ringtail
Hows that state aid ?
Are you sure ? Most of the developed world tax resident individuals and corporates on worldwide income. US is only unique in taxing non-resident individuals. Very few developed nations have territorial taxation such as HK, SGP and Panama.
I can't see how it would be a net negative for those countries that would get a nonzero corporate tax from megacorps that today contribute around zero. Even with price increases, the net effect seems like it would be positive
Because countries are not getting new money. Old money is just cycling between govt and people.
Why ? The payroll will increase even if profit remains the same.
The losers in the above scenario is the Irish because they'd see increased prices, lost jobs, and potentially raised taxes to offset lost corporate tax revenue.
I doubt it. Consumption tax are never popular. Instead of businesses, the people at large might migrate to Ireland for significantly low cost of living.
Thats why gave this example to show that it does not work as profit remains the same.
Lets assume there is no US Co. Ireland Co is parent company and its only doing business in EU. Then either Ireland [1] allows low tax rates to attract business in which case profit is low and thus UK/France share is low. Or Ireland is high-tax, then business move to another low-tax in EU.
This only work if there is single tax rate in EU. But if there is single tax rate, then why even go this complicated tax calculation route.
[1] Estonia (and in near future Latvia) does not tax untill profit distribution, reducing effective tax rate to 0%.
So lets assume €10M is the already inflated ammount to accommodate for Ireland/Sweden share. Then only (€3.12m, €5.25) was needed from (Sweden, Ireland) if taxes were zero. €3.12m + €5.25m = €8.37m. €163k (€10m - €8.37) went to Govts. Then consumption taxes would be (28.2%, 14.2%) for (Sweden, Ireland). Swedese are paying (.282-.142)/(1+.142) = 16.3% more than Irish for same product.
You can calculate all these from equation in my comment before. I write here again,
R'(1-T) = R
whereas T is tax rates. R' is inflated revenue. R is zerotax revenue.
Also when US says 20%. It means US gets £100. US aint the sharing type :p.
How would this even work with territorial taxation countries such as Singapore/Hong Kong ?
For the sake of simplicity, assume 100% profit margin. Let R and R' be revenue generating without and with such tax law. Let T be tax rate.
So a company was hoping R into its bank account. But with the new taxes it would be (R - RT). Naturally the company would just increase the revenue to R' (by increasing prices) where it would give R'T to Govt and keep (R' - R'T).
R'(1 - T) = R
R' = R/(1-T)
Actually I underestimated new tax, for T=33% it would be 49.25%.
How would EU calculate profit share between US R&D and Ireland R&D ? Even if EU do tax R&D, exodus of talent will be just 2x salary increase away.
If Google do leave EU, all it will do is legal maneuvering. Nothing will change for EU consumers. They can still do Google searches and buy ads. Profit will stay the same.
In other words, you are saying EU can deny its citizens right to buy foreign products ?
> Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason.
Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries.
> doing it right also requires a great deal of additional paperwork (+ extra overhead expenses)
Any estimate ?
This is very informative. Thank You.