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Comment by throwawaysea | Hacker News Reader

Why would smaller countries who are looking for a competitive edge to attract business ever agree to this? It seems like this is really just in the interest of the US and other big incumbents that rely on large tax revenue already. But even within that group, enforcing such a minimum really has the effect of cementing the incumbents' hold on economic power. So why would any nations other than the US agree to this, when others stand to benefit by gaining economically at the cost of the US? Personally I also find the notion of a global order that prevents flight (of companies, capital, etc.) to be a bit dystopian. I don't want any power (a nation, or a coalition of nations) to have that kind of influence or authority, and this proposal doesn't give me good vibes.

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Read the proposal: it doesn't matter whether small countries agree to it. The idea is that if any country levies less tax than the global minimum, the IRS will automatically charge the difference. i.e. if the global minimum is 15% and a company based in Luxembourg is paying only 5%, the IRS will levy an additional tax burden to bring it up to the minimum. No coordination or cooperation is required.

The US can tax US corporations anyway it sees fit.

What do other countries have to do with it?

Read the subtitle:

>The Biden administration wants other countries to back a minimum tax as part of its plan to raise the U.S. corporate tax rate to 28 percent from 21 percent.

This makes no sense. Is the IRS a global institution now?

> Is the IRS a global institution now?

In their own minds, they always have been.

I also find it funny that a country that can't even level-set taxation within it's own 50 territories wants to dictate taxation for the world now.

> I also find it funny that a country that can't even level-set taxation within it's own 50 territories wants to dictate taxation for the world now.

Historically that proposal was pushed by EU states and the US wasn't onboard. It's recent development that the US agrees to it.

The US can tax the US company. The US will have a hard time taxing the Luxembourg subsidiary of the US company especially if the parent owns less than 100% of the subsidiary.

> This makes no sense. Is the IRS a global institution now?

It makes perfect sense if you take them as separate concepts.

1. Joe Biden wants other countries to work with the US and set a tax floor for corporate taxation.

2. The US Congress can pass a law that brings corporate foreign taxation in line with how real people (not just fictional ones) are taxed on foreign profits. This doesn't make the IRS any more global than they have been for 100 years.

will there be any penalties for countries that do not agree to this? Say if a country wants to set a lower tax rate than this 15% global minimum in order to attract businesses. Or this country could offer lower taxes in general because they don't want to collect that much tax. After all, how much tax to collect is a structural and public spending issue, and a ideological issue. It is specific to a country, and taxation policies and methods are supposed be the sovereignty of a specific country. I also assume this 15% tax is a tax on company profits. But some countries may want to have lower income tax, but a higher value added tax.

But in the future, when this is established, US and other participants in this scheme might view countries offering significant lower tax as anti-competitive, disruption of the market, disruption of established "international order". Using these talking points, the next logical step is to enact penalties. For example, levy extra taxes on that country businesses' operations and transactions in the judications of all of the participants. Would this be a valid concern?

> Would this be a valid concern?

I wouldn't call it a concern, at least not for me. It's certainly a valid prediction based on historical priors. The US has the scale to make that type of decision for the rest of the world.

And I find the idea that big companies can shift their taxes so they get a massive advantages over local businesse to be much more dystopian.

Without justifying whether or not this is a good thing to do, large countries have a lot of economic levers to use with smaller countries. (Tariffs, limiting foreign direct investment, etc)

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