S M send me another letter anyone else in the Liberland Community can send one too, he makes several points which I feel may not accurately reflect how Liberland is to generate funds and have already started drafting my rebuttal and no I am not writing these letters to myself to generate discussion.
As far as I understand the current system for Liberland taxes, All businesses based in LL will pay zero tax to the LL govt.
So what is to stop multi-national corporations from basing their headquarters in LL and still contributing 0% to LL? Have these types of corporations EVER voluntarily given anything? Isn’t it ingrained in their corporate structure that their only motivation is to increase profits for themselves and their share-holders? Why wouldn’t they use LL in their “profit-shifting” strategies the same way they’ve been using Ireland for years?
For those that don’t know, Ireland’s corp tax changed in 2023 from 12.5% to a rate of 15% (revenues exceeding €750 million) and this was based on OECD global minimum tax agreement (Pillar Two) initiated in 2021. Many businesses were recently caught off-guard in the UAE when they also changed their tax rates from 0% to 15% for multinational enterprises and their main reason given was the OECD global minimum tax agreement.
Since this OECD agreement seems to be transforming how taxation is done for multi-national corps, I will include its history (AI):
“The history of the OECD global minimum tax agreement begins with the OECD and G20 countries. The effort started in 2019 when the OECD, with its G20 Inclusive Framework consisting of over 130 countries, began proposing a global minimum corporate tax rate to counteract tax avoidance and profit shifting to low-tax jurisdictions. A joint Franco-German proposal called “Pillar Two,” presented in May 2019, sought to set a global minimum effective tax rate of 15% to stop the “race to the bottom” in corporate taxation. This proposal gained wide international support, including endorsements from the IMF and OECD leadership.
The United States joined the negotiations in 2020, and the agreement was finalized in October 2021. Over 130 countries committed to a two-pillar framework: Pillar One reallocates taxing rights to countries where multinational companies have customers, and Pillar Two establishes a 15% global minimum tax rate to ensure companies pay at least this rate regardless of their operations’ location. The agreement aims to curb tax avoidance, especially by digital giants, and prevent erosion of global tax revenue.
The 2021 agreement is historic, supported by countries representing over 90% of the global economy, and is expected to raise about $150 billion annually in additional tax revenue. However, it still requires national approvals. The deal also had political challenges, such as the U.S. Senate’s divided stance, but represents a major step toward fairer, more transparent international corporate taxation.”
Generally, I am extremely suspicious of agreements like these that involve so many large and influential countries. It seems like there is always something in the smaller details that intentionally hurts some countries in favor of others. So far I haven’t seen anything in the global minimum tax agreement that I dislike and I think the LL govt should take a serious look at it.
So, as far as the UAE, they will utilize the following tiers:
0-102000 USD business income is still taxed at 0%
102000 USD business income and above is taxed at 9%
Large multi-national enterprises (MNEs) with consolidated global revenues of €750 million or more in at least two of the previous four financial years pay 15%
A 0% business tax for businesses based in LL and operating in LL still can definitely work. I do see a bit of grey area when the business is formed in LL but is based elsewhere and I think this deserves more thought. What if the business receives benefit by being based in LL, but LL receives no benefit to hosting that business: ie no products are made or consumed in LL and no LL workers are employed and no taxes are taken in. This scenario is worth considering.