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As far as I am aware the USA taxes US companies on their foreign earnings regardless of what "local" taxes they have paid in foreign markets like Ireland.  They can do this because they are the dominant imperial power and no major US corporation can afford to be shut out of the US market.

There is a logic to arguing that if you want to trade freely within a common market and political Union, then you should pay the same taxes regardless of where you are incorporated within that Union.

However, as my diary seeks to illustrate, you cannot make this case in the abstract - a lot of other taxes and supports operate at national levels and impact on corporate costs and location decisions.  Ireland has done a good job of "marketing" its low headline corporate tax rate to multinationals etc., but in practice Holland has just as low an effective corporate tax rate.

So my argument would be that we need to consider harmonising not just corporate tax rates, but VAT rates, and that local rates and services charged should reflect the actual cost and value of services rendered and not some arbitrary and capricious imposition as is often currently the case in Ireland.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Feb 11th, 2011 at 08:01:39 AM EST
[ Parent ]
Small quibble Frank, might need checking. I think US corporations can deduct local taxes, but i'm not certain. What i do remember is some very convoluted arguments being made about taxing international income in California.

"Life shrinks or expands in proportion to one's courage." - Anas Nin
by Crazy Horse on Fri Feb 11th, 2011 at 10:04:27 AM EST
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Point taken.  I have read contradictory reports on this - on the one hand that US Governments are taxed on their oversees earnings - but then it hardly makes them to locate in "low tax" locations if they are going to be taxed on the difference anyway.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Feb 11th, 2011 at 12:23:01 PM EST
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US individuals are taxed on their overseas earnings, which is somewhat unusual. I think this is what you refer to.

AFAIK, there is nothing particularly unusual about the American stance on corporate taxes (except that it may be slightly more offshoring-friendly than in the rest of the OECD).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 16th, 2011 at 11:50:52 AM EST
[ Parent ]
Local taxes are deductible in countries that have a tax treaty with the US. Which is most countries that aren't glorified money laundering scams.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 16th, 2011 at 11:47:55 AM EST
[ Parent ]
without industrial policy

(I mean, logically you can't. In the real world, you can, of course... just like you can have a single currency without economic government... [but the consequences will kill you])

... But anyway, the point I wanted to make is this: if you unify European taxation, that does NOT necessarily imply uniform tax rates.

It would be absolutely logical that "peripheral", or "developing", economies should have lower company tax rates than the "powerhouse" economies. Not as a matter of undercutting each other, but as a matter of industrial policy.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Fri Feb 11th, 2011 at 11:11:16 AM EST
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I would support the harmonisation of tax systems, but not tax rates.  I.e. common accountancy standards, common definitions of "profits", common definitions of write-offs - e.g. for R&D - so that companies locating in the EU can use the same accountancy systems to settle their tax liabilities in all Members states - even if (e.g.) Germany charges 30% and Ireland 15% on a common definition of what the taxable income is, and which income arises in Germany and which in Ireland.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Feb 11th, 2011 at 12:27:54 PM EST
[ Parent ]
If we get a definition of which income arises where and tax it where arise, then I think the problem is solved and where headquarters are will be a question of building an efficient headquarter, not dodging taxes. Then corporate taxes could very well be different in different countries.

If we do not get such a definition, my suggestion would be a federal corporate tax, the money from which (actually not really, but similar amount) is handed out equally to the citizens of EU. This would always benefit the poorer members (as 100 euros in Roumania buys more then 100 euros in France), while making sure corporate tax can not be dodged.

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by A swedish kind of death on Sat Feb 12th, 2011 at 07:33:36 PM EST
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