Are you paying 5+ digits tax and in the process of moving ? Then yes you can get the same special treatment while paying fraction of what you used to pay.
> no other developed country in the world has a corporate tax system like the US.
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.
Its very high consumption tax. Effective, implementable but harder to get public support for. Cost of living (CoL) would rise. High corporate tax means high CoL. Every percentage increase will make it worse than last percentage. Wages would have to rise significantly. This will discourage business from moving to high-tax countries. People will likely move to low-tax countries.
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.
A reasonable effect is also companies moving around somewhat to get closer to business rather than close to low taxes.
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.
The US->Ireland->EU thing is exactly what's going on now, and exactly what proposals like this are trying to address.
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%.
But you are not increasing prices. Taxes gets passed on to consumers because companies do not take hit on profit margin just because of different tax rates.
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.
Thats easy to avoid. US Co will sell to Ireland Co which in turn will sell in UK/France. Since Ireland legally allows to go profit as low as 0.05%. UK/France is not getting much.
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 ?
In my understanding what you are saying is, a country will tax profit on revenue generating from its own territory by its own tax rate.
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%.
But what do you mean by "leaving a market" ? MNCs have been doing restructring for decades for reasons ranging from regulations to taxes.
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.
Is there a reason to not go BVI/Nevis IBC route for a small online startup ? The no accounting/record-keeping requirement should look appealing to many, beside 0% tax :).