Corporate tax laws should adapt to the globalization

Twentieth century corporate tax rules should adapt to the new global economy. If current tax rules continue, Governments will slowly run out of tax revenues.

Current rules dictate that companies have to pay corporate taxes to every country they operate in. If a British company makes profit of 'x' dollars in China, it has to pay a percentage of 'x' as corporate tax to Chinese Govt.

Internet and other forms of communication make this world flat. Companies can route transactions through a country which has least corporate taxes and pay corporate taxes to that country. Many companies are exploiting this flaw by routing some transactions through Ireland, which has least corporate taxes in the whole world. They pay 15% tax rate to Ireland for profits made all over the world.

Bermuda has zero tax on profits made from intellectual property sales. Many global corporations open a Bermuda branch and direct all IP revenues to that branch. Even worse, recently a US pharmaceutical company was accused of paying IP royalties to it's own branch in Bermuda and writing off the expenses in US.

American companies have to pay corporate tax of 35% to US Govt on revenues they make all over the world. They get to write off the taxes they pay to the other countries. For example, if a US company makes profit of $100 million in China where corporate taxes are 20%, they pay 20 million as tax to china and pay remaining 15 million to US. (They get to write off 20% they paid to Chinese Govt). But, as usual, there are loopholes. If a US company has a foreign subsidiary, the company can postpone paying corporate taxes until US subsidiary pays the money to the parent company.

Companies shift "mobile" revenues to countries with least corporate taxes. Governments should adapt tax rules to this new global economy. Otherwise the local companies which play by rules will be forced out of business.

Electing one Government for all policies is undemocratic

In democratic countries, citizens have the privilege of electing representatives once for every four/five years. In each electoral period, the representatives get to make decisions for the people in every aspect of society from gun laws to abortion, war, civil rights, taxes and so on. People don't elect different representative for each issue.

In such a system, an individual might have to compromise on an issue just because he cares more about some other issue. This can lead to a situation where people have to live by certain rules which only minority of people agree on. Let's take an example to demonstrate this.

Majority of people in US want next Govt to pull out of Iraq. Majority of people also dont want to tax rates to go up. Political parties stands for one or the other, but not both. If people care more about the war, then they end up with a Government with higher taxes. If people care more about taxes, they end up with the country's army continuing to operate in Iraq. Asking people to make such a choice is undemocratic.

People are forced to elect representatives who stand against some of their ideologies. That's why electing one Government for policy making in every sector is undemocratic.

This begs the question.. What's democracy anyways?

Oil exploration, liberals and the poor

Democrats yet again blocked oil exploration in US coast and Alaska on environmental concerns.

Who really benefits from coastal oil exploration? Oil exploration leads to increased production of oil which in turn brings down the price of Oil. Poor people suffer more from higher oil prices than the rich people. Rich people can easily afford oil at $5 per gallon. Poor people, who make $10 or less per hour, can't afford to drive at such high prices of oil.

Ask a poor person if he prefers $5 per gallon Oil (or) the risk of exaggerated environmental concerns from oil exploration. He would obviously prefer more oil exploration.

It's a paradox that Democrats claim themselves to be champions of poor. Democrats want to keep the air clean around them, even if it adversely affects the poor people.