from Hacker News

US tech firms make eleventh-hour attempt to halt tax avoidance reforms

by tomgallard on 1/20/14, 7:23 AM with 53 comments

• by netcan on 1/20/14, 10:50 AM

  Since this became such a public debate issue in Europe, I've actually more or less landed on the idea that maybe corporate taxes (taxing profits) are a lost battle. The only way to really combat it is for different countries to collude and perhaps sanction tax havens. Even then, I doubt they will be able to raise much tax.

  Modern tax systems are diverse by design: sales tax/VAT. Excise/sin taxes, income taxes, CGT, employer taxes, etc. The mix is designed to reduce volatility. It's also designed to max out tax revenue while avoid damaging the economy by discouraging things like labour, savings, or other important activities too much. The effective maximum revenue for a country to collect in taxes appears to be somewhere in the 35%-45% of GDP range. After that diminishing returns on taxes kick in. Most euro countries are taxing (or rather spending) near that max. So, they can't afford to let corporate taxes.

  Problem is that corporate tax is unavoidably problematic. Large multinationals can arrange their activities (not just their paperwork) depending on taxes. I doubt an single country want to create a tax the ensures large companies avoid setting up local subsidiaries within their borders. The end result is a different set of rules for the large and/or sophisticated that is more lenient than the rules on small companies.

  Personally, I would rather see corporate tax abolished than see it applied in such a way that it discriminates against small companies.

• by benpbenp on 1/20/14, 10:16 AM

  Wealth is meant for people. All of a company's wealth is ultimately destined for somebody's pocket. Why can't we just tax it when it gets there, and abolish corporate taxes?

  Naturally I'd assume in that case that dividends would be taxed at the same rate as earned income, and that both would have to rise somewhat at the higher brackets to cover the lost income. But given that is the case, I honestly don't see any downside. Can anyone help?

• by mercurial on 1/20/14, 9:46 AM

  > Suggesting that any leakage of tax revenues flowing from the complex corporate structures of digital groups is merely coincidental, the Digital Economy Group says: "Enterprises that employ digital communications models do not organise their business operations differently as a legal or tax matter."

  Hell of a coincidence, mate. They're incorporated in Ireland purely by accident, they would never threaten to leave at the slightest mention of "corporate tax increase", and what they really wanted to do all along was to move to the Scandinavian countries. They should all band together and get a stand-up comedy act going.

• by adaml_623 on 1/20/14, 9:17 AM

  Society has decided that companies should pay a corporate tax rates of 20% (UK), 35% (US), etc on profits.

  Finally governments have noticed that these companies are shuffling money around (between countries normally) and are not paying anywhere close to those rates.

  It's very sad that these companies do have a slim chance of fighting this kind of reform. Ideally they should just pull their heads in and concentrate on building wealth under a new slightly more sensible tax regime.

• by Claudus on 1/20/14, 10:14 AM

  Personally, I'd rather that Google keep as much of their money as possible and continue to spend it as they see fit.

  I believe that society benefits far more from a company like Google having and spending the money than any federal government.

• by SilkRoadie on 1/20/14, 12:05 PM

  > In the UK many leading retail groups have called for reform, highlighting what they see as unfair tax advantages afforded to multinationals such as Amazon by outdated tax treaties.

  Currently Amazon pay very little corporation tax in many of the countries they operate in which gives them an unfair tax advange against local competition. This allows them to set lower prices and trade more efficently..

  In Amazon's case it would seem like closing some tax loop holes to get them to pay their share would help level the playing field and potentially increase competition between Amazon and regional stores. This can only be a good thing.

  The one worry though would be how changing the tax system would affect smaller tech companies. Companies which serve multiple countries with low staff could be caught out by increased tax or just technical / accounting costs if you suddenly need to track and file taxes for every country you have customers in.

• by doctorwho on 1/20/14, 4:03 PM

  Just waiting for the founding of "Techlandia" where a big corporation (or several) form their own country and abolish all tax laws. Maybe they buy up some land, maybe they sponsor a country in trouble and take it over. As their own country they would make all the rules. All their employees live in Techlandia and pay no income tax. No more annual filings. No more tax audits. No more whiny politicians coming with their hands out. All infrastructure costs: roads, power, water, sewage and possibly even housing are borne by the corporations for their employees (who live there). They have their own national bank and keep ALL of their profits. Workers retire with huge cash hoards and live wherever the hell they please, like kings.

• by dmk23 on 1/20/14, 8:37 AM

  Let's call these "reforms" for what they are - a shameless and unjustified money grab by the government.