:06pm

It is important to leave a mark.

Never discuss with idiots, first they drag you at their level, then they beat you with experience.

Apr 6, 2021 - 3:02pm

Right. I don't understand the purpose of the corporate income tax anyway. The distributed earnings get taxed directly as dividends or indirectly as capital gains on the sale of stock or on the purchase of treasury stock. The nondistributed earnings get taxed in endless ways: 1) bank deposits are used for lending to real estate and business; 2) investment instruments are purchased to earn taxable interest and which capital gains on the sale get taxed; 3) retained earnings get re-invested, which get taxed all the way through (at the individual and business level).  

The corporate tax, in other words, is almost entirely counterproductive. It sends businesses overseas and lowers economic growth, thus, in the long-term, reducing revenues to the government.

Array

Apr 6, 2021 - 3:21pm

consluttant

the path forward is obvious to me and i don't understand why it's so politically untenable

1) reduce corporate tax rate to zero

2) tax the everloving shit out of high earning individuals

if you get the shareholders instead of the corporations, corporates don't flee the country, and high earners can't either unless they renounce citizenship

How hard is it to change primary residence to influence tax jurisdiction? If corporate tax rates goes to 0, and changing your personal income tax locale is easy, that's a huge net negative for tax receipts.

Also, 0 corporate tax rate, especially if that's for multinationals, grossly hurts smaller businesses because they become less competitive.

Apr 6, 2021 - 3:59pm

How would that hurt smaller companies? There is no minimum size to a corporation. The smaller companies would just form as C corps. 

Array

Apr 7, 2021 - 2:07am

Purely political and it won't bring in a meaningful amount of revenue. Big businesses can easily pay or avoid the tax; small businesses will pay the full thing and continue to suffer. Just arranging the deck chairs on the Titanic.

Government no longer makes hard choices on what to spend money on; both parties are on the "Fed printer goes brrrrrr" level of discourse when in power. Amazingly, our deficits have purchased nothing permanent or sustainably good for our economy:

* little innovation

* no infrastructure (broadband/fiber, roads, airports, water, energy???)

* no investment in young people (every poor kid is behind by the time Kindergarten rolls around because their counterparts have attended 2-3 years of preschool or they had a stay-at-home parent to teach them... still no universal pre-k but government fine with spending $10k/year+ per public elementary student when they're already impossibly behind, and then loaning them $200k guaranteed for a useless degree and saddling them with debt)

Instead... the spending has gone to old people about to die (hooray, we vaccinated the octogenarians but can't get the economy started until the 20-50 year olds are vaccinated 2 months later), inefficient military spending (we can do better with less), and a shamefully wasteful healthcare system (nobody is happy with).

Base Erosion has been discussed for decades, and we are no closer right now than we were before. A higher tax rate doesn't preclude a country from offering incentives that will offset taxes, tariffs, real estate costs, etc. Countries will always compete for corporate investment and jobs. This is a bad move backward for the USA.

Be excellent to each other, and party on, dudes.
  • 3
Apr 7, 2021 - 11:42am

Wait, what? About which of the 10 assertions I made? Nordic countries are much more effective at enforcing taxation than the USA. We have unfortunately gutted the IRS here. Where do you live?

Be excellent to each other, and party on, dudes.
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