G20 agrees to push ahead with digital tax
reuters.com
reuters.com
This is kind of surprising in case of Britain. As long as I remember both Cayman islands and City of London, two of the best known tax havens, are British territories so Britain could prevent tax evasion easily.
When it comes to "taxing" those pesky Facebooks and Netflix globally, I am not sure I understand justification for this.
Companies pay taxes because they use resources and services provided in a given country (roads and other infrastructure, police protection, courts, etc.). Facebook does not use any resources in, say, Belgium, so why it should be taxed there?
If a company located in US, like Facebook, avoids paying taxes there (strange that someone who pretends to be rather left leaning person like FB owner escapes taxes, but that's a different story) it is the US problem, not a global problem and they should sort this out somehow - for instance make FB to pay directly for services/resources provided by the state, maybe in the global economy corporate tax does not make much sense any more? I can imagine that Facebook has some fake office on Caymans, but I hardly believe they would relocate there data centers and employees to avoid taxes, so making tax proportional to number of employees in the given jurisdiction, size of the office, used electricity, etc. might make sense.
That's one view. Another is that they pay taxes simply because they have resources that society needs. If Facebook is trading in the UK (benefitting from access to the UK market, then I think it is reasonable that they pay tax in the UK).
Every rich person in the UK is incorporated in British overseas territory. Shouldn't they be the first to be taxed ?
Examples of X: MrJet and Trivago.
The only problem is usually: why the hack the Alaskian company should pay. But for our global companies the situation is different: when they want to charge someone in France for services, then France has a way to collect :).
Legally speaking, sure.
Morally speaking, it's not so clear. Wars have been started because the rulers subscribed too heavily to your line of reasoning. Being taxed into oblivion is generally considered a damn good reason to kick out the current government, peacefully at first but violently if necessary. While I don't think Britain and France are anywhere near a breaking point with respect to taxes it's worth remembering that a breaking point exists.
EDIT: downvoting me doesn't change the fact that those 2 don't make their money by charging you and me their users, they charge advertisers who want to show us ads and get our data. If a cost needs to be passed on, it will be passed on them.
This is more anecdotal, but my time at a logistics company has shown the opposite to be true. Every cost increase, whether it was a tariff or increased fuel surcharge, was passed on to the next company, and to the next, down to the end consumer themselves. Every increase in vendor/supplier price was reflected almost immediately in the next invoice as our CFO instructed us to maintain our profit margins. There was even a multiplicative effect as each company applied their margins onto each price increase, such that a $100 increase in fuel costs could be double or triple that by the end.
It is possible that companies with massive margins might be willing to bite the bullet, but I doubt the advertising industry is full of companies with big margins. Perhaps the tech companies at the top, but definitely not the more numerous and smaller companies. For this reason, I find it extremely unlikely that "the end user will pay nothing". The end user will pay something, but the size of that "something" is certainly debatable.
Doesn't have to use services/resources. It can just pay a tax for the privilege of operating in the country.
In the case of sales this would be more clear cut. But Facebook profits from user in a country through ads, which do not necessarily need to be purchased in that country. It's just that these things antecedes the internet and the omnipresence of digital goods and services.
How about admitting that the U.S. tech giants unfairly use their monopolistic powers because the Internet has become a winner-takes-it-all economy.
The "competition" is pretty nominal at this point. The areas of competitive overlap are much smaller than the areas of monopolistic market dominance.
None of these companies are taking it all.
Please give some examples.
(except perhaps Russia)
The EU doesn't disagree with me. Some people involved may be asking questions, but that doesn't mean that the EU disagrees with me.
If the EU disagreed with me we'd know, as they'd be taking action against these companies.
Amazon has 50% of all e-commerce spend in the US.
Netflix put Blockbuster and every other movie rental store out of business. It currently has 50% of all video streaming traffic in the US.
Google has 80% of the search market.
I'm not so sure about what Apple monopolizes, but they do have a duopoly in the app store space with Google.
Wrong way to think about this. If you talk about advertising monopoly, sure. But you'd be hard-pressed to make an argument on a monopoly of free products.
> Netflix put Blockbuster and every other movie rental store out of business.
That's because Blockbuster was, quite frankly, shit. They failed to adapt to the internet. So what? Times move on. Netflix is far far better for consumers.
Something isn't a monopoly just because it's popular.
If you're a state missing out on tax because the options that provide it to you are unpopular it sure is.
This isn't a discussion about consumers.
So 50% == all?
Monopolization just happens to be the natural state of any system that has network effects and where all costs are front-loaded (I. e. write the code once, scale to billions of users at, if you squint, zero marginal costs).
But neither of these issues are the motivation for calls for a “digital tax”. Nor is economic nationalism. There have always been industries that were dominated by one or just a few countries: the US has media/entertainment, consumer goods manufacturing has almost entirely moved to Asia, etc.
What’s different about “digital” is that requires essentially zero presence or taxable activity at the consumers’ location. Nobody felt the need to tax Hollywood’s movies because a ticket to ‘Titanic’ in Austria may have meant 2€ leaving the country, but the bulk of it actually stayed in the local economy, as (taxed) revenue of the theatre, local distributors, corn growers, and breweries.
For physical products, this is even more obvious. French champagne served in a Billings, Montana restaurant is about 50% margin for the venue, 30% for the US-based distribution chain, and only 20% goes to funny mustaches people in striped shirts.
But it is fair to say: this is not only about taxes. This is also about countries gain control over global economy.
There's so many things I have to pay 20-30% more for in Canada (for ex: $150 for shoes that are $100 in the US) for ridiculous protective import policies for old non-core industries that do little to help the economy.
It's like the French vineyard sold all their wine at cost to an Irish holding firm, which then sold it at a markup around the world and booked all the profits. Except the vineyard also owns the holding company.
Neither the Montana buyer nor the French manufacturer are in Ireland, but that's where the money winds up and taxes paid.
If instead of making it more difficult to build technology products, Europe focused on making it easier maybe the would be able to provide some much needed competition to the US tech scene. They seem more determined to tear down value than create it though. In the end, it will be their own citizens suffering though lack of tech jobs available in their market (c.f. the going rate for a full time engineer in the US vs Europe), lack of innovative tech that caters to local needs and ultimately lack of tax revenue from local companies.
Funny enough, that's the two strategies that US companies/gov complain the Chinese are doing.
That said, there are a few big European players, such as on mobile games (king digital), network infrastructure (Nokia), etc. Just not as significant name brand value in the anglophone world.
This is kinda a bad example because Illinois still has a handful of plants left, although they're doing everything they can to push them out of the state as fast as possible, I selected them more as an example of a very high tax state than as a non-mfgr state.
The no physical existence loop hole is one worth closing, if you sell goods or services it should be taxed within the authority the sale occurs. That is common sense. However the second issue, what is digital and what isn't and how it can be taxed outside of the same point is a bit worrying, it basically sounds like, if we don't think you pay enough even following the rules you will pay this too.
just watch for the exceptions to pile on because you can guarantee members of the G20 will put them in there, similar to how states and cities whack large chains by looking at their full sales corporate wide instead of local sales.
"The first pillar is dividing up the rights to tax a company where its goods or services are sold even if it does not have a physical presence in that country."
I think this system already applies to paying VAT for digital purchases in the EU.
https://ec.europa.eu/taxation_customs/individuals/buying-goo...
I agree that it’s unlikely the g20 could or would do this tomorrow; I just think it’s what we should eventually aim for, and establishing principles against this so early-on is, imho, a mistake. But I guess I shouldn’t complain about what is, overall, positive news.
The _same_ way global corporations have accounting offices in every country they operate in, or the same way you buy standardized industrial components that comply with existing regulations.
It is not ideal, but getting paid overseas is far from the largest barrier startups have to face.
The second is that without the US, sanctions against these companies are unenforceable, these companies own the digital identities of those populations, so those countries can only enforce data laws at the discretion of US authorities. They are increasingly an arm of US policy.
The bargaining chips now are between the US wanting to regulate them domestically, and foreign countries wanting control and taxation. IMO, the deal proposed by US legislators will be, "deal with us, or them," where the US can offer protection and moderate taxation in exchange for more direct surveillance and policy levers.
The real danger is new foreign tax obligations will likely be leveraged to break up the founder dictatorship equity model and create a scramble for their data assets.