Tech giants face 2% UK digital services tax | Hacker News Reader

Tech giants face 2% UK digital services tax

bbc.com

123 pointshappyopossum227 comments

The UK has gotten very frustrated with the slow movement of international lawmaking in this space. With business rate slashes to help struggling retailers (retaliation against Amazon) and mental health funding increases for schools (retaliation against Facebook/Google), I'm quite happy to see something happen at last.

I expect other governments to follow suit.

From a tech defence angle, I can't see Trump rallying in support of his good buddy, Jeff Bezos.

> The UK has gotten very frustrated with the slow movement of international lawmaking in this space

The space of... international laws to transfer money for literally no reason to the government of the UK, even though they have no services or investments to recuperate related to the money in question?

I mean, it's fair that everyone asks for a slice of the pie, but that doesn't mean it's fair that they take it.

The slice of the pie? If these companies are upset about it, they can just leave the UK market.

When AWS in teh UK can grant share awards of £11.8m to staff, but only pay £155k in tax, that doesn't seem like they are paying their fair share in UK tax.

I'm a bit confused. At least in the us, my stock awards are taxed as income, not by my employer, but by me (well in the us there's also payroll tax but still). Why would you tax Amazon more if they pay their employees? The employees are already paying income tax, aren't they?

No one is saying that we should tax corporations based on how much their pay roll is. What we're saying is that the scale of those two numbers shows how ridiculously inadequate the current corporation tax laws are. Do you really think that a tax which brings in less revenue from one of the largest retailers in the country than an average employee of that company pays in income tax is a functional tax?

It's their kitchen.

I think the space is their market, in which they set the rules and may want to tip things one way or another to prevent starvation and entire dependence on external parties.

In the general case, it's once thing to let an industry shrink because they are out-competed, it's another entirely to let them shrink to the point where recovery is extremely hard or event nearly impossible because of the loss of domain knowledge.

In addition, there's also first mover advantage, and in some industries that can mean the first mover dominates to such a degree that fair competition (market information is distorted) is hard. There's nothing inherently wrong with trying to alter the market, it all depends on the goal and methods. If this were applied towards bolstering competition by incentivizing Europeans offerings, that might benefit everyone eventually.

> I think the space is their market, in which they set the rules and may want to tip things one way or another ...

So far I'm with you.

> to prevent starvation and entire dependence on external parties.

Heh. Man I remember when I used to think like this. I remember the time fondly, oddly enough. Sadly, sorry to say, you will be cured of this.

THIS is also the UK government:

https://en.wikipedia.org/wiki/Independent_Inquiry_into_Child...

or, perhaps,

https://en.wikipedia.org/wiki/1978_smallpox_outbreak_in_the_...

The UK KNIGHTED the person who lied in court to get the government out of paying compensation for ONE VICTIM that the UK government, after being forewarned of exactly what would happen ... to which the UK government didn't react to save a buck. Resulting in a problem that could have easily killed 1 million UK citizens, majority of them children. Needless to say, the UK government did impose incredible costs on some of it's citizens, in almost all cases with very flimsy justification (one person's wife being forcibly kidnapped, without informing the guy or their families, never to be allowed to see each other again, after the government killed her. I mean, it's almost a Disney villain plot, except without the good ending)

Sorry to say, but if you think the UK government has either your or any of it's citizens' interests at heart. Or any other government. You're sorely delusional.

What does any of that crap have to do with the UK taxing these companies on sales?

The point is to disavow the GP of the notion that the UK state is trying to do anything but generate more income for itself by illustrating some of the more recent utterly disgusting decisions the UK state, as an organization, made.

So:

Fairness - Nope

Fixing competition - Nope

Altering the market - No

Incentivizing European offerings - Nope

None of this is a goal. Another example linked to is that the UK state is an organization that has been known to use violence to kidnap child abuse victims, and lock them in with other sex offenders, then afterwards refuse so much as acknowledging that might have been a wrong decision, when the inevitable happens.

Such an organization, I'm sorry to say, can be reasonably assumed not to have the interests of you, or me, or anyone but itself, at heart. It's on the side of big companies and tax law is just driving a hard bargain. It is very much not about making their own job harder by doing such things as massively increasing the number of people they need to negotiate with (otherwise known as "competition").

But go ahead, down vote me, of course the state is the epitome of all that is good of the universe. I understand that if that were to be a flawed way of seeing things, social policies start to sound a lot less like they're helping, and much more like they're cynically designed to increase the abuse suffered by the "helped" people, and prevent them from finding actual help, get out of their situation, or find redress. This shows you a new way of thinking about social policies and why they're made. Anti-child abuse laws are about encouraging child trade (and with that, inevitably, abuse), and preventing at all costs any means those kids might want to prevent the state from harming them further, and above all, to eliminate any legal redress such children might have against the state, at the damage done by it's agents to them.

Of course, one can easily make the determination about these policies. Find a few homeless, find a few now grown adopted children, and find a few that look smart, and ... ask them.

We all know what view they will have. The irony is that usually people turn those opinions into "see ? We need more child care/job programs/homeless assistance/...". A method for preventing those very programs from inflicting future damage as was done on these people is never discussed.

> Man I remember when I used to think like this. I remember the time fondly, oddly enough. Sadly, sorry to say, you will be cured of this

Stupidity _and_ condescension? That's a combo I can't resist trying for myself. Blue ducks bark oranges.

They should be taxed based on revenues they make from their users in UK. Loopholes such as shell companies and such should be well considered, too. I know revenue tax is far from ideal but it's also way more practical than profit taxation, too.

This is a pretty good idea. Tech giants make money in Europe paying little to no tax incorporating in Ireland, while all small to medium businesses incorporated in the UK pay the usual tax. Its simply unfair.

Yes, if the money was going back to the States and being paid as corporation tax over there, that’s one thing, but companies hoard the money offshore and pay no tax. It basically means that large companies get a 15-20% advantage over small companies, and that is clearly unacceptable.

The global arguments about multinational tax usually conflate at least two issues:

- total tax the corporate pays globally; and

- share of the cake paid 'locally' vs in the home jurisdiction

This measure seems to me to be more about the second of those than the first, but politically thats a hard sell so you see all the statistics about how much tax they paid 'in the UK' etc etc. Most people misread that.

Politically of course agreeing on a fair share of the cake is much harder than saying 'we should tax them more globally'.

The fairest way is to pay tax where you do business, you know, like you’re supposed to.

It’s not really different for tech companies or global companies.

This is false, exporters usually pay taxes on their profits "at home", rather than in the jurisdictions they sell their goods, with the exception of thing like sales taxes.

But it's much more complicated than that because the system is not meant to either incentivise or disincentivise insourced vs outsourced functions (and what you seem to be suggesting would create incentives for offshore outsourcing for them, which would be politically unpopular). And corporation tax is a tax on profits, not revenue (VAT already exists and is a tax on revenue and Amazon UK pays a very large amount of VAT).

Maybe a couple of examples: if I buy clothes from Amazon's own brand/white label, which are manufactured in another country, what is the appropriate amount of profit that Amazon UK should be allocated and taxed on for my purchase? Now what if Amazon sold that operation to someone else? Should they then be allowed to deduct it? If you get that wrong, then you create a tax incentive to either insource or outsource functions (since for the same cost structure, one will save tax over the other), which is an undesirable outcome.

Or let's say I'm a UK Amazon Prime subscriber. I use some of that for video content, some for other services like postage. Some of that video content was created by their own studio in the US or Canada and is only available on their platform; some was licensed from a third party. How much of my prime annual fee should be allocated to the Amazon UK operation? How much to the internal Amazon studio? What about other bits of Amazon which are involved? Again, how do you ensure that that doesn't created a non-level playing field vs third-party studios? Third-party hosting services or CDNs? Third-party payment processors? Etc

Then consider that until last year, Amazon in the US would have also been taxed on the whole empire's worldwide profits but been able to deduct taxes already paid under various double tax treaties. So if the UK taxed amazon more, the US would have received correspondingly less. This is still partly true.

None of this involves anything which is tax motivated - it's all business motivated. Layer in tax incentives various government put in place for other policy reasons and it becomes even more complicated.

"Fair" is very hard when you get to the level of complexity involved in these types of businesses.

> Amazon UK pays a very large amount of VAT.

Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon.

Correct.

> Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon.

Economists would say that who should be viewed as "paying" any indirect tax (the tax incidence) depends on the price elasticity of demand for the goods/services in question. For highly inelastic goods/services, buyers should be viewed as paying the tax.

For highly price elastic goods, sellers (who amount to the employees and ultimate individual shareholders of Amazon) should be viewed as paying.

In the middle, it's a mixture.

The "solution" the UK has proposed is another indirect tax, so whatever applies to VAT applies to that as well.

By that reasoning, it's the customers paying company tax, too.

Hell, customers' are the ones paying Jeff Bezos' capital gains tax by that reasoning.

Corporate direct tax incidence is typically thought of as applying to some split of capital providers (shareholders and lenders) and employees. Most economists think it falls mostly, if not entirely, on capital providers.

Customers might figure in that in an even smaller way but its probably very minor.

VAT is a consumer tax not a corporate tax. VAT is always considered only after the company has considered all costs and profit for its business.

Gross taxes are a terrible idea. They just encourage vertical integration. Maybe this will be a simple US style sales tax, in which OK, I still don't like it but it's not as bad.

This will start out as 2% in 2020 but probably be 10% by 2030. That's usually how these things work in the UK.

Good

I disagree that this is good. Volatile tax rates and regulations make businesses less likely to invest and innovate. They will spend more of their time hiring lawyers and accountants, spending less time producing valuable goods and services.

That's how taxes everywhere usually work.

> That's how taxes everywhere usually work.

So, taxes everywhere usually see a 500% increase over 10 years? Forgive me if I require some sort of evidence for a claim as extreme as that.

Did I ever say that? Taxes usually increase. Do your own research.

> Did I ever say that?

Yes. Yes you did, by nature of what you said and what it was in response to, which is very specifically a case were taxes raised by 500% over 10 years.

> Taxes usually increase.

A ridiculous proposition on it's face, as it would mean over times taxes always get higher. In the United States, Federal income taxes have fluctuated up as high as above 90% over the last one hundred years. It's not that high anymore, so taxes have gone down.[1][2] The UK has similarly seem fluctuations over time, and it's not currently at the highest it's been seen.[3]

> Do your own research.

If you're going to make an assertion, the onus is on you to back it up.

That said, you should be careful what you wish for, because someone might just take you up one it.

1: https://www.businessinsider.com/history-of-tax-rates

2: https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco...

3: https://en.wikipedia.org/wiki/History_of_taxation_in_the_Uni...

for some value of "usually"

corporation tax: 30% in 2008, 19% in 2018

zero rate band of income tax: £3000 in 1990, £11850 today (the increase is more than double that of inflation)

Personal allowance (zero tax band) raised to £12,500 from April (in the Budget today).

This gives money to richer voters because the higher your earnings, the more tax saved. But corporation tax takes money from rather anonymous entities, which of course affects voters too in the end but in a rather indirect way.

> This gives money to richer voters because the higher your earnings, the more tax saved.

a rise of the zero rate equally effects anyone earning above the new zero rate threshold (regardless of how much they are above it [1])

a full time minimum wage employee earning ~£14,000/year gets exactly the same reduction in tax from this specific increase as an engineer on £90,000/year

[1]: once you get above £100,000/year your personal allowance goes down (ultimately to zero)

The engineer on £90k got an additional £730 tax cut with the 40% threshold moving from £46,350 to £50,000.

The Resolution Foundation disagrees: https://twitter.com/resfoundation/status/1056969156741029889

However I agree that anyone earning over £100K won't be affected because of the peculiar system where you lose the personal allowance in steps over this threshold.

they don't disagree, your point was:

> Personal allowance (zero tax band) raised to £12,500 from April (in the Budget today). This gives money to richer voters because the higher your earnings, the more tax saved.

the conclusion of which is factually incorrect, and unsupported by your linked chart (which includes more than just the increase in the zero rated band)

What's the mechanism which is causing a benefit from the 1st and 2nd (the very poorest) groups in that graph, which is caused by adjusting a threshold at £50,000?

But raising the zero rate means someone earning >£50k has less of their income taxed under the higher rate (40%).

You lose your personal allowance half a percentage point for every pound you earn over £100k. People who earn £125k get 0 of the basic rate.

The fun thing is that total marginal income tax between those two numbers is 60% without counting national insurance.

> The fun thing is that total marginal income tax between those two numbers is 60% without counting national insurance.

Could you elaborate?

Can you give any examples?

Google British VAT, which is now at 20%. The tory party consistently raises it.

Also, the Rates scheme only payed by home owners became the Poll Tax levied on all which became the Council Tax levied on all households. Another tory party abomination.

I know this gets said a lot, but I live for the day the world sees innovation and quality tech companies from Europe instead of taxation and regulation.

There is plenty of innovation and quality tech in Europe and governments tend to levy taxes, in Europe, and elsewhere.

Honestly, you have to be pretty ignorant to hold this opinion.

Actually it is more informed than ignorant. Remove Sweden and UK from the the European list and you have needles in a haystack.

Even if you account for the 'unicorn' adge there is barely have innovation in Europe. On the social front too too, European pay and ownership is more concentrated in the hands of the leaders and is less evenly distributed than American counterparts.

Your comment strikes me a bit as if it comes from a defensive point of view instead of taking a hard look at things.

> On the social front too too, European pay and ownership is more concentrated in the hands of the leaders and is less evenly distributed than American counterparts.

I would be very surprised if this was the case. Could you please back this statement with data?

> Remove Sweden and UK from the the European list and you have needles in a haystack.

Remove California and New York from the US list and ...

California and New York are part of the United States. I know people sometimes don't understand this, but the better comparison would be "remove London from the United Kingdom". See how dumb that sounds? That's how dumb "remove California and New York from the US" is.

And Sweden and the UK are part of Europe, so what's the difference?

So I keep hearing but not ever seeing. I know people on the internet love to talk Europe up as some leading tech innovator, but there's a reason why Americans worry about competition coming from either inside America or China.

Europeans should worry more about building quality companies and broadening their tax base instead of getting salty about the money saved from foreigners.

Its about fragmentation, Europe is fragmented by countries (governments), language, culture and law. US and China, not so much, a company has an immediate larger reach, and has less scaling issues than it would in Europe. Consider also the access to funding, how many small pots of money is there in europe all disjointed, compared to funds in China/US. Consider the focus companies can get in China with government support, its what makes china such a threat to the US. US has arguably accelerated areas via military R&D.

There's lots of innovation and quality tech in Europe. We just don't see it because Europe has much greater diversity of language and culture than North America. This means that companies can target a niche in their country that has zero relevance to Americans.

Not everything of value needs to be a billion dollar unicorn. There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.

English is the business language of the world. I highly doubt there's some tech epicenter near Brussels that would rival Silicon Valley (or even New York City, Seattle, or Austin) if only those companies spoke English.

And sure being a Unicorn is everything, but it sure as hell isn't nothing. I have no doubt there there is a company in Europe doing something amazing, but Europe doesn't have a culture that continues to churn these companies out and I can't help but believe that their approach to regulation and taxation is apart of the problem.

They get so giddy about regulation that it's kinda baffling. Regulation should be thought of an unnecessary evil - not some exciting project.

It’s the second biggest economy in the world. They’re not that backward.

I remember some tech crunch reporter claiming they'd never heard of a nine figure tech sale in Europe, the same day as a local business in my home city (Nottingham) was sold for over £100 million.

It's not that we don't have a tech industry in Europe, it's just that US tech reporters are often insular, ignorant and lazy.

> US tech reporters are often insular, ignorant and lazy.

And then there are the bad ones…

Sure. Let's oil tankers spil remaining oil in the ocean as it pleases them. And let's facebook print partisan ads and fake news paid by Russia in local election.

That regulation (and the attitude to business and its place in society) is the reason every employee is entitled to 29 days annual leave min, I can't get sacked at any time for any reason and I don't have to pay medical insurance (hell I didn't know what it was till my mid twenties) cause the NHS.

Sure it discourages business in ways, but in many ways it creates a better society. Business isn't fundamentally good and regulation isn't fundamentally bad either. Remember that it's regulations that banned slavery and child labor.

'A company in Europe'. You're blinded by your bias that tech companies have to be big to be beautiful. Read the comment again. The poster is saying Europe has dozens of languages and national cultures. Several dozen local ecologies of companies serving local needs, in aggregate, can be just as valuable as one giant, or several giants.

> There's lots of innovation and quality tech in Europe.

I agree.

> We just don't see it because Europe has much greater diversity of language and culture than North America. This means that companies can target a niche in their country that has zero relevance to Americans.

But then how come american companies are able dominate europe and even the world? On the flip side, how come canadian companies aren't dominating? How are american companies overcoming the challenges of language and culture in europe?

There might be some merit to you diversity of language and culture claim but the more I think about it, it seems like a crutch or an excuse for europeans. I think europe has a lot to offer, but they aren't living up to their potential. Could it be lack of capital/funding or cultural aversion to risk taking? Or maybe other commenters are right, there are more to life than being the top tech producer.

Canadian companies are struggling because our best CS and SE grads are going "Cali or bust." Believe me, I'm enrolled at University of Waterloo and I see it every day. People fight like crazy for the best co-op jobs in California. Why? Because they pay a lot more.

It's a chicken and egg problem. Quebec is different though. There's a lot going on in Quebec in French that we don't see in the English-speaking press. Same goes for the major languages in Europe. Of course none of these will "dominate the world" because they're not in English.

So... that means that the restauranteurs, skilled tradesmen and everyone else should be bearing the burden, and not the extremely profitable tech companies?

I don't know how you arrive at that logic.

Unlike in the U.S, those lower mid earners are the people bearing the tax burden in much of W/NW Europe. The overall tax rate for a person earning less than median income is over 50% in Sweden (granted some of that is about mandatory charges for services like health insurance, which differ in being technically optional to Americans in the 5-45th percentile, and somewhat universal to those below).

Only a couple of data points, and I recognise these are not a trend, but:

1) Estonia have been doing some interesting things recently. In fact, they contributed a lot to Skype in the early days.

2) a significant portion of developers etc for Upwork are European.

3) SAP

4) Trust pilot

5) Zendesk

Cheers!

> innovation and quality tech companies from Europe

Brit here (still in Europe for the moment). There is a lot if you include aerospace and pharma, less if you just consider software. The only non-British European software I've used and could remember off the top of my head was SAP.

This made me think - what countries have sourced the software on my home PC? It's mainly American with a couple of outliers: e.g. New Zealand for Otoy's Octane renderer, a UK anti-virus package (ESET), and ... that's it.

EDIT: Oops, ESET is Slovakian.

(ESET is from Slovakia, but still European)

Oops - I've corrected my comment. I was confusing ESET UK with the parent company.

Ed Sheeran pays more tax in the UK than Amazon.

Is this true?

Edit: holy moly it is! https://metro.co.uk/2018/10/12/ed-sheeran-may-be-the-worlds-...

That article seems to be confusing revenue with profit. The $2 billion Amazon made in the UK is revenue; I suspect its profit is actually smaller.

Yeah, that confusion is made clear by the earlier statement that he made `1/5` the profit.... he did not make $400 million, which is 1/5th of 2 billion. It says he made $37 million.

It’s easy to keep profits small when you pay a large “license fee” to your offshore parent company.

For so many years this was no problem for the western countrys, when this way came much money to us from africa and other poor places. The "license fee" thing is super old, it's propably the oldest way to "optimise" tax.

So does the policy. Deliberately. This is 2% off the top.

You aren't buying from a UK company when you visit Amazon.co.uk, rather Amazon EU S.a.r.L (based in Luxembourg). This would take back 2% that is coming out of the pockets of UK consumers and being taxed (at a much lower rate) in Luxembourg.

The Amazon UK tax liability is barely anything. They put a handful of professional services through their books here, and most of that is wiped out by warehousing costs. As somebody else pointed out, Ed Sheeran pays more tax in the UK. It's madness.

Most multinationals do stuff like this... Because why wouldn't you? Some have argued it's their fiduciary duty to their shareholders to optimise their tax liabilities like this... But that doesn't mean we have to put up with it.

This.

And then you have ethically dubious practices like Starbucks getting a super sweetheart deal in the Netherlands, and then "charging" the UK arm a "licensing fee" for the brand name. Despite being the same bloody company, just to exfiltrate the tax from where it should have been paid, to where they will have to pay less.

Legal? Yes. Ethical? No. Should it be stamped out? Yes. Will that require all countries to act? Sadly, yes.

Highly unlikely. People like to look only at corporation tax, and ignore everything else.

Ed Sheeran is a person and is taxed differently than a company. That article is manipulative clickbait.

UK Amazon executives pay more taxes than Ed Sheeran.

The article is talking specifically about his company, Ed Sheeran Ltd, not his personal taxes.

Not really. Sure it's different taxes but for the revenue Amazing should be paying a much higher share of its profits and it does.

I doubt that and I'd like to see a source to back that asertion up.

Here's one for Ed paying more than Amazon

https://www.fastcompany.com/90251523/ed-sheeran-paid-more-uk...

"Ed Sheeran" isn't a person. There is a person by that name, but when you high "Ed Sheeran" you don't address the check to him. It goes to a production company who then deducts associated expenses, from his personal trainer to his airfare. That company then pays the flesh-and-blood Sheeran a salary for services rendered. If he is anything like the other 99% of celebs, he keeps money in his production company and pays himself a salary low enough to meet his immediate needs, thereby avoiding or at least delaying income tax. This company will continue to pay him this salary long after he disappears from public life and, theoretically, could be making payments to his estate long after his death. Should he want more money for something like a house, as the only shareholder, he can issue to himself a dividend and pay income tax on that amount when it hits his personal account. Or he can take the money as a loan, and delay those taxes until later. Or his production company can "invest in real estate" by buying the house and renting it to him for dollar a year.

Celebs are not people. They are businesses.

The people who really get shafted on taxes are the like of professional athletes. The services they render their employers occur at very fixed times. They don't get to spread their income over decades as entertainers do.

"The Treasury forecasts that the tax will generate £275m in 2019-20, rising to £370m in the following year.

It then expects that digital services tax receipts will reach £400m in 2021-22 and £440m the year after. "

Smaller amount than I expected, but still a good chunk of change.

One thing that will be interesting around this is any future trade negotiations the UK has with the US, especially after we leave the EU.

This tax will target the US giants.

Agreed - it's scheduled for 2020 and it looks like it's just on the books to be negotiated away in that deal. Not a bad idea though, it's a free concession that they didn't have before.

I'm sure Trump is going to bend over backwards for Silicon Valley.

This looks like it is on gross sales? If so that would hurt low-margin companies quite a lot; I imagine Amazon would be essentially forced to increase prices by 2% for example.

The problem is for highly global, IP based companies it is very difficult to tax profits.

You can just create a 'cost' (platform license fee, trademark cost) in another sister company (that is in a low/no tax jurisdiction) and charge it to the UK based one that is equal to the profit. Boom, no profit due to tax.

Not really sure what the best solution is. The UK isn't really big (or competent, depending on your outlook) enough to make tech giants like the US, so tech US companies dominate.

This has led to a massive outflow of tax revenue to these US giants. Eg, most advertising revenue pre internet would have stayed in the UK and been taxed in the UK. Post internet it is all flowing out to Facebook, Google et al who pay close to zero UK tax on tens of billions of (very high margin) sales.

We've had 6 tech companies breakthrough billion $ threshold this year.

We're the biggest tech company creator in the EU.

Sounds more like you've got a small (or incompetent, depending on your outlook) source of information.

In the past year, the UK has added six billion-dollar tech companies worth $12.4 billion to its club of 26, more than any other European market, and has produced the highest number of billion-dollar companies in Europe since 2000 – contributing $64 billion to Europe’s $240 billion ecosystem of billion-dollar tech companies

https://www.information-age.com/tech-titans-europe-end-big-t...

Not talking about market capitalisation. Talking about profits. The UK doesn't have anything on the scale of FAANG generating enormous (taxable) profits. We are literally 2 orders of magnitude off.

I wonder if it would be viable to bar the Hollywood accounting style loopholes of profit losing subsidiaries for everyone - specifically barring licensing from profit margin calculations and market rate for other services. Like if it has $5M of marketing fees there had better be equivalent of what $5M of marketing could actually get as opposed to just growing it to eat up all profits.

I've heard about such limitations with some convoluted options like charging rent to your corporation being bound to market rates at maximum.

And that wouldn't be the end of the world for bricks and mortars retailers now, would it?

The UK is seeing the high street decimated with many chains closing scores of shops, or closing outright. That's awful for people who can't, or don't want to, shop online - and also leads to less tax being collected on the whole as Amazon et al siphon their money to places where they've managed to strong arm a sweetheart deal.

> That's awful for people who can't, or don't want to, shop online

The obvious counterargument is that a 2% increase in cost on almost everybody amounts to a pretty awful amount of disutility when you aggregate across the whole population, and it's regressive as it hits low-income people the hardest. But because of the boiling frog effect, nobody notices that sort of hurt enough to complain about it.

I'm not taking a pro-Amazon position here; just pointing out that a gross-receipts tax is a pretty blunt instrument.

Meanwhile it hurts people like me who don't like to buy stuff in stores, because they always have a smaller selection and it takes a lot more time.

President Trumps threats to leave the international postal union would hurt the low margin Chinese companies more - as they currently benefit from low cost shipping deals agreed decades ago

Any supremely-profitable industry is bound to be taxed sooner or later, esp if its foreign.

I haven't seen any details though. Is it a % of ads sold? Or some other mechanism?

It's going to "happen" in 2020. Plenty of time to change their minds...

It's nice to see they can plan a road map for tax but for brexit....

It sounds good but something tells me it will end up increasing prices for consumers.

They did have a plan for Brexit but I think it amounted to 1) eat cake 2) still have total access to mainland Europe's cake markets too.

On a more serious note a tax plan is easier because the government only has to negotiate with itself while Brexit actually involves outside countries who are disinclined to give the UK a cushy deal.

I know it's different things but at least this has a road map of what is planned and when by.

Why would that bother anyone but the customer? Tech giants will just add it to the tab.

People have no idea how much digital service is worth so if they want it, they pay whatever is the price. I don't think 2% (or even 10%) price hike will cause them to not advertise online their one simple trick to improve health of your joints. What are they gonna do? Print newspaper ad?

Sure still achieves the UK.Gov goal, raise additional revenue, don't directly impact citizens.

It will directly impact people who buy advertisement online in UK because Google and Facebook just raise price by 2% for them.

yep sure and I'd guess that not many individual UK citizens purchase Google or Facebook ads :)

Companies do, but it's just a small bump in their advertising revenue.

The UK gov are alll about raising taxes that aren't obvious, so they can raise more cash whilst claiming to be reducing things like income tax.

Remember the UK has a really low rate of corp. tax (19%) compared to most other countries, so hitting internet advertisers for a small amount of their budget isn't a big thing.

That's not how it works ad buyers are not going to automatically increase their budgets.

And how would that work? Google and Facebook could charge more for ads which impacts mostly the advertisers, Amazon could in fact increase the prices impacting average Joes in the UK, but they would lose the advantage over smaller competition unaffected by this kind of tax. This is a globalisation tax that would most likely not affect "normal" people while still bringing quite a few pounds to the national budget.

> Google and Facebook could charge more for ads which impacts mostly the advertisers

How does that work? There is no level of indirection after which the money somehow comes from some magical place. This is still paid for by the consumers in the end. Somebody pays for the ads and the cost of that is factored into whatever the ads are for.

The advertising fees would rise which would either increase the portion of the advertising budget or reduce the advertising scope.

That said there are limits to what can be passed on without harming profit margins given other constraints like price points.

You cannot explain to the "tax more" crowd that tax can only ever confiscate a part of existing economic activity. I don't know why, it's a perfectly simple and straightforward argument, but their argument is just "x pays a%, y pays b%, why doesn't everybody pay max(a, b)% ?". It's jealousy, really.

Now that's not to say there isn't merit to both sides of the argument that some level of tax is too little and some level is too much. But not in the UK. The UK is firmly in the tax too much camp, as is most/all of Europe.

If I want to pay someone to, say, be my lawyer. And the person I hire for that wants an iPad, then of every 1GPB I pay to the lawyer, 23 cents ends up as revenue for Apple (making revenue for apple is WHY that person wants to be my lawyer, in other words, it's the reason for there to be any economic activity at all in this relationship). 77 cents ends up in the governments' hands to spend (of which, I might add, the government spends about 104 cents). That's ... just not reasonable (and also why every UK company lawyer has to defend all the executives for free to keep his job, to cheat this system)

Discrimination aside, isn't the UK providing the favorable tax haven to begin with (Double Irish)?

Also, how is revenue classified? If someone buys ads on Facebook do you now have to count and prorate clicks based on where the user comes from?

And now with GDPR (or whatever the equivalent is in the UK) What if the user does not accept tracking where they come from? Then there's the clause that says the business must track the minimum needed to comply with tax law even if the user does not opt in. So there goes privacy.

Seems like there are a lot of laws that contradict and negate each other. What a mess.

> Discrimination aside, isn't the UK providing the favorable tax haven to begin with (Double Irish)

The Republic of Ireland is not part of the United Kingdom

That´s not... exactly... what was being referred to.

https://en.wikipedia.org/wiki/Double_Irish_arrangement

I'll repeat the parent.

"The Republic of Ireland is not part of the United Kingdom "

The Double Irish arrangement refers to the Republic of Ireland, a separate country to that of Northern Ireland, both of which can be found on the island of Ireland.

There are Bars in Boston where I would not make that statement :-)

More seriously the split between the north and south is no joking matter in a number of places.

TL;DR:

Uk wants to pass a new sales tax, that applies only on "established tech giants" that generate "at least £500m a year in global revenue" of 2% of sales made in the UK.

Revenue tax not sales tax maybe you should have read it.

Revenue = sales = top-line.

That's not what a "sales" tax means a sales tax is levied on the consumer not on the turnover of the company eg VAT in the UK and the various "sales" taxes you have in the USA.

Good. It is becoming more and more apparent that there is a toll on society created by these companies. They have a negative impact on our domestic businesses (traditional brick and mortar, as well as home-grown digital businesses) not to mention our mental health and even democracy. By taxing them, hopefully we can go some way to reversing some of that damage (although I'm less hopeful of that...).

Also, what seems to have provoked this tax in the UK specifically is the tendency for such companies to artificially lower their profits to more or less avoid UK corporation tax altogether by claiming that sales of UK clicks to UK companies handled by UK based account managers were in fact completed in Ireland...

Exactly. I'm no fan of the current UK Government, but their hand has been forced. I'd rather all countries get together and ratify a standard for where profits can be realised. Hopefully this will open the dam for the others to get involved.

That is what Philip Hamond (last sane person in the cabinet) said - that of there was international agreement they would go with that.

There was a recent article highlighting that Ed Sheeran paid more in tax in 2017 than Amazon or Starbucks...yes, I don't think the current system works well - https://www.fastcompany.com/90251523/ed-sheeran-paid-more-uk...

The only possible criticism of the UK govt is that they made this bed for themselves by aggressively narrowing the tax base.

Although isn't it the case that the actual product is almost entirely developed outside of the UK. It doesn't seem unreasonable to repatriate money to pay for that. It is exactly what happens to physical products that are manufactured overseas. The correct way of taxing that is VAT.

Companies aren't repatriating profits to Ireland or Bermuda because they're developing the product there...

If you built a software product, would you consider your customer service & sales staff part of that? How about the people who ensure the systems are kept running? How about the accountants & lawyers who are eligible to practice in those jurisdictions and know the relevant tax codes/laws?

Do you think your software product, if made in USA, would be bought in France or Germany or Italy or anywhere but North America if you did not have someone who worked in that timezone and spoke that language and knew that culture?

Would those people who did that role be considered an important part of your company, considering you would not have anywhere near the same number of sales from those regions if they did not exist?

To pre-rempt the "I'd outsource it" response. When 7+ figures of revenue(& profit) are at stake, I can assure you that you would change your mind. Or if you would not, the new guy the board hires to replace you would.

VAT only applies to consumer sales - if they sell to businesses, there's no VAT to collect.

So you see it as a tariff? Do not let the more efficient foreign player in, to let the local equivalent develop?

Economically it does not make sense, if we are looking for a global optimum (literally); this is the standard free-trade argument.

It may make sense if there's no global trust; you don't want to depend on products of a potential unfriendly party, or let them have a large foothold in your economy, just, well, in case.

But here I (also) see the desire to milk a cow that can be milked.

I take your point, but I think you've over simplified the situation. For example, in days gone by, the UK tax system happily forced retailers to pay vast amounts of tax ("business rates") based on the shops they occupied in town centres. This was part of the total tax burned on retailers. Online retailers avoid this tax and thus could be considered to have an unfair advantage over bricks-and-mortar stores.

Yes, excellent point. It's not correct to say a company is more "efficient" in the market simply because it can undercut another company due to being taxed differently. If the global companies are able to still compete effectively while paying the same taxes, then they are still welcome to displace local businesses.

Can any advantage even be fair, under such an angle? If it's legal, it's "fair". Hence, laws are being updated to level the playing field, that is, to remove the advantage which to the lawmakers looks excessive (as in making traditional industries fail) and exploitable to the benefit of the local economy (they will pay because it's still profitable).

There is no global economy. The mere notion of global doesn't make sense since everything is local.

Education and healthcare are provided locally "for free", assumed to be covered by taxes. It doesn't work if everything you ever pay or buy is magically transferred abroad and skip tax collection.

Of course, these are basic services provided in most of Europe. It may be seen differently in a different location that doesn't provide these.

It's not that the foreign player is more efficient, so much that the multi-national player is avoiding taxes that the local company has to pay, by virtue of accounting games, which distorts the market.

This is an attempt at redress.

No, I see it as "if you're going to pretend your UK profits are nearly all made overseas, we're going to tax your revenue instead".

Which is worse luck if you're a business with real unit costs and thin margins like Amazon than if you're selling near zero marginal cost ads or software, but it'd be a lot easier to sympathise with Amazon if they'd paid a bit more than £1.7m in tax in the last year.

Nobody expects the outcome of this to be a local equivalent developing, but they do expect companies to avoid less tax.

> They have a negative impact on our domestic businesses (traditional brick and mortar, as well as home-grown digital businesses

I have a home grown, UK based digital business. This is going to affect me negatively more than the continued existence of the FAANG companies.

You do more than £500m a year in sales in the UK?!

Sorry you're of course right. I did a bunch of research before starting my company to work out whether HMRC had a tax on digital goods (currently it doesn't even have this concept at all) and understood they'd changed that, for all companies.

A level playing field makes sense, and domestic companies are at a disadvantage if their local profits are taxed while foreign companies' "local profits" are taxed offshore at a lower rate.

That said, this doesn't level the playing field, it tips it towards local companies. The tax on business revenues should apply to domestic companies as well, and it should apply to businesses of all sizes. If it has to be netted against taxes on earnings ("tax is the larger of...") to make it not punish local businesses then they should do that.

Anything else harms the consumer by distorting the market.

There's absolutely nothing wrong with a government tipping the playing field towards local companies.

There’s totally something wrong with favouring local businesses owners at the expense of local consumers. The benefits accrue mostly to people with incomes far in excess of the average.

Local business owners hire local employees.

Yes there is, especially if it results in the consumer paying more for a product. That's the government taking (additional) money away from you, and handing it to a local company.

If that doesn't make sense, an example could help when you want to buy a hypothetical WidgetBox.

Amazon WidgetBox: $100.00

Local WidgetBox: $102.00

After the added tax on Amazon, now you have no choice but to pay $102.00 for something you could previously pay $100.00 for. In business speak, it's call "screwing you" - in the article it's dressed up as "helping local businesses (screw you)".

Apart from the local company's payroll makes up $50 of that cost, of which $20 goes to taxes, so society is still up $18.

It's far more complicated than you make it seem.

> Yes there is, especially if it results in the consumer paying more for a product.

I don't see why ever-decreasing prices seems to be your metric for good here.

I voluntarily pay more for certain things because it is a more ethical choice in those cases.

2% does not tip it, it's actually a pretty low, but still sane, figure IMHO.

The same country that will not lift a finger to stop money laundering from around the globe, being used a the basis for offshore tax havens, and non-dom shenanigans will quickly do tax to the hilt.

Yeah fair call this. Their property market is essentially black money bank.

https://twitter.com/hmtreasury/status/1056942074271072258

I’ll remind every person here that you are taxed on your revenue, not your profit. It’s worth thinking about because it’s not always been the case in the past that companies had more rights than individuals.

You propose taxing a company on their revenue and also taxing individuals when they realize their capital gains?

Such a high level of double taxation would kill all investment in this country overnight

That's actually not the case - expenses related to earning your income are usually (with a few notable exceptions) deductible. Also, capital gains are a real thing, and you are taxed on realized gains - not the full amount you sold for.

If you're employed in the UK there's very little you can deduct - mostly it's salary sacrifice arrangements like pension, childcare vouchers etc. The only real deductible I can think of at the moment is mileage allowance, and since very few people do anything but commute to and from their place of work, they can't claim that. It's only if you're a salesperson or area manager driving your own car.

If you're self employed however the picture is a little different.

When thinking about the UK rolling out new taxes, this inevitably comes to mind: https://youtu.be/pmgcylAxjfY?t=118

The reality is that the large US tech giants this is aimed at are essentially mercantile companies. Paying little or no UK tax on significant UK revenues, which are then remitted via tax efficient structures to the US parent. Profits are a Will-o'-the-wisp which appears and disappears in whatever tax jurisdiction is most efficient at the time. For this reason I don't see corporation tax (which is <10% of total tax receipts) being something future governments can count on (unless that government is home to the mercantile company). TLDR: Find somewhere else to get the 9%.

Gotta pay for the Brexit fuckup somehow.

I was scared for a minute. I thought this was about taxing consumer for accessing internet.

It's fine. It's about taxing giant corporations who are evading taxes.

It'll likely trickle down to the consumer... the consumer will end up paying somehow.

This only happens in highly competitive markets like say, cotton t-shirts, gasoline, or wheat. It is not like Facebook is now going to have charge more for a social media account to stay afloat among a sea of other social media companies. No, Facebook (and Google, etc) will have to pay their corporate tax like they should. Although I think the new US corporate tax code is already going to prevent the current evasion schemes until, of course, new ones are invented.

That's a line pushed by large corporations to convince people that money saved through tax avoision is somehow benefiting the consumer. Companies should pay their fair share of tax.

Moreover, the argument makes little sense when dealing with companies like Google and Facebook. The average consumer isn't paying for access to Google Search, Gmail, or Facebook...

> It's about taxing giant corporations who are evading taxes.

I wouldn't say "evading" unless what they are doing is illegal. If they are following the law, and the law allows what they're doing, then it's not tax evasion.

If you're not happy, then change the law to actually make it illegal, and then if those companies are still doing it then you can call it tax evasion.

Pointing out this distinction makes it sound like it's fine as long as it's legal. It's like when people say "It's not terrorism when a state does it because terrorism is defined as non-state political violence". It's technically true, but largely besides the point.

> It's like when people say "It's not terrorism when a state does it because terrorism is defined as non-state political violence". It's technically true

Except that it's not; usual definitions of terrorism don't exclude state action, and indeed state action is of particular concern with regard to terrorism, to the point of being frequently cited as justification for state-on-state warfare in recent decades.

There's a difference between killing people and (legally) avoiding tax. I care about innocent people dying, but I couldn't care less that greedy governments get less money (they don't deserve any money to be fair, considering how bad of a job they're doing).

Are you American because it sounds like you're an American and you hate your government?

There are countries where taxes actually pay things like healthcare, unemployment benefits or retirement and not financing wars in the middle east.

Are you European and send in additional money to your revenue collection agency?

No? You're avoiding taxes (or evading taxes) by choosing to pay the lowest legal amount you're obligated to. Therefore, you must be American. What a paradox!

I mean, the UK is literally changing the law to require them to do it because they felt that the companies weren't paying their fair share, so it seems like they felt that something wasn't quite right.

The fact that they changed the law rather than used the existing one makes it crystal clear that it was legal.

Not really. The GAAR makes many "technically legal" schemes illegal. But it requires expensive and long litigation by Hmrc to prove it.

Passing a new law short circuits the process.

And the GAAR also by their own admission covers rather less than you imply anyway which is why litigation is likely to be involved. The official guidance[1] specifically cites circumstances which are not (in HMRCs view) caught by it (eg nominating a different residence every month as your primary residence in order to benefit from additional reliefs which extend for longer than the month on multiple properties and effectively completely avoid capital gains tax) which you might have thought would be caught.

[1] https://www.gov.uk/government/collections/tax-avoidance-gene...

Not really. Often new laws are simply more specific, making prosecution easier.

For example a "noise nuisance" law covers a subset of offences that a "breech of the peace" law does. Other subsets could be covered by blasphemy laws, profanity laws, etc..

Along with being more specific it's a chance to declare a moral position and appear to be doing new things to protect citizens/subjects.

They aren’t evading taxes. If they were evading they’d be prosecuted rather than a new tax being introduced. They’re avoiding. Like we all do with our ISAs and pensions.

If you misuse the terms it makes it harder for everyone to talk precisely about the issue.

>Like we all do with our ISAs and pensions

I think it's a bit disingenuous to suggest it's like that, because the average person is not worth hundreds of billions of dollars.

Sorry but you cannot in good faith compare the impact of tax avoidance by Amazon to an individual's pension.

The problem really is that the loopholes are inaccessible to regular small businesses. A lot of small companies _do_ pay a fair level of tax which makes it difficult to compete with a company that doew not.

It’s fine to debate morals.

But it’s important to make a distinction between legal and illegal.

You’re accusing them of having a different opinion on a moral isssue to you. That’s one thing. Accusing them of doing something illegal - that’s something else. And it’s now super clear that it’s legal, since we’ve decided we have to introduce a new tax to tax them.

My issue isn’t with the debate - it’s about being precise. If you say everyone’s evading then you ruin the power of really saying someone’s evading. You’re crying wolf.

I don't get it. On the one hand you say you just wanted to make clear the distinction between the two terms, on the other you claim when facebook and Amazon are avoiding taxes that's the same as when ordinary people try to save for retirement.

If you didn't want to be quoted on that you shouldn't have put that comparison in.

I don’t mind being quoted on anything.

It’s either legal or it isn’t. For one you can prosecute, the other you can only criticise. It doesn’t matter if it’s a single person or a massive company. Either we have made the solemn decision as a country that it is prohibited with the force of the state punishing you, or we haven’t. It’s a huge difference.

Think about it like this. The next time someone is really evading tax and you call them out on it people will think ‘oh well nothing we can do about that without new laws’ because you’ve conflated it with avoidance this time.

Look, we disagree on how tax avoidance should be dealt with on a personal and a corporate level and that‘s fine. But you‘re constantly conflating a valid point (which is a proper distinction between the two terms and which I agree with) with your opinion on the matter.

If one were less charitable you could call that a strawman.

It's not disingenuous, it's exactly the same motivation, just operating on a different scale.

Tax avoidance is not the same as pensions and ISAs.

Pensions and ISAs are tax planning. Using government mandated tax reliefs for their intended purpose.

Tax avoidance is using government mandated tax reliefs for unintended purposes.

Try not to misuse terms, it makes it hard to talk precisely about the issue.

https://www.gov.uk/guidance/tax-avoidance-an-introduction

Your link just confirms this is avoidance and not evasion.

They aren't necessarily evading taxes. When you participate in an ISA or pension program, you are using the tax code as intended. When a film production company decides to film in a given location due to favorable tax credits, that's using as intended. When multinationals set up shell companies in Ireland, the Caymans etc. whose sole purpose is redirecting revenue to avoid taxes it's arguable that in many cases this is evasion rather than avoidance. To the point that there are countries going after companies for back taxes related to some of these schemes now that its been made public and obvious that there were no 'real' business activities occurring in those locations other than minimizing taxes.

I believe the GP's incorrect 'by the letter' use of the term was intended to point out that this kind of avoidance is more like evasion in that it is against the spirit of the law.

I give it 20 minutes before one of the big accountancy firms find the (totally unintentional) loop hole to evade this tax.

It's getting much harder since you have to register tax evasion schemes now... But probably yes.

In the other hand I can't believe it is expected to raise so little.

Tax avoidance

I imagine if you registered your tax evasion scheme you would receive a knock at the door in short order

The UK is working really hard to close down tax planning. Its practically dead already for personal tax planning.

They'll probably back down when companies threaten to leave. Like Amazon did when threatened with the Head Tax. Or how Dole left Hawaii.

I don't think they want to do it anyway, they have been lobbying for international cooperation on this and other countries have been dragging their feet. My guess is this is meant to hurry things along a bit.

This isn't like threatening to move offices, which doesn't cost them revenue. The UK is one Amazon's largest markets. Facebook and Google both make billions of dollars in sales in the UK. They're not going to forgo that.

It’s just another sales tax. Amazon already deals with hundreds of different tax rates in different jurisdictions. They’ll just price it in.

Amazon's not always the cheapest as it is. If it prices it in, then competitor's start to look more attractive; which is exactly the point.

I wonder if the recent "link tax" forced into the proposed EU copyright legislation has something to do with making this "digital tax" work in practice. Wouldn't be the first time that copyright law is used for something completely different to what it was meant for.

Nope its on faking low profits aka tax avoidance

This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax. Sure maybe the local companies could then undercut Amazon if they somehow don't have to pay the tax, but eventually they'll just raise their rates to match because why give up the profit margin if they don't have to?

It doesn't matter anyway, the tax will never happen. They're just using it as a point of negotiation for a new US trade deal after Brexit.

This is a great argument for breaking up these tech giant monopolies.

Statu quo is also hurting the local economy. All local businesses have to charge taxes to customers, they are at disadvantage to foreign based companies.

It will not “hurt” people in the UK. If that tax passes through and is applied, it’s possible that the price transfer will only apply to UK residents. In that case, the Treasury will have more money to spend on services for UK residents which would hardly be hurtful.

Sure but then why not just raise taxes on UK citizens?

The whole point of this tax is to penalize the "tech giants" which happen to all be American, and it won't really do that.

Those companies are 100% American: they rely on technologies like the Web invented by an English scientist working at the frontier of France and Switzerland. They rely on algorithms invented by Russian, French, German scientist. They hire students from university around the world, to be engineers, managers, salesperson for clients also from everywhere in the world.

If those companies want to keep on hiring people without staggering student’s debt, they need to contribute to the local economy. I know they already do that (I worked for such companies for long enough, and paid a lot of taxes locally) but my point was twofold:

- paying more tax is often a good thing for the people who are going to benefit from the corresponding government services; that is certainly the case in the UK;

- if your company develops, promotes and sells products in a country, it makes sense to also pay added-value- and profit-tax there, and not avoid tax by claiming that the value was created in a tax shelter like Suriname, where you have no activity.

I take it you have never encountered the competence of a U.K. government-run service?

I grew up in the UK and I’ve lived there for the last four years. I’ve lived and paid taxes in six other countries so I’m happy to compare.

There certainly are possible improvements, but it’s overall very well managed and there are here many aspects of how civil servants are trying to improve at the same time the cost, the efficiency, the quality but also how to think about the service that touched me. The National Health Service, for instance, is a little bare-bones but the cheapest developed health service there is. The Land Registry is incredibly helpful, especially when you depend on reliable, sensical data for your business. The BBC is expensive but peerless. Transport for London, for all its sins and there are many, transport more people, faster, further, more reliably than anyone; it’s heavily dependent on having redundancy rather than reliability but at least it works often enough. Social services are minimal and insufficient, but nowhere else can people find jobs so easily if they are motivated and willing to learn. That is also not just due to companies, but also government services that manage to let people employ others without making it too difficult.

I sincerely believe that the same system, without the stress that the Tory government is putting on the budget for education, police and health, could be world-class.

>Those companies will just raise their prices to cover the tax

How exactly will Facebook raise prices in a way that it will hit the average consumer?

More ad/content ratio

I’m pretty sure FB already maximizes their profit per user based on what they think the user can tolerate, and I doubt it can be arbitrarily pushed further on a whim.

They'll raise prices on advertisers in the UK, who will subsequently raise prices on consumers.

“Why weren’t you already charging more, if you could?” Would be my obvious first question at that point, if I was a shareholder.

Because the competitive equilibrium doesn't allow it unless the cost curve shifts for everyone at the same time.

They are not shifting for everybody at the same time, they are shifting only for “tech companies”, who are currently perceived (rightly or wrongly) as undercutting “normal businesses” in an unfair way. (Scare quotes because in practice I don’t trust the UK government know what they mean by the words).

Well, then tech companies will raise prices and product makers will buy fewer ads, leading them to increase the ad load, or similar. It demands on the demand elasticity.

> How exactly will Facebook raise prices in a way that it will hit the average consumer?

The average consumer is also a worker and depends on an employer that will be paying higher advertising costs for the same benefit.

And now %X of that cost will return to the economy instead of going overseas. Ad costs should stay roughly the same, since they are the result of bidding. It's not like Facebook leaves $2 on the table and says we'll keep that there for you guys unless we get taxed.

When something has near zero marginal cost, it is all just about demand. The only scarcity is caused from other bidders.

Why should a country send %X margin on all of their consumer products overseas (via ad costs) to someone who is selling their own citizens' content and capturing the users/locking them in with network effects? There is a lot of innovation at Facebook et. al., but they get a massively outsized portion of the network's value when you compare what they put in vs. what users are putting in.

Where it could hurt would be a service that can barely break even using ad revenue and goes under as a result. But for big corps with network-effect lock-in in their segment, it seems like a net win for any country that does this.

More to the point, if Facebook isn’t selling anything to UK consumers, will it pay any tax?

It's selling ads. Its consumers are the (UK) businesses buying those ads.

If this is a tax on sales, rather than impressions, they could prefer international sales by 2%. If this is a tax on views, then this is harder.

Facebook could also raise the reserve price for auctions for UK ads.

Facebook has a payment platform with various products.

> They're just using it as a point of negotiation for a new US trade deal after Brexit

I suspect it's got more to do with countering Labour

The tech giants are free services! Adding 2% to the price of Facebook leaves it still free!

I know it's a dogmatic talking point that you have to make to pretend that tax incidence is pointless, but it doesn't work here.

> The tech giants are free services!

No - See [0] which is Facebook's own page about their charges. Either Facebook will soak the additional costs up and / or pass them them on their paying users - the advertisers. Who may in turn pass the increased ad costs to the buyers of the advertised products / services and/or cut internal costs. Something like that.

[0] https://www.facebook.com/business/help/201828586525529?ref=f...

If Amazon raised their prices to cover the tax they're not currently paying High Street retail shops would at least stand a fighting chance against them.

You'd still have to leave the house, and look up reviews yourself.

" They're just using it as a point of negotiation for a new US trade deal after Brexit."

Is this really that useful in that case? Not to say the UK is irrelevant, but after leaving the EU the UK won't be as big a market, is a 2% tax on a market dominated by the US really much of a threat to, anything?

Not to say the tax has no value at all in other ways (revenue) but as a negotiating tacit, not sure what it does.

> This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax.

If amazon could charge an extra 3% without losing customers to other suppliers, why wouldn't they do that with or without the tax?

Currently if amazon charge £10 and argos charge £10.20, amazon wins, if amazon charge £10.30 (to 'recover' the new tax), argos wins.

Is Argos exempt from this tax? They certainly exceed the 500m in revenue threshold.

If they are, this tax seems to be more like a tariff than not.

Argos isn't an online market place.

A rational company optimizes profits, rather than just revenue, when your costs go up, you may be interested in raising your prices, even if it reduces the number of items you sell, because part of the revenue has to be paid to someone else. You can see this trivially if a business only has a 1% profit margin on an item.

It's likely going to fall on some combination of business and consumer that we won't know a priori.

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