Comment Re:"Hollywood accounting" (Score 1) 345
The challenge is to change the rules in a way that doesn't drive jobs out of the country while not getting derailed by lobbyists.
That's not really the problem. Any increase in the effective tax rate is going to drive jobs out of the country, that's just how it works. It's supply and demand. Make operating a company in the US more expensive and demand for real estate and employee labor moves to alternative suppliers of tax jurisdictions that have lower "prices."
The underlying problem is that the entire concept of "corporate profit" is accounting fiction. Corporations only exist on paper, and you can make the paper say whatever you want.
In particular, the problem is that the existence of profit violates the notion that assets have a single "market price" that can be identified for the purposes of transfer pricing. Walmart buys a widget for $.79 and sells it for $1. That's how they make their money. The fact that a subsidiary does the same thing (and happens to be a low tax jurisdiction) is not something you can legitimately complain about; of course they're paying less for things than they're selling them for, that's where profit comes from.
Which is the source of the problem. How much is it worth to Microsoft's UK subsidiary to have a license to sell Windows? How much is it worth to Google Australia to be able to use the Google trademark? There is no objective way to determine exactly what these things are worth. So lo and behold, the things that subsidiaries in high tax jurisdictions buy from subsidiaries in low tax jurisdictions are on the high side of the acceptable range, and the things they sell to the same subsidiaries are on the low side of the acceptable range. And it doesn't take much of that to eat all of a company's profits -- making profit is hard even when you're trying to do it.
The fact is, corporate income tax is inherently broken. Corporations are a legal fiction, which means corporate income is a legal fiction, as is its location and tax jurisdiction. Trying to tax something fictional is a great way to get a thousand tax accountants to assert that it doesn't exist, but not a particularly good way to raise money. If you want to raise money, tax something that has a physical location: Sales, labor, real estate, etc. Microsoft can easily arrange for its local subsidiary to be unprofitable; they can't avoid collecting sales tax on Windows while continuing to sell it to customers in your jurisdiction.