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Interesting Links for 10-04-2012

Original post on Dreamwidth - there are comment count unavailable comments there.

This is where the idea of tax incidence comes in.

I think the argument is that only indivduals pay tax. Organisations, like companies that appear to pay tax are only convenient places to apply a tax.

If you lower the rate of corporation tax you leave more profit to be distributed by the company. This will distributed between customers, suppliers, various groups of employees, lenders and owners depending on their relative bargaining positions.

So, if the UK and Luxembourg had a tit for tat attempt to under cut each other on corporation tax in order to attract Amazon to have its head office in one or the t’other you would expect the corporation tax Amazon pays to fall to zero leaving lots of money to be haggled over by the other stakeholders in Amazon.

How they end up dividing that used-to-be-corporation-tax cake is anyone’s guess? How and which government is gets to tax that additional income is also moot.

Basically, the idea is that if you cut Amazon’s corporation tax to zero you could increase income tax by a corresponding amount leaving Amazon to decide on its European HQ based mainly on operation considerers e.g. which city its MD wanted to live in, rather than tax rates.

It makes sense that there is no such thing as corporation tax, far easier to tax the profits when they are taken out of the company as income. The problem is that, then there will be no taxation income for anyone in the EU as Amazon is not a European country, just a subsidary of a US one.

I'm guessing that whether you permit profits made within the EU to simply be withdrawn to the US is another whole argument for accountants and tax lawyers.

No, it doesn't make sense. Corporations are artifical people: they can enter into contracts, hold assets and liabilities over time, sue and be sued. To say that for taxation purposes (but no other purposes) corporations should magically vanish into thin air is ridiculous.

In the UK, money is taxed when it changes hands, but with specific reliefs. This definition covers income tax, VAT, sin taxes, stamp duty, and corporate tax (which has a great big relief for "business expenses"). Tighten up on the reliefs available, subject to EU law, but corporate tax should stay and is staying.

Amazon is a US company in that it is based in the US. That doesn’t tell you much about where the ultimate shareholders live and where they would be subject to income tax.

A point well missed by President Obama when he went after BP, which is about one third owned by US pensioners.

It also doesn’t tell you how able EU citizens who work for Amazon would be to negotiate better pay if Amazon didn’t have to pay EU corporation taxes.

Transfer pricing for tax purposes is an interesting field but not one I have gotten much involved in.

Maybe the UK, France, Germany, Italy and Spain should just invade Luxembourg for being free riders. And also the Channel Islands, Monaco, etc.

We can't. We can't afford it. Luxembourg has got all the money.

By annual GDP, Luxembourg is a $40 billion economy. The UK is a $2 trillion GDP economy and currently enjoys near-record-low costs of borrowing. Why would we invade when we could just buy out the ducal family on the never-never?

What are the captial gains tax implications of a pure invasion compared to buying out a going concern?

Accelerated depreciation on all deployed materiel, extending to a complete write-off of expended ordnance?


... and a significant write of goodwill upon acquisition.

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