Stop Gaming Corporate Taxes

in #tax6 years ago

In the United States corporations are gaming the tax system and they are doing it legally. Meanwhile, the middle class is caught holding the bag and paying most of the taxes. Recent tax legislation does nothing to resolve the core problem so it doesn't matter if taxes are raised or lowered for corporations.
The main problem and the gaming of the tax system can best be described in an example, then I will produce my idea of how to solve.
Google Example: Google is one of the biggest "gamers" of the tax system. They have created a corporation in Ireland with no or low corporate tax rate which holds the "license" for their search technology. Obviously this corporation is bullshit because we all know that the search technology was invented at Stanford University in USA. Google is able to charge as much as they want through this bullshit Irish corporation and basically avoid as much tax as they want. It's incredibly easy to create corporations around the world and move money around to avoid tax and "game" the system.

My tax proposal is very simple and eliminates this corporate gaming while bringing jobs and opportunities back into the country. I'm sure this approach would work for many other countries, however, I'm only familiar with US taxes so it would have to be evaluated for other countries.

The simple proposal is to count income and expenses only from within the country.
Income: Only income generated from within the country
Expenses: Only expenses from within the country. This part will be controversial because corporations would no longer be able to deduct expenses from overseas labor nor overseas parts and materials. In addition, they would not be able to deduct any lobbying efforts. This even includes no deductions for anytime any executive spends on lobbying efforts. Every minute of time spent with lobbying groups will need to be tracked and removed from deductions. To be even more radical, they would not be able to deduct any executive pay that is over 100 times more than average worker pay. This means that if the CEO earns any more than 100 times average pay, their ENTIRE salary and benefits are not expenses for taxes, not just the amount over 100x. Boards of directors would have to think twice about CEO pay.
Tax basis is now In-country Income Minus In-country Expenses => New Profit Basis
The tax rate on this proposal would start at a fairly low level for most companies and then adjusted over time.

Every country were the company does business could implement a similar system counting just the Income and Expenses from within their country. Thus countries with low in-country income but high expenses such as off shore labor or materials would produce a tax deduction surplus and would likely incent the company to drive more sales into those countries or move these expenses to the country were they have more income.

This tax proposal would reduce or eliminate the current tax shell gaming going on now and balance labor and materials into the countries producing based on the income levels.
Let me know what you think and if this would work in the US or your country.

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