Europeans vow to pursue digital tax plans after US “provocation”
arstechnica.com
arstechnica.com
The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here.
So for purchases within Europe, the end consumer is already paying a 25% tax on the digital services provided by google.
But for good and services sold outside the EU, and remember that Europe have export driven philosophies, there is essentially no government revenue from foreign digital services.
Europe deserves compensation for buying American digital services in the same way America deserves compensation for buying German cars. It doesn't. Instead it needs to focus on a more competitive business environment where the money is cycled more times through the economy before ultimately making it's way to the government.
Every time I think to myself "Well, at least I'm not a libertarian," I read a sentence like that and after first getting confused (What does that even mean?) I then feel sad because I'm pretty sure if I parsed through the logic it would turn out that I after all more of libertarian than most of the people I know.
You've stated this as a fact, but it's not self-evident. There are obviously cases where some degree of "protectionism" makes sense. For example, you probably wouldn't want to let yourself get into a situation where another country supplies 100% of your food, if you could help it. As an extreme case, if you can produce all your food locally and it only makes your food 1% more expensive (than the tariff-less case), that's very likely a great trade-off.
Some degree of protectionism can make sense in certain circumstances. I'm not claiming it necessarily makes sense in this case (could very well be a terrible idea), but I think you'd need some evidence or reasoning behind the claim that it's definitely a bad thing for Europe.
This isn’t in any shape or form comparable to VAT this is an import tariff.
That is undeniably one aspect of it. However, I think the other one is that digital services have become a larger part of the world economy and they are structurally unlike anything that existed when the current rules of taxation were devised.
Traditionally, services required people on the ground and local subsidiaries that were subject to taxation and regulation. For instance, you can't run banking and insurance services for European customers entirely from the US. Trade in goods always benefitted from geographic proximity as well, even without tariffs.
A situation where you can provide services to a huge number of customers on the other end of the world without any local representation or taxation of corporate profits (or other income) is historically relatively new and does in my view justify calls for reform of global taxation.
>They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff.
Claiming that trade imbalances as such are somehow unfair and need to be remedied is in my view nonsense, but it is an idea popularised by Mr. Trump himself.
You can't have it both ways unless you accept that mercantilist power politics is all there is and neither enlightened self interest nor principles play any role whatsoever. I think we can do better than that.
A time will come when the US is not the global digital products leader. I surmise that the US will then be very much in favor of digital taxes.
I also think they should call this a digital tax or apply it only to digital services. I understand that’s where the biggest impact will be felt but a minimum corporation tax rate shouldn’t depend on business type and I dislike the idea people are free to target companies for being “too successful”.
Because of Trump, US allies have to guard more corners than before. It's a serious problem and I think Trump is actually giving Russia/China an unfair advantage.
He has already destroyed the Asian partnerships against China that Obama started, he also got out of numerous Western partnerships because it wasn't his signature on it.
I would say that the problem is not Europe, it's 100% Trump. Allies won't back him since they can't trust him. Everyone knows he's trying to have as much as personal gain as possible. Even meddling in European affairs,. Eg. Ukraine for the clear sake of money).
Every time Trump suggests to help countries handle their affairs, you know he's going for the "pay Trump, get US military assistance" card, it's nuts.
The Western alliance since WO II can't survive in it's current form if Trump would get another term, they are all waiting till someone sane comes back. If it doesn't happen, it will become a serious problem :(
TLDR; If you wouldn't trust Trump as a business partner, how can other countries trust him. You can't unite/partner with a person like that.
Edit: if down vote. Please share something that Trump seems trustworthy without personal gain. I haven't seen any situation during his entire term, trying to redirect US-money to his pockets.
China on the other hand will eclipse the US significantly both economically and militarily, reshaping the world.
They were a lot stronger during the USSR and even then the call for democracy broke it up.
Europe has never been closer to Moscow. Important: Without firing even a single gunshot.
https://www.foreignaffairs.com/articles/united-states/2020-0...
For that reason if for no other, I think an American conflict with China is more likely than a conflict with Russia. China still has hundreds of nukes too, which is hundreds too many, but that's many times less than what Russia has.
To be clear, a direct war between any three of these countries would be a stupid, horrible idea.
This Russia obsession is bizarre
If you don't know what or where he will be next, how do you counter him?
Reagan kept the Soviet Union off balance to the point of dissolving it. He's considered one of America's greatest statesman today, but called a clown by the elites at the time.
The CCP should be concerned about the same fate if they trifle with Trump. They have given every reason for him to isolate that country.
Please don't mistake unpredictability to untrustworthy, ego-centrism and self gain driven behaviour. The guy clearly lacks any social decency that toddlers even know.
Reagan did this only as a strategy to USSR, but Trump is clearly influenced by self-gain and ego-centric. He is very predictable, if you use that as a variable.
Reagan also supported anti-communism countries and saw the strength in allies. Trump stands alone, every where he goes and doesn't have the brain capacity to lead a country.
I think you haven't been paying attention the last months. The US has never been this divided, Trump resembles a con-man/lunatic a lot more.
Ps. A divided nation is a weak one.
Didn't surprise me
> Trump's power as a statesman is his unpredictability
As said earlier
> Please don't mistake unpredictability to untrustworthy, ego-centrism and self gain driven behaviour.
Basically, she was just presenting it as if she's babysitting a naughty kid.
So the way to counter Trump is to make obvious the irrelevance of what he's saying or tweeting at any given moment, because he might change his opinion an hour later.
Starace rode a horse.
Reagan rode a horse.
Putin rode a horse.
Le Pen rode a horse.
Kim rode a horse.
Kadyrov rode a horse.
Johnson sat on a horse.
Bolsonaro rode a horse.
Equines have not much cortex, but they do prefer their allies reliable.
(the counter argument here would be Animal Farm's Boxer. We'll all discover which model had a better fit, later this year.)
https://www.economist.com/special-report/2020/06/18/who-runs...
Just one of many examples.
You will indeed see it in November, not long anymore :)
Edit:
> My book doesn't come out until later in the summer, but I'm going to tell you now one thing that you'll find in it: all of the reporting indicates that Barr is involved in the dubious funding of the Trump 2020 campaign by foreign sources. This is all a lot worse than you realize.
Perhaps sooner :)
Trump is the most failed businessman ever, he burned through all of daddy's money.
No sane person ever gave him any credibility after following him. Eg. When he tried to influence the stock market consistently in 1987, they just started ignoring him.
He's just a one-trick pony, trying to do the same thing over and over again on a bigger scale ( he has some experience with it by now).
But the only consistency in his life is his failure.
Honest question: why? Why should Europe unite with the US against China?
I don't mean this as a challenge, I'm not trying to argue either way¸ I'm just curious about the reasoning behind your statement.
China is already harassing and sinking fishing vessels and trying to close the South China Sea. It may soon try to enforce an ADIZ over the SC Sea as well. Not great.
China is a growing aggressive power with cyber attacks across a multitude of countries and is running, like Russia, disinformation campaigns to undermine democracy.
It is in the interest of EU and the US, and indeed many countries, to have a rules-based international order. It is increasingly in the interests of the US as its power is in relative decline.
There is a reason that the next president will have to restore trust to the US as world leader and will have a tougher job than normal.
The US isn't the only potential ally against Chinese influence, why should Europe align itself with America instead of other countries?
Also, do you think there's no argument to be made for changing China's behaviour through a partnership?
Of course! All countries that value a rules-based order should ally, and that would include the EU, the US, India, Australia, and the many other smaller countries.
> Also, do you think there's no argument to be made for changing China's behaviour through a partnership?
Been tried. India was trying that by letting China have a stake in the economy. It hasn't ummmm worked out so well.
China uses the economy as a tool for its own political aims.
How can you not see that they are waiting till trust re-appears.
1 example: If Europe would really partner up, Trump would require Russia to be in the table ( G7). The current situation is nuts and it's not Europe's fault.
Ps. Trump has no interest in peace and prosperity. Haven't you been paying attention? The US has never been this divided and the current leader thinks tweeting is more important.
The EU cannot afford to wait that long. China isn't taking a pause on its aggression. Indeed, its exploiting the US under Trump, Covid, etc to move aggressively now.
> The current situation is nuts and it's not Europe's fault.
"fault"? It doesn't have to be your fault if the mess still ends on your lap. And Europe (and I'm a European) being neighbours with Eurasia doesnt have the luxury of huge oceans separating it from revanchist powers.
The thing about democracy is, it's a slow process.
Currently the best thing is to wait till November and China knows that.
They are exploiting the situation, but in contrast. I think the "one road, one belt" will fail if they continue their exploitive behaviour.
Taiwan is not an easy topic right now, because it's a bit too early. Since Western democracy under Trump is not United :(
As soon as we can, harder measures should be employed.
But the EU cannot wait for Trump to go away because if he wins reelection that could be 5 years away. We don't have that time. The EU needs to work with what its got - work with India, Australia, PacRim countries.
The problem is that the EU is itself split with different interests. Someone has to provide leadership. The US president is the natural option but Trump has not stepped up. Someone else needs to - it cannot be Merkel as she's stepping down soon, but we urgently need leadership on the issue.
But that would cause additional problems because of his ego and childish behaviour. So the best thing currently, is still too wait. It will happen if Trump gets re-elected.
It's not easy for someone new to step-up immediately as the so-called leader of Western democracy.
We all know that Obama and Merkel were potentials/it and Trump isn't. We'll c.
Ps. I think the current/best move to counter China already started. But it seems to bit below the radar currently.
Trump's only interest is re-election.
The US govt is a huge entity with may players of which the president is one, albeit an important one. The US military, State, academia and other institutions are all actors and they do have an interest in peace and prosperity.
Presidents come and go, but institutions remain and it is important that the relevant institutions adopt a common posture towards China.
It's European money, that is taxed. Not money earned outside of the country.
American corporations squeezing money out of European countries would be a more accurate description.
Basic economic insight :)
It's not like those European countries have a gun to their head. They can always just create their own Google, Apple, Microsoft, Samsung, Sony etc and stop using the products of foreign corporations. As a European, I personally very much like the services provided by these foreign corporations. I have many issues with them, but they are way better than (most of) the things I've seen made here.
That they can create alternatives is besides the point and has nothing to do with the digital-tax you were talking about.
I don't think the US (or the EU) can change Chinese policies on a list of issues alone. At least not without a tonne of backlash at home over the economic results. So the EU (/US) (plus a list of othets) either need to unite on those issues or accept them happening.
The issues I'm thinking about are: Hong Kong, freedoms in wider China, treatment of minorities, coronavirus and the recent clashes in India (I don't want to take sides, I just want two nuclear powers to stop shooting at each other). You may disagree with one or more of these issues. But I'd be surprised if you think nothing on this list warrents at least some international pressure?
I'm more than happy to admit that none of the places I've listed are perfect. And we all have bones to pick with each other. But right now we're squabbling over very little while China sets up camps and deployed troops...
They will do so when someone more trustworthy appears, but that is not the case currently.
You can't get trust, if you just take all pre-existing agreements and throw it out of the window.
After, i'm not an expert so I can't say that the system pushed by EU is the best idea or not.
The talks are mainly about an additional 5% in taxes on the European profits of Facebook, Google, Apple, Netflix, or Amazon.
How does a small tax increase for highly profitable companies get into the way of standing together against China?
Does the U.S. and silicon valley want to continue to manoeuvre and lobby to exempt tech companies from tax dues on revenues generated from digital attention and data gathered from users overseas?
And if so, does TikTok have to pay tax dues in return for similar revenues generated from U.S. user data?
The short-term balance sheet benefit to tech companies from avoiding overseas taxes seems understandable, but the longer-term implications of setting a precedent like that on an international stage seem less clear to me.
Lower corporate taxes have not resulted in "talent" moving to those countries. It's all legal maneuvering. This is tax evasion 101 (https://en.wikipedia.org/wiki/The_Laundromat_(film)).
However, in the modern world, corporations don't just use low taxes to simply route massive amounts of capital through low-tax countries without a net benefit for anyone — they are actually exploiting tax loopholes in different countries' tax laws against each other.
https://en.wikipedia.org/wiki/Dutch_Sandwich
If Google actually used your machine to port scan and automatically exploit other computers, would you be enraged?
Well, that's exactly what their black hat tax lawyers were doing on the financial side:
If the beneficiaries are bribed individuals in various governments, that would be another thing entirely.
I don't have an issue with a bank being based in the Bermudas or anywhere, for example; but in that case the HQ should really be based there. There is the same issue with ships registered using flags of convenience. Again, I don't have a problem with that per se. But if there is dispute involving your ship, you go ask Liberia to sort it out. You get your insurance from Liberia too; you get the picture.
Now, being French I'm also well-aware that French politicians are completely unrealistic and want to tax French companies doing business abroad in France, and American companies doing business in France, in France (notice the pattern?) There is a middle ground.
A bit of competition is always sobering.
They're just shifting money, not talent. Money which is then taxed at a very low rate (Apple International had an effective corporate tax rate of 1% in 2003, which was shrunk down to 0.005% by 2014) and in return doesn't really benefit the people of that country.
Can't see a reason why they wouldn't pursue this objective except US's objection, now the relation had soured anyway.