Taxes

The G7 Agrees To Create a Global Tax Cartel

It will be no better for taxpayers than oil cartels are for consumers.

|

For several decades now, politicians around the world have tried to curtail tax competition to make it easier for them to increase the tax burdens on their citizens without them fleeing to other lower-tax jurisdictions. The best way to achieve their goal is to create a global high-tax cartel. If implemented, the recent G7 countries' agreement to impose minimum taxes on multinational companies would get them much closer to this shady objective.

It's no mystery why politicians don't like tax competition. In a global economy like ours, individuals and businesses are better able to work and invest in nations with lower tax rates. The ability to shift residences and operations from country to country puts pressure on governments to keep taxes on income, investment, and wealth lower than politicians would like. Politicians in each country fear that raising taxes will prompt high-income earners and capital to move away.

Politicians disparage this type of tax arbitrage with phrases like "race to the bottom" while every low-tax nation is labeled a "tax haven." These epithets are meant to obscure the fact that this is perfectly legal and ethical. It's annoying to our legislators who want to spend as much of other people's money as possible, even if it means grabbing some income that's earned outside of our borders and/or preventing other nations from offering lower rates to companies willing to do business within their borders.

Enter the global minimum tax, which seven of the wealthiest countries in the world have just agreed to. Back in March, the White House described the proposal as a way "to encourage other countries to adopt strong minimum taxes on corporations, just like the United States, so that foreign corporations aren't advantaged and foreign countries can't try to get a competitive edge by serving as tax havens." It leaves little doubt that the point is to curtail tax competition.

Here's how it would work: Under our current territorial system, the U.S. government doesn't tax foreign-earned corporate income (only the foreign government in which the income is earned does). However, a global minimum tax of 15 percent changes that because any profit earned in a country with a lower rate would be taxed at a rate up to the 15 percent minimum level. It means that U.S. companies with foreign subsidiaries would have to pay at least 15 percent on their incomes, no matter where they do business. That analysis applies to all the signatories under the agreement.

But to these G7 government officials, the real value of this agreement is that it will make it easier to bully—or at the very least, to exert strong political influence over—some 135 countries to get them to join their seven-country tax cartel. That's how cartels are born. And make no mistake: Corporate tax cartels such as this one would be no better to taxpayers than oil cartels are to consumers.

The great irony is that many pundits and politicians are praising the agreement as a win for consumers and workers. The fallacy is that, if the U.S. government can grab more money from companies, for example, legislators can redistribute more money to the masses. Don't count on it. Academic research shows that the imposition of higher corporate taxes is a highly destructive way to collect revenue because it lowers investment and, in turn, workers' wages. It also increases consumer prices. Also, let's face it, no nation has ever become wealthier and better through higher taxes and wealth redistribution.

In fact, once you institute such a system, it's only a matter of time before revenue-hungry legislators (of which no nation in the world has a shortage) will demand rates higher than 15 percent. There's also a risk that they'll then demand that the system be extended to individual taxes. (The United States is awful on this front, as we already have a worldwide tax system for individuals.)

Hopefully, lower-tax nations will resist this pressure. After all, they should be free to decide how to tax income earned within their borders. Besides, if high-tax nations think there's a problem with the current system of taxation for multinationals, they should first look at the rules they have on their own books that create that situation. What they shouldn't do is to join a global tax cartel.

COPYRIGHT 2021 CREATORS.COM

NEXT: Harvard Housing Researchers Confirm That Supply and Demand Are Real

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. It will be no better for taxpayers than oil cartels are for consumers.

    And it will be about as effective. In the US at least, it’s not a treaty and requires Congressional action.

    1. Making money online more than 15$ just by doing simple work from home. I have received $18376 last month. Its an easy and simple job to do and its earnings are DWQ much better than regular office job and even a little child can do this and earns money. Everybody must try this job by just use the info
      on this page…..VISIT HERE

  2. Right-wing USA Marxists already make fun of “muh private companies” that want to resist Government Almighty’s attempts to nationalize (confiscate control of) the “means to production”, when “means to production” = web sites!

    Right-wing USA Marxists, will you now make fun of “muh private companies” as they try to fend off ever-increasing corporate taxes? Hey Marxists left and right! Do you not understand that you and I (consumers and producers) end up paying these so-called “corporate” taxes?

  3. And Obama proved that the Senate has no say in treaty powers with the Iran nuclear deal.

    1. https://reason.com/2021/06/16/why-did-youtube-remove-this-reason-video/#comment-8954142

      JesseAz
      June.16.2021 at 2:51 pm

      MUH PRIVATE COMPANIES.

      Right-wing USA Marxist JesseBahnFuhrer, will you now make fun of “MUH PRIVATE COMPANIES” as greedy nations world-wide take ever more and more and MORE of their earnings? See my post above, asking that question. Are you gonna answer, you power-pig Marxist? Or just slither away and hide under a rock?

      1. Root-link is OK… Comment-# is wrong. In case anyone cares, comment # here… https://reason.com/2021/06/16/why-did-youtube-remove-this-reason-video/#comment-8952253

  4. A worldwide conspiracy against the people of the world by the avaricious governing classes. Just normal politics.

    1. How else can they claim to have built that if they don’t take it from us first?

    2. Overthrow them all

  5. Actually it will be worse for consumers than the oil cartel. You can always decide to buy less oil.

  6. “The G7 Agrees To Create a Global Tax Cartel”

    It should be noted that the Constitution doesn’t enumerate the power to tax to the G7.

    On order for Biden to ratify a treaty, it would be necessary for two-thirds of the Senate to approve it. Since that isn’t about to happen, this agreement, like Paris accord and the Iran nuclear deal, can simply be ignored when the next president comes into the White House.

    The next Republican nominee for president will almost certainly promise to void any unratified agreement that says America can’t cut taxes unless we get the permission of the Europeans first, and that will be an excellent reason why a libertarian should consider voting for the Republican nominee.

    P.S. There isn’t anything libertarian about elitism, and the Democrats are fools to subject American domestic policy to the same elitist boot the U.K. just fought like hell to get out from under.

    I’ve said it before, and I’ll say it again–populism is a democratic reaction to elitism, and telling us that we can’t cut taxes–regardless of who the voters elect to represent them in Congress–is nothing but elitism. Democracy has a proper purview, and setting taxes is well within it.

    We can’t live in a free society unless the people who spend our money, declare our wars, ratify our treaties, and set our tax rates are accountable to the voters. If Biden were trying to ensure a populist reaction to elitism wins the Republican nomination in 2024, he couldn’t do a better job.

  7. Another left wing democrat boondoggle for us to argue about once again.

  8. That picture is ridiculous. On the other hand, if I were at the G7 summit, I’d probably want to throw a few elbows myself.

    1. ya trouble ahead when the Germans and Brits show elbow-love

    2. I think they should emulate the bonobo.

  9. Cartels: bad except when the government does it.

  10. Of course, businesses will do the math and determine exactly how much tax they can work into prices and how much will come out of the profit margin. This means more of what we have always known – corporate taxes eventually become sales taxes. YOU are the one who pays them.

  11. Open borders for the mutherfucking win, right?

    Who could’ve possibly foreseen the rise of globalism leading towards a one-world order? Other than pretty much everyone who isn’t abjectly retarded or a willfully retarded leftists or left-leaning libertarian I mea. Pretty much everyone? Good thing we’ve been sounding the ‘go along to get along’ and anti-nationalist horns for over a decade.

    1. Says Mad Marxist Mad.Casual, who SUPPORTS Government Almighty’s attempts to nationalize (confiscate control of) the “means to production”, when “means to production” = web sites!

      1. the property owners (the web site owners) should decide!

        “Website owners = property owners” – SQRLSY One

        1. Do any of you guys live near SQRLSY? One of you needs to go pick him up and take him to the vet so he can be put to sleep.

    2. Well, some of us still try to be individualists and reject both nationalism and internationalism. I’m less hard line on open borders than I once was, but I don’t really think that questions like this one have (or should have, at least) much to do with immigration and border control questions. There’s no reason why it can’t be that you just pay taxes to the state you are in when you make the money. Nothing about free movement of people means that there has to be a shared tax policy. Let the different polities compete that way too. You don’t need border controls to draw a line that delineates tax jurisdictions. It works fine with US states (mostly).

  12. Hopefully, lower-tax nations will resist this pressure. After all, they should be free to decide how to tax income earned within their borders.

    Whoa… check out Racist McRacism over here. Borders should be porous and therefore essentially meaningless.

    1. Having trouble rationalizing, other than racism, why a libertarian wouldn’t want higher-tax nations to go against the flow and refrain from taxing beyond their borders as well.

  13. Sure, we pay corporate taxes. But you do realize that if we didn’t have corporate taxes they’d just raise consumption or other taxes right?

    Arguing like this is the worst sin is foolish. If you truly cared then you’d be more upset about insane government spending like 700 billion on the military every year, etc. Take the spending out of the equation and suddenly making the case for a corporate tax starts falling.

    1. You’re a fucking moron.

    2. Or start cutting thing here is a short list tk get you started
      Medicare, Medicare, social security, CIA, NSA, fbi, departments of energy, education, labor, housing, HHS, Dea, fda, dhs, EPA, nih, etc.

      Getting rid of these would do more to help the American people than any new program

    3. “Sure, we pay corporate taxes. But you do realize that if we didn’t have corporate taxes they’d just raise consumption or other taxes right?”

      Corporate taxes, like many other federal taxes, are “hidden,” so that few people actually realize how much they are shelling out to the government.

      Why not eliminate ALL federal taxes, and just institute a national sales tax, which would be printed out on one’s receipt every time one makes a purchase?

      That might actually get people to say — “WTF” — and maybe we could take a big slice out of that $700 billion.

      After that, we can start with State taxes….

    4. You want to remove one of the few things from the budget that is actual,y required in the constitution. Of course you do.

      You should be put down too, along with SQRLSY.

  14. The ability to shift residences and operations from country to country puts pressure on governments to keep taxes on income, investment, and wealth lower than politicians would like.

    Pshaw! This has nothing to do with tax revenues, it’s just the government wanting to do the honorable, righteous, and fair thing and make sure the evil greedy corporations are paying their fair share. It’s been proven that even in the event that raising tax rates result in less revenue, politicians are so dedicated to the proposition of fairness that they will vote to increase tax rates. Good for them!

  15. https://twitter.com/AuronMacintyre/status/1405584744608374786?s=19

    How convenient that every financial publication came to this conclusion simultaneously [link]

    1. I appreciate the financial publishers looking out for me, but I think I’ll keep my house. Hopefully my neighbors see it the same way.

  16. Let me see. It’s not a law, and therefore not binding on future presidents or congresses. Nor is it binding on the other nations in the world. Prediction: if actually implemented, there will be lots of international corporations finding new homes in the 188 countries who are NOT named Canada, France, Germany, Italy, Japan, the United Kingdom, or the United States.

    Hmm. Switzerland could be looking pretty good in the near future…

    Of course, ALL members of the Gang of Seven will have to negotiate domestically (meaning making carve-outs) for their own “special” industries, so it might not really matter at all to anybody.

    1. The board of Bristol-Myers would like to announce the relocation of our headquarters to Rwanda.

      1. Exactly.

  17. I have to give the Biden Administration credit, they are ambitious. Destroying the US economy just isn’t enough for them, they want to destroy the world economy too!

  18. Ok, the G7 has sicked a global 15% tax on us by taxing big companies. They have yet to realize that private companies make money on the supply and demand market place. Big companies will pay the tax by increasing costs to the consumers to make up for the taxes paid. That means every consumer in the world has to contribute to that tax. Taxing big companies and taxing the rich are the same thing. Taxes are written off as the cost of doing business. Essentially, this is saying you cannot tax the rich and get ahead of the game. Governments are incompetent at business and waste money profusely through waste, fraud, and abuse through programs made up be legislatures by never get evaluated for effectiveness. Most government programs are ineffective and do not do what they are advertised to do. They simply waste money. Everyone in the economies of the world will be better off if this tax fails to be instituted.

Please to post comments

Comments are closed.