Tesla Moving to Austin
Elon Musk announced on Thursday October 7 that Tesla would relocate its headquarter from Palo Alto, California to Austin, Texas. This is on the heel of similar moves by multiple other high tech companies during the last couple of years. Austin is a lovely city and the cover photo was taken at a side walk near the downtown area. Although the officially stated reason for Tesla’s relocation is for employees to afford reasonable housing, but tax policy and regulatory environment for businesses are often cited as the main reasons for business relocation. Texas does not have either personal income tax or business income tax and is generally considered more business friendly.
Coincidentally, something interesting happened at the international arena less than twenty four hours later. The US government led an international effort to impose a minimum business tax around the globe in order to get multinational companies to pay their fair share of taxes. The?Organization for Economic Cooperation and Development?(OECD) announced on Oct. 8, 2021, that, effective in 2023, its members have agreed to set a global corporate minimum tax rate of 15%. The deal also gained the support of Ireland that had used low corporate tax rates as an incentive to attract many global companies as its economic development model during the last three decades. The landmark deal championed by the US government, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will nominally reallocate more than $125 billion of profits from around 100 of the world's largest and most profitable multinational corporations to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits.
Is there an irony here? While we are forcing countries to meet a minimum tax requirement in the name of “multinational corporations will no longer be able to pit countries against one another in a bid to push tax rates down”, yet we are seeing exactly the same dynamic between different states that pit states against one another to push tax rates down. This also reminds me of the fact that many professional sports teams pit cities against each other for tax money to subsidize sport arenas or stadiums. Recognizing paying tax is not something people enjoy, what is the right balance between ensuring businesses pay their fair share vs the incentive for locality to create business friendly environment? Is there a different dynamic between developed economies vs developing economies? I welcome your constructive comments and perspectives.
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Owner of JTwentyOne Coaching, Training & Consultancy
3 年Chasing the country to the lowest tax rates, is a race to the bottom. I accept that Elon's move may not just be Tax related, California is expensive and from what I have seen and heard it has been progressively getting worst but are we being fair California? One of the drives of their Government is to improve the environment, actively engage a renewable energy based economy. However, what springs to your mind when you think about the status of Texas, cowboys and oil maybe! Perhaps the cowboy mentality is a bit biased but with Texas history firmly locked on the dirty oil you can see why they may not be bothered too much about the environment and thus are not concerned about using taxes to address the problem! I welcome the move to create a baseline tax that every country needs to pay, my only wish is that we had done this 10 years ago before so much damage had been done. Can anyone see a pattern here? I.e. look at all the great talk going on about the environment but this talk is doing nothing to bring to heel the great polluters like China? What needs to happen is unified action now, not more talk otherwise it will be too late
Experience Leader with Domestic & International Exposure I P&L Growth I Entrepreneur I Business Model Innovation I Business Consultant at SYK Consulting Co.(Former Vice President Sales-Automotive with Global Assignment)
3 年Very interesting topic and i feel that local Govt.should support the business and its employees to a level as Govt.has to run the full country supporting the citizens with their basic needs and social security obligation. The Uniformity in tax should be there per country and not on states like USA has Federal goverance system.It was there in India also initially to boost the business in particular state/UT but post Gst all has been scrapped and one tax ,one country regime is there which is better i feel. The Tax differentiation will surely create imbalance and everybody with run to Austin,Texas to enjoy the lower tax regime and earn benefit for employees & corporate's. USA is world's no.1 economy and present/ past government must have thought over it and should create a system of one tax,one country even though are Federal Republic.
Lawyer and Leader
3 年Tesla is leaving CA because of the ridiculously high California state taxes and the impossibility of building anything without being regulated to death.