$COMPANY is $COMPANY all around the world and if $COMPANY wants to do business in $COUNTRY (which is not an obligation, they choose to), then yes, they have to entirely cooperate with $COUNTRY.

If they don’t want to, they can still do business elsewhere.

This is the thing which is not the case. The subsidiary in the US is nearly always a different company than the one(s) in Europe. They'll have different management and different lawyers etc. Sometimes they even have different owners, e.g. because one of them is a joint venture with some other company, or a franchise. And they have to be different, because different countries have different laws and those laws often conflict with each other. So the subsidiary in the US follows US law and the one in France follows the law in France.

You could try to make it otherwise, but it's pretty obvious what would happen then. Companies couldn't formally operate in multiple countries because their laws are incompatible, so instead there would be a straw front company in any given country that nominally isn't owned by the conglomerate, but is effectively just reselling their product/service in that country for an additional margin that only pays the salary of local management. To prevent this you would have to ban companies from having foreign suppliers, which is not very practical.

And since countries know that's what would happen, they allow foreign subsidiaries to be regarded as separate entities even if they have shared ownership, instead of demanding the charade.

Well Netflix is nice and all but I prefer social security and teachers in school.

https://fred.stlouisfed.org/series/FYFRGDA188S

Basically flat since the end of WWII, significantly lower before the war. At the height of the New Deal, less than half of what it is now. And that's in the face of significant growth in real GDP per capita. Probably not a dissimilar story in most other Western countries.

The problem isn't in the amount of taxes being collected, it's in how the money is being spent.