Pages

Pages

Wednesday, December 13, 2017

The Guardian: Rita de la Feria - There’s a simple way to stop big corporations avoiding tax. Here’s how

If multinationals had to pay their dues where they make their sales, the kind of activities revealed in the Paradise Papers would be a thing of the past


Companies can set up their headquarters in tax havens and then they become difficult to tax, also, countries end up competing with each other to offer the lowest taxes to attract companies, but in 2008 two professors suggested a solution, impose a type of sales tax on the products sold in a country related to the profit the companies make. It might put the price of products up a bit, but, hopefully, competition will bring them down again. 

In our globalised economy, where production chains are spread across the world and highly movable, it is difficult to determine under existing rules where and how the profits of big firms should be taxed. In effect, we can no longer properly identify the countries that have both the legitimacy and ability to tax those profits.

There is therefore only one long-term means of effectively taxing corporations: we must remove the incentives to corporate mobility for tax reasons. How to achieve that is the key question. For years, people have advocated the introduction of a common method of taxing corporations – but political agreement, even within Europe, has proved exceptionally difficult. The likelihood of achieving that global agreement seems extremely low.
In 2008 a paper by professors Michael Devereux at Oxford University, Alan Auerbach at the University of California, Berkeley, and Helen Simpson at Bristol University came up with a new solution: what if we taxed profits in the country where the customers are? Their idea was to tax corporations at the least movable point of the production chain, at a point that corporations could not shift or manipulate.
The most common tax avoidance techniques rely on one crucial premise: that moving your headquarters or activities will affect where profits are taxed. If your patents are located in a country with lower corporate income tax rates, then the income they generate will be taxed at lower rates; if your management activities are located in that country, most of your profits may be taxed there. What these avoidance schemes have in common is their reliance on mobility: moving can result in a lower tax bill.
If we taxed at the destination, or sales endpoint, there would be no benefit in moving headquarters or patent registrations to a lower-tax country. Because customers are relatively immobile, a destination-based tax would remove mobility from the equation. At a single stroke, we could almost completely eliminate tax competition and avoidance. Crucially, although international cooperation would make that more effective, it could still work if only one country unilaterally moved towards a destination-based corporate income tax.
 

9 comments:

  1. OT:

    Kaivey, the Hague judge's name was Carla Something-or-Other. Can remember the name of the book or the date she published it. If I do, will tell you here.

    ReplyDelete
  2. Hah! Carla del Ponte. Google her. She was chief prosecutor too.

    ReplyDelete
  3. See...here's one article about her from 2001 that you can skim. https://www.theguardian.com/world/2001/mar/04/warcrimes.comment

    She completely changed her mind about Milosevic 7 or 8 years later (don't hold me to these dates), wrote a book about it, and had to escape from Europe because of it.

    ReplyDelete
  4. Replies
    1. This comment has been removed by the author.

      Delete
    2. What I have been reading is outrageous, there was a whole load of organised crime involved with the war. It made me feel sick. I will do more research on it. I got this from Wikipedia -

      The Kosovo Liberation Army (abbreviated KLA; Albanian: Ushtria Çlirimtare e Kosovës—UÇK) was an ethnic-Albanian paramilitary organisation that sought the separation of Kosovo from the Federal Republic of Yugoslavia (FRY) and Serbia during the 1990s and the eventual creation of a Greater Albania.[a] Its campaign against Yugoslav security forces, police, government officers and ethnic Serb villages precipitated a major crackdown by the Yugoslav military and Serb paramilitaries within Kosovo known as the Kosovo War of 1998–99. The KLA was largely funded by Albanian diaspora organizations and narcotics trafficking. NATO, headed by the United States, supported the KLA and intervened on its behalf in March 1999.

      Kosovo liberation Army was using "Narcoterrorism" for financing its op was erations.[11] There have been reports of abuses and war crimes committed by the KLA during and after the conflict, such as massacres of civilians and prison camps.[12] In April 2014, the Assembly of Kosovo considered and approved the establishment of a special court to try cases involving crimes and other serious abuses committed in 1999–2000 by members of the KLA.[13]

      Delete
    3. It's looks as if the US backed the wrong side.

      Delete
  5. Crikey! MRW, that's interesting, I'll look into it. I still have Jura's reply. I could send it to her.

    ReplyDelete
  6. It's looks as if the US backed the wrong side.

    It more than backed it. It created it, Kaivey.

    Few know the real story, and no one believes/d what really happened.

    What Clinton did was appalling. However, he was more concerned with staying out of jail as a prez and not getting impeached. So he let the CIA and rogue elements (including Madeleine Albright who was having an affair with the 29-year-old head of the KLA known as Snake Eyes, Snake Head, or something like that) absolutely bullshit the world at the time. To this day, Serbia still has all the bad press. I lost friends from not going along with the bullshit being sold to the USA.

    Oh don't start me on it. :-(

    ReplyDelete