Google’s tax remains subject to much comment, thanks to Jesse Drucker who has taken the work I did on this issue so much further.
This is well worth reading.
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Surely, this is yet another example of the fact that:
1. There will always be rich individuals and institutions who will seek to minimise the impact of taxation, and will be able and willing to pay ‘financial engineers’ to help them.
2. There will always by ‘financial engineers’ who will be able and willing to seek out ways to re-engineer profits from high-tax regimes to low-tax regimes.
3. There will allways be tax regimes which have a relatively-low ‘natural’ tax base, who will therefore gain more by collecting a low rate of tax on ‘un-natural’ tax bases than they will lose by lowering the tax rate on their ‘natural’ tax base, and who will therefore offer a low tax rate to attract ‘un-natural’ tax bases.
The result is a race to the bottom in rates of tax on capital gains, profits, other un-earned income, and super-normal earned income; to the point where all such taxes in every tax regime are taxed at a lower rate than normal earned income. The hidden majority of the damage caused by ‘low-tax regimes’ is not the (disgraceful) level of tax lost on the tax bases diverted through them, but the far greater level of tax lost on the tax bases not diverted through them but under-taxed as a defensive measure.
Surely, the implication is clear. The’solution’ must include a global minimum rate of tax on capital gains, profits, other un-earned income, and super-normal earned income. A ‘solution’ without that will always be ‘not fit for purpose’.