And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.
This is why there has been a bunch of hoopla over Irish tax incentives for example, as it allowed the likes of Microsoft, Apple and Google to claim all sales inside EU was done by their Irish office. The rest simple earned just enough to cover expenses...
(note: Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS. Oh, and since it's "paper profits only" (mostly) he hasn't paid tax on it either)
People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly)
The reality is Amazon, and to a lesser extent Google, Apple Yahoo, Microsoft and Facebook are government-sponsored companies that have been given extreme preferential treatment for close to two decades now.
Without that 20% advantage, there is no way Amazon could compete with Walmart. Without that, the business model is absurd, even now.
Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole.
(note: they don't sell to "you". They sell to, say, Microsoft Ireland for $final_price - 5%, then the "only profit" is that 5%, and that's all they pay tax on. For FB/Yahoo/Google/... it's even worse)
As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.
2) Ability to shop around for the cheapest jurisdiction for international sales (which means outside of the US Amazon paid low single digit tax rates on everything)
3) Ability to sell stuff from people and not being forced to prove they pay taxes or have it impounded
All 3 above are not available for brick&mortar retailers.
In case you were wondering why the CEO of Amazon, Jeff Bezos, is a Wall Street banker and not a geek.
What subsidies are you even talking about? Most of your post sounds like stuff you just pulled out of your ass
> You forget the effects of the "full reinvestment" policy. Amazon barely paid any tax at all
Is there anything stopping other companies, Amazon competitors like Wal-Mart or otherwise, from following this same policy? If no, your claim that companies like Amazon are government sponsored holds no water.
> Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS
Except it is not even remotely close to the same thing in practice. Jeff Bezos doesn't have $150B sitting in a bank account somewhere. How do you propose to tax money that he doesn't have access to? The very second he accesses any of it by selling shares, it is taxed. Are you proposing that everyone who has any kind of appreciating investment (so, anybody with a 401k) annually pay taxes out of pocket on the gains? You're going to piss off a lot of ordinary Americans if so.
> People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly)
You completely lost me here. Where is this 20% government subsidy for being an "internet business" coming from? As somebody who's helped run an "internet business" I wasn't aware of such a subsidy, was I completely missing out??
And as somebody who currently is working on supply chain logistics involving shipping items to the US from China, I was also unaware that there was a program where the US taxpayer would fund our costs. Can you point me to such a program please? It would help me tremendously.
> Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole.
This is the only part of your comment which seems grounded in reality - big corps absolutely take advantage of fancy accounting and overseas tax havens. What this has to do with "internet businesses" is utterly beyond me.
> As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.
To make such a bold claim, surely you've done such an analysis, or at least have read such an analysis that you can link to?
I think the grandparent is referring to this:
https://www.quora.com/Why-are-Chinese-goods-so-cheap-to-ship...
"Under current rules, those charges (called terminal dues) are set ludicrously low for certain countries, among them China. (Under UPU rules, for example, China, the world’s second-largest economy, gets the same break on terminal dues as do Gabon and Botswana.) This means that the USPS actually charges China Post less to deliver a package from China into the U.S. than it charges a U.S. business or customer to deliver a similar size package within the 48 states. The post office is losing money on every package it delivers from China — costs it has to pass on to its own American customers, not to mention U.S. taxpayers."
Are you saying shipping from China has no advantages whatsoever?
Can you explain how this product costs $1 and ships worldwide for free?
https://www.fasttech.com/products/1299/10003175/1236402-1000...
That's wrong and impossible to support in fact. You can spot a fraudulent claim like that easily because it wings an arbitrary number that on the surface appears absurd (and as it turns out, is).
Tax Microsoft at the OECD median, their net income for 2018 would be about ~$25 billion. Their tax rate for Q1 was 14%, which is comparable to the effective corporate tax rate in much of Europe.
So you don't like their 14% rate and think it's too low? How would raising that to 18% or 20% change anything fundamentally? It wouldn't. And it certainly wouldn't "rapidly shrink [them] to 10% of their current size." Whether their net income is $23b or $26b or $28b annually, Microsoft remains worth a similar value as to what they are today (ie well over half a trillion dollars).
The same holds true for Facebook, Apple and Google.
Making ridiculous claims without anything supporting them, doesn't make for a very good argument position.
This is not what I mean. Replace Microsoft tax with an auto repair shop's taxes. Everything produced and installed and serviced locally.
1) Sales tax/VAT. On the full amount of the sales, not just the lowest they can get away with. That's 10-27% depending on the location. No interstate commerce exception. No import/export exception.
2) Corporate tax in the local jurisdiction. That's the 14% tax rate (and there are jurisdictions where this is 35%). This comes on top of the sales tax of course.
3) Capital gains or profit tax in the local jurisdiction, on the company side (there is ALSO capital gains tax on the investor side, it's not either/or everywhere). This is going to be somewhere from 0% in some (few) places, 15% (normal) up to 58% (in jurisdictions where capital gains is taxed like income) (note that this will be charged before buybacks or dividend payouts are allowed). Auto repair shops don't get to pick ... why should Microsoft ?
This is ignoring lots of varied taxes, TAX DEALS, real estate investments, owned real estate, depreciation for machines being allowed or not, any investment/loan taxes, ...
Now we have a minimum of 35% tax, up to 81% tax, on any amount of money that shows up in the share price or is paid out to investors.
THAT's the figure to be compared to the 14% tax rate. THAT's why Walmart and "brick&mortar" retailers feel slighted.
THAT's why everybody should be angry as hell at people like European Commission president Juncker, as he was one of the pioneers of allowing companies evade tax within Europe. Of course, that's also why it won't ever be fixed without replacing most/all of the political establishment in Europe (but US is not that different)
https://www.fool.com/investing/2018/04/08/trump-is-right-ama...