First, companies don’t optimize for tax at the exclusion of everything else. And calling tax optimization and inefficiency is interesting considering it directly impacts returns.
Second, the innovation isn’t in the tax policy, it’s in the use of the tax revenue. If I come up with a less bureaucratic and less costly administrative process for companies, why shouldn’t I pass the along if I want to?
Third, the implementation goal is global. That’s been stated by Biden.
And I’m guessing the lower income countries will suffer. You want to pay t a similar tax rate for the US for say Myanmar? Abundant corruption, questionable private property rights, untrustworthy courts?
On (1), I’m speaking from an allocative efficiency standpoint (should have been more precise). For example, say I’m a company selling in NY, I can locate production in NJ or AZ, and pretax it is cheapest to locate in NJ. If AZ offers a tax incentive that makes it cheaper for me to locate in AZ I’ll do it, but if you sum up pretax revenue minus costs they are lower than had I located in NJ. So this is a transfer from NJ coffers to company profits + AZ coffers, but it is negative sum.
Not sure I understand what you’re saying on (ii). I think you’re saying that if countries have to compete for business, then, holding fixed their statutory tax rate, they have an incentive to improve bureaucratic efficiency to increase resources available (given the statutory tax rate). But I think the issue is you get competition on the statutory rate, which pushes rates towards zero. I actually think a minimum tax which binds and hence constrains the statutory rate could provide a great incentive along the lines youre talking about to optimize bureaucracy.
On (iii), I’m guessing a minimum tax wouldn’t bind in countries willing to explicitly expropriate FDI. Also having a minimum could limit the scope to vary effective rates for individual companies as carrots / sticks, which if anything could reduce corruption.
Second, the innovation isn’t in the tax policy, it’s in the use of the tax revenue. If I come up with a less bureaucratic and less costly administrative process for companies, why shouldn’t I pass the along if I want to?
Third, the implementation goal is global. That’s been stated by Biden.
And I’m guessing the lower income countries will suffer. You want to pay t a similar tax rate for the US for say Myanmar? Abundant corruption, questionable private property rights, untrustworthy courts?