Face it: some form of taxation was going to appear no matter what. It's inevitable. You don't just roll into a country, make billions of dollars, and expect to pay no tax in perpetuity. As tax proposals go, this one is pretty reasonable.
This isn't a punitive measure because it sets no one apart for any past behavior. It also isn't a "shield from competition" because all companies have to adhere to it, not just American ones.
And a retaliation from the US, via a similar trade tariff that exclusively targets EU companies, is also likely inevitable.
Lets the trade wars being. I wonder who will come out ahead.
> It also isn't a "shield from competition"
Imagine if the US added a 20 dollar champagne tax. By definition, "real" champagne can literally only come from the Provence of champagne, France. But technically the law applies to US companies, perhaps ones that own a vineyard in France.
Would you be OK with this theoretical tax? It is totally fair, and not targeted against anyone specific country!
Hopefully we will get more "fair" taxes like these in the upcoming trade wars.
This is basically how exports work, why should tech be different?
Similarly to what OP said, since this tax disproportionately affects US companies doing business in EU, the US is likely to add a torrid to EU exports to the US. And the argument “You don’t just roll into a country, export billions of dollars of cars (or whatever), and expect...”
That's free trade. It's also shady and selective to avoid paying taxes for infrastructure the company uses. That's kind of screwed up.
The EU isn't collecting American taxes. They're fixing EU issues.
This largely looks like an EU tariff on whatever they end up defining digital companies as, which will likely be defined in such a way to tax Google and Facebook, while avoiding taxing Spotify.
The reason this policy is being pushed, is because some nations have benefitted a lot from US tech companies, eg Ireland, while others eg France and Germany, are jealous that they're not getting their spoils (while simultaneously seeing no large domestic tech company creation). France and Germany have vast influence over the EU, they regard it as their little fiefdom of power. To watch Ireland become richer and richer and richer by the year, as their GDP per capita just keeps soaring ever higher, drives those sleepy giants crazy.
GDP per capita
Ireland: $68,000
Germany: $44,000
France: $39,000
It's pretty obvious what's going on.
Ireland's economy has tripled in size in 17 years.
France's economy hasn't net expanded since 2006.
Germany's economy hasn't net expanded since 2007.
I seriously doubt France and Germany - both high corporate income tax nations - want to see a bunch of Irelands further sprout up in the EU, pulling even more economic benefit away from the power duo in the EU.
2) It works for Ireland to have low taxes, because they are a small country collecting the tax for the entire profits in the EU. Even if their tax rate is low, they still get a sizable benefit. This can't work for the big countries.
2) It works for Ireland because other countries prefer not to engage. If Germany had the same tax rate it wouldn't work for Ireland anymore right? As what is now Ireland only revenue would be split between the two or more countries.
When this happen wouldn't Ireland have to raise taxes if it wanted to keep the same money?
It appears to me that this would achieve an stable and healthier equilibrium after some time.
If lower taxes were always better why have any taxes at all?
Ireland can't win a race to the bottom, and it will have to have higher taxes if others will lower theirs.
So all other countries have to do is lower taxes to force Ireland to raise its own, and reach a new higher taxes equilibrium, that is beneficial to all countries.
Isn't that what others are arguing for?
I'm not sure how this is comparable.
Ireland's low tax works for Ireland because it has no competition, so it gets the "market" all to itself. If competition arrived, Ireland would have no option but to raise taxes to make it up for it - as it needs this funds. It would essentially force Ireland's hand on this issue.
On the OPEC side they have external and internal competition. Sometimes they can make it work because demand is higher than what external competition has to offer and what internal competition need, but if external competition has enough supply or internal competition need more than they are getting, it does not work anymore (and the price drops because of extra supply).
It seems like your proposal would establish a cartel-like structure related to corporate tax rates. I was trying to point out the inherent fragility of this type of arraignment, especially in the EU where there are many stressors between member countries.
I think the system will work only as far as you have power players that are able to punish everyone who gets out of line - by racing to the bottom and driving profits out as a punishment [1].
That's exactly what I think complaining countries should do. They're not getting any revenue now, so they are able to power play Ireland into fair taxation, and the system will be as stable as their possibility to do so. If you take into account that any country cheating will take revenue away from others (thus their reason for a high tax), they should always be able to counter, as they are now.
[1] https://www.nytimes.com/1988/11/03/business/saudis-use-pain-...
Why does the UK deserve more than 20%, given that the vast majority of Google and Facebook's engineers and managers are in the US?
If I spend £100 on AdWords as a company, the £20 VAT comes off my VAT bill. I pay £20 less.
So Google's VAT bill is utterly inconsequential and meaningless.
VAT is only paid once by consumers for products, advertising is a company expense that simply shifts the VAT one level down the chain. It doesn't get applied at every level on the supply chain, it gets passed down.
So if Amy's Amazing Tours sells a £100000 tour round London, without any advertising, it generates £20000 VAT paid by Amy.
If the same tour is sold by Mike, for the same price of a 100k, but with £50000 worth of Google adverts, Mike pays only £10000 VAT with Google paying £10000 too. Still adds up to £20000.
Fact is, Google are using the UK's infrastructure, our commons, our laws, our police force, our army, our NHS, our roads, our telecommunications, etc. to do business. And need to contribute to it. Plus we tax economic activity to support our welfare systems for our society and Google/Facebook/etc. are circumventing that.
That's one way to look at it. Another way is to see it as a tax paid by each supplier based on how much value that supplier has added to the supply chain - a sort of 'value added' tax, if you will.
> So if Amy's Amazing Tours sells a £100000 tour round London, without any advertising, it generates £20000 VAT paid by Amy.
> If the same tour is sold by Mike, for the same price of a 100k, but with £50000 worth of Google adverts, Mike pays only £10000 VAT with Google paying £10000 too. Still adds up to £20000.
In this example Amy contributes £100k in value, Mike contributes £50k in value and Google contributes £50k in value. Essentially Google has allowed the UK government to collect the same amount of tax even though Mike has produced only half as much value as Amy. Isn't that nice?
Regardless, you still don't understand VAT. The consumer pays VAT, not the business. It just happens to be collected by the business.
VAT is not charged on exports.
It's a consumption tax levied on individuals, not a tax levied on business profits.
Google generates nothing as the money would simply be spent on something else.
So I pay VAT, you pay VAT, companies do not pay VAT, they merely collect it.