They’re not unavoidable, they can just potentially come at an unacceptable cost. In the corporate tax instance, literally the only thing you need to implement corporate tax avoidance is the ability to incur a deductible expense to an offshore company. No matter what other laws you write, if you can do that you can avoid corporate tax. If you can’t do that then you don’t have economic globalization (or you’re not participating in it at least).
This unrealistic wishful thinking you seem to be exhibiting is something I think politicians intentionally prey on. If some politician can convince you that it is possible to “fix this”, but without the all the obviously mandatory costs and tradeoffs, then they can also potentially convince you that they can and will do it. This particular policy issue has been a part of many political platforms, yet nobody has ever “fixed it”, because it cannot be fixed (at least not without also ruining a lot of other things).
> the only thing you need to implement corporate tax avoidance is the ability to incur a deductible expense to an offshore company
> This unrealistic wishful thinking
Quite the contrary, for some reason you seem to have a cognitive dissonance about the sheer complexity of tax laws. The loophole is not as simple as “anything can be offshored” - there’s a significant nuance involved in what is possible even now.
I own several companies that have a large pile of transfer pricing agreements, I’m very familiar with the nature and complexity of international tax laws. All corporate tax avoidance is, is incurring offshore expenses to shuffle profits offshore. As long as you can do that, there is literally no way to prevent the tax avoidance. The only thing you can do is make it more complicated.
This is also the reason most developed economies have given up on regulating transfer pricing any more than they already have, and instead the strategy has shifted to trying to get the tax havens to implement or increase their corporate taxes. That’s why the “global minimum corporate tax rate” idea has recently emerged, and why the EU uses their black and grey lists to coerce foreign jurisdictions to write new tax laws. This strategy is arguably more effective, but still a complete failure, because you have some tax haven jurisdictions that simply ignore the pressure, and other tax havens are simply never sanctioned because they have sufficient leverage in the global economy to avoid the attention entirely.
It is very literally a choice between corporate tax, or globalization. There is no way to have both.
The issue is neither corporate tax nor globalization, but the difference between corporate tax rates, which provides an incentive in the first place to shuffle profits offshore.
A solution could be to tax offshore expenses with the difference in tax rates, i.e., min(0, corporate tax rate -destination company's corporate tax rate)%. That would eliminate the advantage of lower tax rates at the destination.
Another way would be to allow deducting only min(100, 100 - corporate tax rate + destination company's corporate tax rate)% of the offshore expenses. That still provides benefits for shuffling profits offshore, but the origin location gets some of it.
This is just a reinvention of the global minimum corporate tax effort, and it would fail for exactly the same reasons. Except, with the added benefit of making corporate tax avoidance procedures more complicated, without actually accomplishing anything (now you need to offshore your profits to a friendly high tax jurisdiction before offshoring them again to a low tax one).
Also, aside from the fact that this policy would fail, what you’re describing is a rather extreme import tarrif, which is a highly protectionist policy.
Honestly, I just don’t buy it’s impossible to properly handle global taxation.
Governments do it just fine for normal individuals. Small to medium businesses also pay their taxes pretty fairly. It says something profound about the system, if the avoidance needs large complicated structures to do so.
Then explain your solution for doing so, or show me a jurisdiction that has managed it and explain how. In reality no jurisdiction has ever achieved this, and for the reasons I have explained.
Real people also manage to avoid their taxes all the time. People complain about the rich not paying their taxes every day. People can also offshore their income in mostly the same way a company can, with the only additional complication being residency requirements. I just finished watching the F1 qualifying, a sport that has 1 Monegasque athlete, but nearly half of its currently active athlete living in Monaco.
If you want a system of global tax governance, then you’d need a global government. Something we don’t have, will not have, and a lot of people tend to be especially resentful towards any of the efforts to create one (or something that behaves like one).
This unrealistic wishful thinking you seem to be exhibiting is something I think politicians intentionally prey on. If some politician can convince you that it is possible to “fix this”, but without the all the obviously mandatory costs and tradeoffs, then they can also potentially convince you that they can and will do it. This particular policy issue has been a part of many political platforms, yet nobody has ever “fixed it”, because it cannot be fixed (at least not without also ruining a lot of other things).