Once they have set up a UK subsidiary then they will need to pay a corporation tax based on their total UK sales - UK costs. Sales are sales to the UK; any sales made to other countries, then no tax needed as those countries might (and probably should) have their own tax schemes. Costs would be employee costs, payments made to other UK companies such as an advertising agency or truck leasing and any other taxes they have to pay like rates or VAT.
Import more (including IP) and you pay more tax unless you also increase your UK costs.
Does a corporation want to sell their products and services in country X? Very well, they must agree to the following regulation. The country X reserves an option to, at any point in time, buy up any subsidiaries or parts of the corporation, for value based on generally accepted accounting principles (GAAP). For example, if the accounting profit of Microsoft Germany is $0 over the past decade, the country has an option to purchase Microsoft Germany for its fair GAAP price - $0. After doing this, the country also has an option to reverse the trades the subsidiary has done. So, if Microsoft Germany sold its IP to Microsoft Ireland for the total value of $100, the country X can buy it back for $100. Repeat with Microsoft US, Microsoft UK, etc. The shareholders will be left with their extremely valuable (according to GAAP) Microsoft Ireland and Microsoft Singapore.
Any sufficiently large country with sufficiently motivated government can pull this off. No revolutionary overhaul of the existing tax system is necessary. The regulation is clear and fair. But again, it's never gonna happen.
The sanctions can also be used against the shareholders and executives of the companies taking advantage of these situations.
And use some protectionist measures to help grow national industry - see Baidu, Yandex, etc.
You require them to play along, you sanction them if they don't, and you penalize anybody locally who does any business with the companies who are 'based' there.
The EU maintains a current list of "non-cooperative tax jurisdictions", and applies these kind of rules today: https://en.wikipedia.org/wiki/European_Union_tax_haven_black....
If the global tax changes being discussed come to fruition, I'd expect that list to extend and the penalities involve to tighten up a whole lot further.
Basically you could just penalize and persecute companies that funnel their profits to small tax-haven countries with little or no employees but excessive profits and hence, are considered avoiding taxes. The general gist of it is that since there is no penalty they lose nothing currently except small reputational damage. It's definitely a solvable problem but one needs a consensus to enforce it across the borders.
Some ideas seemed a bit unlikely, but overall great refreshing read in my opinion.
Then it's a consumption tax (aka sales tax), which we already have and is generally regressive.
And whichever country that happens to be at the moment gains nothing other than a shell company with zero employees.
Companies will just continue to flee to whatever country is now offering 0%. Christmas Island has a new 0% corporate tax policy? Let's go buy a mailbox there and move our "headquarters".
The old-school thinking is that low corporate tax policies encourage business, creating jobs in the process and boosting that country's economy. In the real world it's a shell company with zero employees that pays that country zero in taxes.
This push for a global minimum tax is interesting, and obviously scares the hell out of a lot of conservatives and others who want nothing to do with "global" anything. Also, how would that even work? Countries would simply not agree to play along, no?
The only thing I can think is that this entire thing has to be flipped into some sort of "VAT"/usage situation.
So if a US company is using Microsoft Azure and pays them $1 million annually to do this, Microsoft has to pay US taxes on that $1 million. Track where the customer is based and pay tax based on that countries tax policy.
I'm clearly no tax person, so my ideas mean nothing. But I've put a lot of thought into this "race to the bottom" and it's difficult to come up with a solution.