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Comment by DVassallo | Hacker News Reader

I wonder how much tax revenue the EU would have lost if Google and Facebook didn't exist.

This isn't the point here though? These companies are doing business in the EU and not playing fair by not paying their share of taxes. This isn't about preventing them from existing, it's about making them contribute what they owe to the EU countries.

I don't want to put words in the parent's mouth but I believe his point is that what is "fair" and what they "owe" are up for debate. Additionally, his question hints at a potentially equally significant and subtle issue: is the effort to capture this increased tax revenue from 4 companies really worth the potential costs on a society to get them?

$5bn isnt going to balance Greece's budget. Setting aside the potential arguments defending Google (I have genuinely have no opinion on them or any of the other companies), a comprehensive law that requires every internet company to track every dollar by country and pay proportional taxes on their revenue could, in my opinion, severely cripple innovation in a continent that is finding itself falling behind at a global scale due to a variety of macro-issues. I like to give governments the benefit of the doubt that they won't do something silly like that, but then I look at this net neutrality issue and start to wonder.

Bottom line, there does not appear to be a consensus on this issue "morally" (for lack of a better word) which is why we're seeing such diversity of views on HN and globally. Just throwing it out there...

Large tech companies employ hollywood accounting techniques to continually reinvest surplus revenue. In doing so they rarely post any significant profit, depriving the taxmax of corporation tax.

This 'reinvestment' is used to compete and drive profitable competitors out of business. This is an unfair practice. The result - no profitable companies, smaller taxable base and nothing for the taxman to collect.

The bigger the juggernaut, the more influence they have on the taxman ("but we're contributing to pay/income/property taxes - surely you don't want us to relocate abroad"). Large multinationals use their corrupting influence to strike sweetheart deals and use these deal-made tax savings to abuse the market even more.

It doesn't just have to be tech companies, but the interesting thing is the abuse of 'intellectual property' (a thing which governments literally imagined in to existence) being used to transfer around wealth through agreements that, without it, wouldn't hold any water.

No company just adds 100% of its value.

Facebook isn’t anything new – maybe it adds 10% more value than MySpace would have had if Facebook didn’t exist in the EU. Maybe it adds 20% more value than the VZ Networks would have added.

You can’t just look at the entire value these companies provide, because local providers existed before Facebook and Google replaced them. Yes, Google and Facebook are overally more efficient, but only by a small amount.

Facebook most likely reduces the productivity of citizens.

I wonder how much revenue and profit would have lost Google and Facebook if they didn't exist in the EU

How do they "exist" in the EU? One way to see it is that people from the EU are simply buying services from a US company. It's as if they caught a plane, and paid at a cash register in California. But instead of making the trip, they just sent a check.

> One way to see it is that people from the EU are simply buying services from a US company

I would like how they do businesses, including Amazon and Apple if they leave the EU because the way you see it is totally wrong.

Starting with data protection directives and following with dealing with VAT, and EU customers

> How do they "exist" in the EU?

They both have headquarters in Dublin.

And physical presence in almost every EU country

So if they didn't have a physical presence in the EU, then it would have been fine not to tax them?

Which i'm sure they would happily burn to the ground if it meant they weren't taxed there. I don't think you want to go with the argument of physical presence. It rarely works well with any multinational.

Well in the meantime these offices do exist, and they also employ people in quite a few EU countries[1].

So that's the reality they have to live with.

[1] https://www.facebook.com/careers/locations/

> It rarely works well with any multinational.

how many multinationals have left any big market just for taxation?

Are you saying Singapore Co cannot receive payments from French consumers unless they pay corporate income tax to French Govt ?

In other words, you are saying EU can deny its citizens right to buy foreign products ?

No, I'm asking how many multinational have left a big market (one of the biggest in the world) just for taxation.

But what do you mean by "leaving a market" ? MNCs have been doing restructring for decades for reasons ranging from regulations to taxes.

If Google do leave EU, all it will do is legal maneuvering. Nothing will change for EU consumers. They can still do Google searches and buy ads. Profit will stay the same.

> But what do you mean by "leaving a market"

Pulling off any presence in that market, offices, stores, etc.

> If Google do leave EU, all it will do is legal maneuvering. Nothing will change for EU consumers. They can still do Google searches and buy ads. Profit will stay the same.

No, because there is all of the burden of a company from outside the EU doing business with EU companies. And not talking about the restriction on data protection.

And don't talk about companies like Amazon or Apple with physical goods

Benefit of Sales/Stores are insignificant compared to proposed tax liability. All these can/will be outsourced the moment it becomes reality.

How would EU calculate profit share between US R&D and Ireland R&D ? Even if EU do tax R&D, exodus of talent will be just 2x salary increase away.

> Benefit of Sales/Stores are insignificant compared to proposed tax liability.

You're joking, isn't?

biggest ones that immediately springs to mind is C&A and pfiser in the UK. the UK and US auto industries in general, manufacturing in general.

Google left the US.

So did Apple.

In fact, are there any multinationals left in high tax countries?

What are you talking about?

When the heck did Apple and Google left USA?

> In fact, are there any multinationals left in high tax countries?

I think you're confusing where the headquarters are located with presence in a market

google is just finishing its restructuring to xxvi holdings, apple has had all its cash outside of the us for quite some time.

I repeat, you're confusing headquarters with presence.

If yu're seriously saying that Apple or Goole have left USA and the EU you're really don't know what we're talking about

i think you are confusing appearence with physical existance. much like the eu that thinks they can apply their laws and taxes to a world where reincarnation is a "real" thing available at a few clicks of a keyboard.

and servers are now homed deep under the sea.

Countries restrict their citizens from buying foreign products all the time? The US did it to Cuba as an entire economy

National Security is different matter. Even that can only be done to few countries. Can US or any other country do it whole world ? I highly doubt it.

I mean, it would hurt them a lot, but it's entirely possible

If you're selling something in the EU, you gotta stick to EU laws. It's not about where is the company from, it's about where it's making business. Simple as that.

EU companies pay for advertising there. You know, their customers. They sell to customers in the EU. The social network/search thingy doesn't have any relevance to tax - it's their advertisement business governments want a slice of.

If there's any problem with taxation any country can order its banks to not process payments to Google/Facebook. Tax authorities don't give a shit who hosts the citizenry's family photos. That's not what "operating in" a country means.

Banning 2 corporations is one thing and banning all offshore corporations another. Would citizens go along with this ? Never.

This is pretty dangerous thinking. The EU only has half a billion people. Thus, the truth is: Over time, these companies will make infinitely more from developing nations outside of the EU than they would from the EU. especially if the EU is taxing them heavily.

Additionally, even if you say "don't care, if they leave we'll just build our own companies", now you are hamstringing the global growth of those companies.

(I'm just going to assume the companies that leave are not going to put your homegrown companies and people at a very serious technological disadvantage, which they might)

This is of course, why the EU wants everyone on the bus.

> This is pretty dangerous thinking.

Dangerous thinking? It was just an answer to a claim about the wealth they create as if they are exempt to be taxed because they create wealth.

> Over time, these companies will make infinitely more from developing nations outside of the EU than they would from the EU.

Over time, but I bet that any of those companies wouldn't trade the profit of one of the greatest markets in the world now for an hypothetical

> especially if the EU is taxing them heavily.

EU is not taxing heavily

>> This is pretty dangerous thinking. The EU only has half a billion people. Thus, the truth is: Over time, these companies will make infinitely more from developing nations outside of the EU than they would from the EU. especially if the EU is taxing them heavily.

Disagree. Think about advertisers. A lot of products popular in the US are popular in the EU. When it comes to marketing the latest Hollywood blockbuster if they can't reach half a billion people through Facebook they'll go elsewhere. If half a billion people suddenly disappear from Facebook those people who have friends and family there will turn to other communication systems and Facebook may get used less and less.

Well, I guess Myspace and Yahoo would still be a thing...or new players would take their palce...so don't worry about that.

That is a very good point. They should be grateful for these multi-nationalistic monopolies. /s

Just stating how much taxes are being "avoided" is an imperfect perspective. If, say, it turned out they contributed $100B to the economy, then that $5B wouldn't look that big in that context.

I always struggle with this logic. Is your argument that if 100B EUR in Facebook ads were sold (presumably the way in which Facebook 'contribute'), then this 100B was 'created' by Facebook? I imagine other measures would be proxies for Facebook's profits too (e.g. some portion of engineers' salaries to go private landlords).

Isn't this reverse-progressive taxation? If Facebook were outraged at paying taxes enough to shut up shop in Europe, wouldn't that 100B (or something like it) still be kicking around, just in different hands?

I get what you're saying, but I think it's fundamentally wrong for two reasons.

First, it is "big" when you consider how that money could be used. Cynicism aside about funding wars and filling walls with cash, it could be used for substantive (read: big) social good

Secondly, this is an important market. If they don't want to pay taxes, they have the legal option to not do business in Europe. So while you say "5B is small compared to 100B", I say "5B is a small price to pay for the billions they made."

"they have a legal option not todo do business in europe"

Do you see any way to do that other than to prevent eu businesses buying ads from google?

Because i think that might have a few severe unintented consequences for businesses in the eu, and have exactly zero impact on google.

It'd also open the market to a new competitor when people in the EU (and elsewhere) realised that they can't find local ads on Google.

Not sure I understand. You're saying EU business' not allowed to buy ads on Google would have "exactly zero impact on google" ??

google would still charge the same to display an ad exactly the same number of people will see google ads exactly the same number of people will click on an ad

The only thing that would change is companies outside of the eu will burn through their ad budgets faster.

plus a whole (not quite so new) industry would emerge outside the eu bypassing the regulations. such as happened in China.

Corporations have a lot of power over countries right now, but does the world you live in ignore everything countries can do to companies who ignore their laws? They can attempt to block everything Google while they build their own local services, ala China. Google is also a US company and while their software might be hard to prevent getting into the EU, they can start leveling sanctions against physical US goods if the US won't do anything to reign Google in. I dont think any of this is likely to happen, but political entities on the scale of the US, China, the EU, etc have options to bend companies to their will

i think you are confounding corporations as physical, "real" organisations in the real world, and cyberspace, which has no nationality by design and where the old world order is not welcome.

The old world order would very much like to believe they have dominion over cyberspace, but they do not and should not.

Cyberspace is not some metaphysical entity that exists in the ether. Every website, every connection, is being run on physical hardware. I'm not arguing that cutting off access to something on the internet would be easy or even feasible, and it would hurt any coubtry that tried to, but it is entirely possible

every website is a law unto only itself, every connection breaks the "physical" limits of national borders. the cat is out of the bag and the old powers that be have no power to keep their human slaves on the farm.

https://www.eff.org/cyberspace-independence

Physical isn't in quotes in what I'm saying. A country can actually cut off access to the internet, it just costs them all the benefits of the internet. Send out a couple of guys with axes or a boat with an achor and you can cut off access completely

You think Google no longer being able to do business in a market so large (~500 million people?) that it eclipses the US by a comfortable margin will have no impact on them?

That would damage Google a lot more than it would damage the EU nations.

google will still be able to sell those 500mil eye balls with or without putting the money back into the eu.

Those eyeballs will still be worth the same.

it will make as much difference to google use as the us copyright fine made to sci hub.

"you are the product"

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