When the list gets too long to count, will we finally come to see that tax dodging is in the fabric of the income tax as practiced by most countries today? It is structured, systemic, and by design, not a loophole, not a bug. It is the dominant culture. Probably it is destroying the income tax for all intents and purposes.
According to Victoria at Franco American Flophouse we better ad Google to the tax dodger ledger too if we hadn't.
ReplyDeletehttp://thefranco-americanflophouse.blogspot.com/2012/10/google-and-french-fisc.html
I think you are very right we need to have a conversation about the future of the income tax before it goes the way of Canadian Manufacturers Sales Tax and no this isn't an Obama vs Romney issue. While Obama has promised certain changes(or more like reversions) to personal income tax policy such as allowing the Bush rates to expire he has promised no real change on the corporate side and in fact his officials on several occasions have defended the longstanding OECD(really US behind the scenes)rules on Transfer Pricing. Another tax blogger named Phil Hodgen actually did an interesting post on the historical history of deferment and transfer pricing.
http://hodgen.com/apple-cash-tax-policy/
Interesting selected comments from Phil:
Periodically Congress wakes up and sees the problem. Laws are proposed to provide a temporary tax loophole for U.S. corporations to bring their foreign profits back to the United States. Here’s recent example.
That’s dumb.
The better solution would be a wholesale re-architecture of the Internal Revenue Code. That’s a topic for another blog post sometime.
I would just point out, however, that the current Internal Revenue Code we have has its intellectual underpinnings in brains that hearken back to the Civil War. Our current version of the Internal Revenue Code is the 1986 Code. It is largely a creature of the Internal Revenue Code of 1954. The Chairman of the House Ways & Means Committee from 1933 until 1953 (except for a two year stretch) was Robert L. Doughton. He was born in 1863 and his father was a Captain in the Confederate Army.
Imagine what international commerce looked like to someone born in 1863. When Robert Doughton was working on tax laws in the 1930s, 1940s, and 1950s, all of which culminated in the 1954 Code, what did his world look like? His childhood knew of steam ships. The telegraph. Horses as transportation. From brains like these grew our current international tax rules.
Another major slice of the U.S. international tax law came into place in 1960. What was the world like then? People in Congress in 1960 would have been born in the early (20th) Century. What biases and understanding did they bring to the table about America’s place in international commerce?
Life moves fast. You Don’t Live in the World You Were Born Into. But to a surprisingly large extent, Apple Inc.’s current business strategies are driven by tax policies from the brain of a man born in 1863 to a Confederate Army veteran. Funny, that.
A few more comments:
ReplyDeleteOne way to mitigate this is of course country by counry reporting(something that kind of already exists in Canada on a province by province basis). I have a feeling though country by country reporting is the great holy grail of international tax law that will never come to be. For one thing province by province reporting in Canada is a result of the Federal Government in Canada taking over the entire income tax system during World War Two and then later devolving some control of rates back to the provinces in peace time(while maintaining a central collection mechanism for all but two provinces). I just don't see soveriegn nations giving up any type of taxing authority to some international body.
Oh yes, Google is definitely on the ledger and with a prominent spot!
ReplyDeleteI am becoming increasingly convinced that though we continue to call what we are doing "income" taxation, it only barely matches that description. I'm working on a paper on the topic and will post on it sooner or later. Your point about the designers of the various elements of our regime, how they must have seen the world, and how we see the world today, is only too true.
But I'll disagree a bit on CBCR. You don't have to cede the authority to tax to an international body in order to achieve that. You (the state) only need to (1) collect the necessary information yourself and (2) make it publicly available so every one can see it, including foreign governments. Countries fail so spectacularly enough on doing (1) that it is no wonder (2) seems impossibly far fetched.
This is not a matter of ceding authority. Quite the opposite, it is a matter of seizing authority--the authority to demand worldwide information in respect of companies connected to your state. What any one state does with the information will depend on the domestic political pressure that comes to bear as the consequences of the many oddities of "income" taxation are brought to light.