The EU allows for free cross boarder trade and movement of assets within the EU. Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there. It's an automatic incentive.
There are rules here because otherwise it would be a race to the bottom. Each country wants Amazon, Google, etc for their employees' income tax.
The whole EU loses out from one state giving multinationals preferential treatment.
>> Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there
I'm not sure this is true any more, at least not everywhere
"Amazon has become the first technology company to abandon controversial corporate structures that divert sales and profits away from UK in the face of a clampdown imposed by George Osborne.
From the start of [May 2015] the online retailer has started booking its sales through the UK, meaning resulting profits will be taxed by HMRC [the UK tax authority]. The group made $8.3bn (£5.3bn) of worldwide sales from British online shoppers but for 11 years all these internet transactions have been booked in Luxembourg."
Amazon and Apple have both been bitten by EU states offering illegally disproportionate "deals" to individual companies. These were deemed to be state aid by the EU and each member state (Luxembourg and Ireland respectively) were required to charge back-tax to correct the tax situations.
But there are still lower tax areas. This is still an issue that is not simple to unravel because flat tax was not a founding part of the EU, something we figured out after the fact.
Amazon, Ebay, and Google all put the vast majority of their earnings through secondary states within the EU, not the main markets. I'm not sure what Apple do these days, but they've just paid a couple of ~£200m in extra tax found from an audit. The others "claim" they are going to rectify this, but it's all face-saving. They're all lying tax cheats.
I meant to also point out that they said this in 2015 but from my reading of my invoices, and their various Companies House filings, Amazon EU Sarl is still the entity trading in the UK.
Their UK businesses are tiny. Warehousing and marketing.
Some people seem to assume that high corporate income tax rates are a good thing, but there's really no proof of that. We would all be better off if every country eliminated corporate income taxes entirely, and made the change revenue neutral by increasing taxes on high income investors and employees. This would encourage economic growth by eliminating resources wasted on tax accounting and avoidance.
Zero Corporation Tax allows multinationals to make huge profits and just chuck the money back home, even if that's outside the Union. Yeah, they're probably paying tax on it somewhere, but it's not taxed in the place it was earned. That's the problem here. Countries are losing cash and tax revenue to this.
Your trickle-down economics is similarly unproven.
I think the idea is that governments should tax things which aren’t as mobile (personal incomes, land, consumption etc) in order to minimise the distorting effects on the market tax can otherwise have. There are positives and negatives to that but it’s not totally obviously bad.
They don't. What Ireland has signed on, is that, just as in any EU country, the corporate tax must be equal for all. National or local governments cannot negotiate deals with specific companies. This is a promise they have broken, and the cause of all the noise about Irish tax.
Seeing so many people discussing this under wrong assumptions, even on HN, makes me sad and makes me think there's a very low ceiling on tax complexity, above which people lose track completely. This means we'll never be able to fix tax. Only tax lawyers will ever even begin to grasp it. It's also a pretty good argument against direct democracy as well as an argument for abolishing the corporate tax completely.
These conclusions are only yours. One could argue that although the ceiling could be pretty low, it's not something that is set in stone.
Besides, it's not like your alternative is any more appealing anyway. I'm not so sure about the absolutism of saying "oh, it's not perfect, so let's just abolish it completely to make sure countries get even less to subsidize healthcare and education".
Before implicitly calling other people braindead next time, maybe consider that none of us are 100% right and we are all just having a discussion.
Ireland's corporation tax rate is purely an internal matter, even in the single market. In fact, Ireland rejected by referendum the Lisbon Treaty in 2008, and only voted for it the following year after a series of clauses known as the Irish Guarantees were added. One of those guarantees is:
> Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or
operation of the competence of the European Union in relation to taxation.
It's legally binding, and ensures that Ireland retained the right to set our its corporation tax rate.
All the other EU nations at the time (some have joined since) unanimously ratified the Irish Guarantees, so if anything, it's rich of them to now complain about an agreement that they willingly and knowingly signed up to.
Because it's in all these countries interest to avoid a race-to-the-bottom and being played against each other by companies that only need to move a mailbox to change jurisdictions.
For examples of the same mechanism: Amazon's HQ2 farce aptly shows what happens when jurisdictions cannot effectively coordinate and are forced undercut each other. Is there any doubt that Amazon would settle in some city and hire people and pay taxes without their little version of Hunger Games? So the net effect is simply some city being marginally better of but forgoing the jackpot that would usually come with being chosen, and therefore those citizens having to pay instead.
Plus the harm that comes from Amazon making decisions based on money alone, to the detriment of other factors such as quality-of-life for its employees.
That's why any trade deal includes provisions prohibiting subsidies not covered by a few narrow exemptions: they distort the competition and simply lead to losses in a zero-sum game between nations and private corporations.
This should help explain Brexit a little better. The EU is about giving up sovereignty. It may or may not be a fair trade depending on your POV. But people talk about it like the EU is a no brainer by looking only at economic grounds.
For me, the whole aspect on which the EU is a no-brainer is peace, and leverage against powerful lunatics and maniacs, like Trump and Putin. Which is precisely why the latter is hell-bent on dismantling it.
Was it wrong for the parliamentarians to fight the royalists in the first English civil war? Many lives were lost but the foundations of democracy were set and the monarchy weakened. The pragmatic view would have been to maintain the status quo that had worked for hundreds of years rather than the uncertainty of war.
Every person has their breaking point where mere pragmatism no longer holds sway. Peace, but at what cost?
To be honest, it's not about what people value. It's about what we have in practice. There hasn't been a war between EU countries for a while now, and that's something that I appreciate, given our history. Sure, you could argue that nuclear dissuasion is the reason why, but we don't even have any kind of cold war going on either, and I think the EU is to thank for that.
What's really good is that this creates a system where it's not only nonexistent, but it's also not even possible at all. It's like what Typescript/a linter does to Javascript: the EU greatly discourages entire classes of problems threatening the life/well-being of its citizens.
The leverage against foreign countries is a real pragmatic thing, though, not some ideology. Why else do you think Trump celebrated Brexit, and actively tries to break up different unions that we've spent years building, like NATO? I'm not saying that he's the devil, even though I'm not a big fan, but I understand that he's doing it to have his way with less opposition. Divide and conquer?
Because they are a member of the EU, a trade union that evolved into much more. They can choose to leave and also lose all their tech HQs that are only located there because Ireland is part of the EU.
But it does provide for rather strict limits on subsidies, and a subsidy is indistinguishable (or, actually, defined as, among other things) making one-off tax deals with individual companies.
