That doesn't seem fair to the smaller (sovereign) countries who want to set their own tax laws to incentivize companies to do business there. In fact, it seems fundamentally outrageous that one country should be able to dictate anything about tax laws in another country. Wars have been fought over such abuses of power.
> "We're working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom."
The race to the bottom Yellen refers to is corporations playing one country off another, as in "lower your taxes or we'll move our profits to Ireland." The proposed solution - countries agreeing with each other not to lower the corporate tax rate below some limit - is an example of sovereign nations working together in a way that benefits both sides, not one sovereign nation dictating policy to another.
I don't think it's fair to assume harmonized tax rates are mutually beneficial. Taking Ireland as an example, how many of the companies that shifted profits there for favorable tax treatment would continue to do that if they had to pay the same as they would in the US? My guess is relatively few would remain. So Ireland would likely lose revenue without that discount as an incentive drawing in these companies.
Without a harmonized tax, Ireland could also lose all of its corporate tax receipts to some other country that's willing to stoop even lower.
More generally, this is a variant of a mutual coordination problem in game theory, in which it is everyone's interest for everyone to cooperate, but in each individual's interest to be the only party that doesn't cooperate. Those are notoriously tricky to induce/enforce agreement on, but it has been done.
So it is fair that one tiny country sets a near-zero capital tax, and enjoy free trade of food and services with all the big countries around it. Any corporation would move to the tiny country, of course, where nothing happens except tax and accounting.
You're confused about the incentives here, I think. Traditionally the conflict in this space has been smaller nations wanting to tax economic activity within their borders (by larger multinational corporations) and being prevented from doing so by coercive foreign policy. You really think that Ecuador or wherever wouldn't like a bigger cut of the oil they're shipping out?
The news here is that US policy seems to be moving to align with smaller powers, not the reverse.
No... countries like Ireland explicitly set lower tax rates to attract companies to open HQ there. You think Apple has an HQ in Ireland just because they like the whiskey?
But it’s not global it’s whoever the allies are, which I guess is OECD and co. They’re just trying to avoid having companies move (tax jurisdiction shopping) and do reverse mergers to shirk tax responsibilities, etc.
I presume it would be via some convention which allows tit for tat reciprocity and so on.
Panama has full right to set its own tax rates. Developed countries have full right to deny Panama's corporations from entering their markets, and even forbid their own corporations from dealing with their Panama counterparts.
Or, more realistically, the developed countries will pull any of the dozens of levers to make non-cooperative countries' life miserable.
Yes, as long as Panama wants to continue doing business with the US. Guess what, most companies that are incorporated in a tax heaven do nothing there except tax and accounting, so they will pressure Panama to agree to the US' demands so they can keep enjoying their privileges.
It's not about rights, it's about ability. If Panama wants to trade with the US or it's vassals, it will do what the US says. China doesn't have to listen to the US, if Panama wants to defy Yellen, it can deal with China - although China may not see Panama as worth it, I don't think that tax breaks are an export that China is desperate for.
edit: think of it like this - you have the "right" to eat meat. But if I refuse to be friends with people who eat meat and you need my friendship, you can't eat meat.
I don't think it's valid to say that the parent has misunderstood how the world works without saying what you believe that misunderstanding to be. It seems perfectly logical to think that a corporation would be attracted to places with lower corporate tax rates to use as a tax shelter.
