You're understanding is outdated this mechanism is finished as of 2018.
https://en.wikipedia.org/wiki/Double_Irish_arrangement
However this article is a little biased -- it's main contributor is a user called "Britishfinance" -- who appears to be a London based corporate shill to take the heat off the City of London being a tax haven.
Like what do people think, some guy working in the City spent tons of time making extremely well sourced and well constructed articles just to... Divert some sort of "heat" from the entire London financial sector... On Wikipedia? Imo that's absurd, and it's very similar to the type of accusations people (pointing at the original reddit post that popularized the city shill theory) make whenever they find an article that bruises their nationalist ego.
Luxembourg, City of London, Liechtenstein, Monaco, Netherlands, Belgium, the Vatican, Switzerland (sort of), Malta, all for slightly different reasons. I've even read articles from these nations where they point out that the only way they'll ever distinguish themselves is with tax law. Or rather: that they'd be broke if they weren't tax havens.
And then we're remaining silent about "royal" tax havens that are individual companies which get preferential tax treatment from parliaments (e.g. Shell) and, uh, I guess "presidential" Total. These deals, for individual companies, are far more atrocious (and forced on tax departments) than any tax haven you'll find. They are directly enriching favored individuals in a particular country, and get tax advantaged for it.
And to add a more "creative" situation to terminate, Cyprus is a double tax haven (both the Greek and Turkish parts of the Island are tax havens, for different reasons, interesting for different types of individuals and/or companies, but the fact that money can cross the line, even if people cannot, offers interesting opportunities as well). Neither side of the Island will ever have anything to offer the world other than some small tourism industry, so ... for them as well being a tax haven is the only option (other than, I guess, war).
So what do you do about the problem that many of these countries have no real options other than being tax havens?
But to be clear my comment was really just about the specific wiki article he linked to and the weird rumours that spawned around it. Otherwise I usually don't even try to comment on anything related to economics or finance here on HN anymore, it's just not the... right platform for that Imo.
Nice catch. It could be a Russian bot or just Russian activity.
Will ‘Global Britain’ clamp down on money laundering?: Regulatory easing after Brexit risks attracting more dirty money to London
What exactly makes the City of London a tax haven? If anything, it is not a tax haven itself but a facilitator to set up structures in some Crown Dependencies.
But that makes it a financial and corporate service capital, not a tax haven (i.e., "a country or independent area where taxes are levied at a low rate")
Instead, ask yourself why you can move funds so easily across borders and decide whether allowing these capital flows is a good idea or not. The inevitable cost of allowing them is tax arbitrage but it’s not close to the biggest cost - financial instability, trade deficits, a shrinking middle class and deindustrialization are much bigger costs, and are equally inevitable once you allow these cross border capital flows.
Allowing cross-border flows of floating capital such as machines and commodity inputs and outputs should not be problematic if all new legal tender is initially placed into circulation through public local loans issued on security of the replacement cost of industrial fixed capital physically attached to domestic soil.
Conveyance of state enforced privilege such as deeds, titles, patents can also only be recorded between domestic residents and domestically chartered corporations liable for corporate tax. While these privileges provide security for capital investment they are not really capital themselves.
Allowing foreign investors to purchase shares of domestic corporations does not seem overly problematic as long any deeds, titles, patents held by corporations are directly taxed and there are some distributive offsets and deductions for domestic residents.
The perfect is the enemy of the good enough, we cannot craft a perfect tax solution, but we can make it better.
That's not what's going on here. In a fiat money world, money doesn't move out of a country, it is held in correspondent accounts. E.g. there is a bank account here with your name on it. When you think you are moving your money, you sell that bank account to foreigner, and now their name is on it. They sell a bank account in their native country to you. No money has moved in the course of this transaction, rather you have entered into an ongoing financial relationship in a foreign nation without being subject to that nations laws (beyond a bare minimum of requirements) or tax obligations. That is what "unfettered cross border capital flows refers to". It is not so much something that needs to be stopped as something that needs to be actively allowed, because you need an entire system of international investor rights and banks with pairwise correspondent accounts in both nations to make such an arrangement work. There is a massive infrastructure needed to support this illusion that you can "move" money from one country to another with the click of a link.
And this system didn't exist even 30 years ago, it's a new system.
The question is whether the benefits outweigh the costs. If you allow this you are going to have lots of problems with tax evasion. But I'm not sure what the real upside is here. The only purpose of these foreign capital inflows is to finance trade deficits, and that doesn't seem to be in our interest, either.
Moreover, what we dinged China for is not preventing capital outflows but preventing capital inflows, and we rightly pointed out that this forces trade surpluses, which is kinda the point (see my comment about "only purpose"). So of course China, which is interested in running surpluses rather than deficits, is going to block inflows. The question is why do we allow them?
Thus we are back to the unstable equilibrium of trying to get everyone to agree to maintain this vast international system but promise not to try to tweak it to their advantage. Well, China has pretty clearly demonstrated that it's not going to play along -- neither is Korea or Taiwan, for that matter, so why are we still pretending the unstable equilibrium -- this dream of converting a world with sovereign fiat currencies into one that looks like the old specie flow model -- is a thing that can exist?
The only reason is because for a lot of influential people, these capital inflows are highly profitable -- e.g. for those who can skim a little off the top. Just like Bermuda's tax laws are beneficial to financial advisors and bank staff in Bermuda. But let's not let this minority set the overall national policy: yes, these capital inflows benefit the US financial sector, as US banks can now charge fees to customers all over the world who want to maintain accounts in the U.S, but they do not benefit the US economy nor the US tax base.
I recall a US presidential candidate in the most recent election cycle mentioning this as the solution to the current corporate tax avoidance problem. In fact it was a major part of his campaign.
I am not very knowledgeable of the downsides of a VAT approach and how it could be gamed, but what he seemed to say did make sense to me. The idea was to tax the value created in the location it was created. I suppose the way you could game that system was to somehow show that no (or very little) value was created in the US?
Would moving to taking a small percentage of revenue solve this? A federal sales tax that is included in the price of products that cannot be avoided. Sure the argument against this may be that they will just pass the increased costs down to the consumer, but why wouldn't the same would happen if the corporations start having to pay more taxes in general .. whether on their profits or on something else?
But note that in the EU we do have VAT, and the governments are still (pretending to be) looking for ways to curb "tax optimization".
We just need to only record and recognize conveyance of deeds, titles, patents between domestic residents and domestically chartered corporations and eliminate deductions, depreciation, expensing for intangibles.
Federal income tax does not allow depreciation of land, IP and enclosures of ideas should be treated similar to land.
If your competitors are using these loopholes, you have to as well.
It’s the individuals that shield their wealth by using international corporations that stand to lose the most.
But, even if so, CEOs/board members are often those high net worth individuals. So there's a potential conflict of interest that isn't resolvable.
This explains why corporations will lobby against a minimum tax, even if the institution doesn't ultimately care.
Raising taxes on your profits is surely not in the interest of your shareholders.
It doesn't matter if it isn't worse for you competitively. It's worse for your profits.
If you could have more competition AND more profits, you would want that.
There's absolutely nothing in most jurisdictions that require corporations do seek to maximise value without other considerations and at all cost.
Even if that was the case what "maximizes shareholder value" is highly subjective and/or hard to assess objectively in most cases.
E.g. if you believe (whether true or not) that equalising corporation tax would benefit the finances of your customers (maybe your customers are mostly small cap domestic companies that are damaged by competition with large multinationals that can afford tax sheltering; or maybe you think making such tax sheltering impossible will encourage companies with large cash hoards abroad to actually start spending, since paying tax on the profits means even low returns from reinvesting in expansion will suddenly be relatively more attractive than it used to be), then you might well have a reasonably held belief that such a tax would benefit your company.
I understand this statement to mean "Corporations have a fiduciary obligation to maximize shareholder value [within the law]".
Do corporations have a fiduciary obligation to change the law, as in your interpretation?
A lot of laws are essentially written by corporations for corporations.
Certainly that won't ever be abused to screw over one company and benefit another for political purposes, right?
And, seemingly, a tax authority (the IRS) would be better equipped to calculate these amounts anyway.
Nope. A blanket tariff that applies to everything equally.
No one, including tax lawyers, will tell you with a straight face that this is the way things were expected/designed to work. All of these tax avoidance strategies are emergent properties of complex systems that are the result of uncoordinated action amongst individual actors that cannot be fixed without collective organization. I support this and 15% seems reasonable to me.