Here's an update from 2 days ago: "As of 1 December 2023, 33 countries have either introduced draft legislation or adopted final legislation transposing Pillar Two’s model rules into their national laws. An additional 17 jurisdictions intend to implement Pillar Two, although they have not proposed legislation to do so." https://taxfoundation.org/blog/global-tax-agreement/
Yes they are aware of the competition for corporate tax, and many are aware of the new competition for personal income tax and sales taxes.
They will try to do international cooperation to fight this, but my prediction is that it will be slow, cumbersome, and globally ineffective, even if they win battles here and there.
As for the OECD global minimum tax agreement, Pillar 1 seems dead and will possibly not be implemented, pillar 2 still has some traction, but mainly in the EU, and is losing traction elsewhere. It will still be possibly implemented, but has already been weakened by a growing list of loopholes, including a carveout for economic substance that will effectively allow tax havens to keep providing rates below 15%.
It seems the real minimum effective rate will be closer to 5% than 15%, and this can even be offset by subsidies.
I'm going to write about this in my book, so it will be the subject of one (or more) article(s) in the future ;)
The OECD minimums, whether successful or not, are just the first step. These efforts show the unfortunate direction we're heading to. Hopefully, game theory will play out and some jurisdictions will stand as beacons of hope for freedom. However, I can imagine a grim future in which big debt-ridden Nation States use coercion against often smaller freer countries to force them to increase their tax levels...
I definitely feel the Laffer curve warming my butt whenever I decide to do some over hours. You get more responsibilities, more nominal pay but the ROI is always against you. Try to get that promotion to see what happens!
Then people come up with all sorts of crazy terms for that: Quiet Quitting. Or that Chinese one, Laying Flat. It's just not worth it to be a wagy: you work, get taxed to your bones, and have the privilege of working harder to be taxed even harder.
That's when entrepreneurship also becomes much more attractive: you save on taxes, have no upper limit to how much you can earn, save yourself from the office politics.
The first point I think is not necessarily complete unless you expose also what were the different income levels that got you to each one. Additionally, one pernicious taxation that is not there is inflation. But that's for another day.
The Tyranny of place is becoming no more (The Sovereign Individual's book mentions this concept of mobility, take a look https://amzn.to/3tdAjUx)
Looking forward to your book! The Way of the Intelligence Rebel is already on my shelf to give my kids when they come of age.
Great article, thanks for taking the time to dig the sources and analyze them!
I'm sure governments are aware of the situation... Hence the "global minimum corporate tax rate" proposal... ( https://en.wikipedia.org/wiki/Global_minimum_corporate_tax_rate )
Here's an update from 2 days ago: "As of 1 December 2023, 33 countries have either introduced draft legislation or adopted final legislation transposing Pillar Two’s model rules into their national laws. An additional 17 jurisdictions intend to implement Pillar Two, although they have not proposed legislation to do so." https://taxfoundation.org/blog/global-tax-agreement/
And they are now calls for a "global billionaire tax" as well: https://www.icij.org/investigations/paradise-papers/a-global-billionaire-tax-could-generate-250-billion-annually-researchers-say
Yes they are aware of the competition for corporate tax, and many are aware of the new competition for personal income tax and sales taxes.
They will try to do international cooperation to fight this, but my prediction is that it will be slow, cumbersome, and globally ineffective, even if they win battles here and there.
As for the OECD global minimum tax agreement, Pillar 1 seems dead and will possibly not be implemented, pillar 2 still has some traction, but mainly in the EU, and is losing traction elsewhere. It will still be possibly implemented, but has already been weakened by a growing list of loopholes, including a carveout for economic substance that will effectively allow tax havens to keep providing rates below 15%.
It seems the real minimum effective rate will be closer to 5% than 15%, and this can even be offset by subsidies.
I'm going to write about this in my book, so it will be the subject of one (or more) article(s) in the future ;)
The OECD minimums, whether successful or not, are just the first step. These efforts show the unfortunate direction we're heading to. Hopefully, game theory will play out and some jurisdictions will stand as beacons of hope for freedom. However, I can imagine a grim future in which big debt-ridden Nation States use coercion against often smaller freer countries to force them to increase their tax levels...
Yes it is possible, we should take nothing for granted : it will be a fight that will require the efforts of every freedom loving people !
Great article!
I definitely feel the Laffer curve warming my butt whenever I decide to do some over hours. You get more responsibilities, more nominal pay but the ROI is always against you. Try to get that promotion to see what happens!
Then people come up with all sorts of crazy terms for that: Quiet Quitting. Or that Chinese one, Laying Flat. It's just not worth it to be a wagy: you work, get taxed to your bones, and have the privilege of working harder to be taxed even harder.
That's when entrepreneurship also becomes much more attractive: you save on taxes, have no upper limit to how much you can earn, save yourself from the office politics.
The first point I think is not necessarily complete unless you expose also what were the different income levels that got you to each one. Additionally, one pernicious taxation that is not there is inflation. But that's for another day.
The Tyranny of place is becoming no more (The Sovereign Individual's book mentions this concept of mobility, take a look https://amzn.to/3tdAjUx)
Looking forward to your book! The Way of the Intelligence Rebel is already on my shelf to give my kids when they come of age.
It is one of the (many) perks of entrepreneurship, yes.
Yes I read the Sovereign Individual in 2021 and it is a huge inspiration, see https://disruptive-horizons.com/p/10-principles-of-history-for-predicting ;)
And it's cool to see a reader of The Way of the Intelligence Rebel here, kudos for preparing to give it to your kids !