Out of curiosity, how do you define where profits are made when it comes to selling digital services? There is no physical movement of goods. Do you determine it based on where the software was originally written?
A digital good is handed to me wherever I am when I purchase it, so I pay taxes in that jurisdiction.
So if a company had $100B global revenue and $10B global profit and 0% of the profit was in France while 10% of the revenue was in France, then the company should be taxed based on the $1B profit that can be attributed to France based on revenue there.
Any other scheme seems it’s prone to creative licensing schemes and similar.
Why is that fair? In your example, if UK provided 100% of the labor shouldn’t UK get 100% of the tax to support social programs for that 100% labor?
Labor seems a better way to distribute and incentivize employment.
Work effort could be distorted in whatever fashion the country wants. They could declare all their work is done in some off shore 0% tax nation and pay nothing.
The UK gets 100% already from the income tax for their workers.
It’s not fair in the sense that the right countries necessarily get the tax money - but it’s certainly more likely than it is today.
It’s not fair in that it guarantees businesses aren’t taxed too much or too little, but it does guarantee that the profits are taxed somewhere which ends the incentive to shift the profits around.
Perhaps “fair” is the wrong word. I mean “fair” as in hard to evade overall, not fair distribution.
Then there is little or no revenue local to France.
You will have to go after financialization tricks, where healthy companies get loaded with debt, weird tricks with assets and all the stuff the finance industry comes up with that has nothing to do with core function of the company. Now imagine the powerful lobby you have to work against.
Food for thought: in a distribution chain you will find lots of small value adds. Take sea ports, there are loads of companies that handle import of materials or products. The price they charge for their goods/services are dominated by their import costs.
Consequently, it’s a terrible idea.
If anything bigger buisnesses have more ressources to avoid taxes. - Thus having everyone pay the same would lead to large companies paying more than they do now and small companies would be barely affected.
corporations aren't people, and I think you know this. "corporate personhood" means that a corporation has some (not all) of the rights held by individual people. it certainly does not mean that it makes sense to tax corporations as if they were humans that filed a W-2 each year.
what do you think would be solved by jacking up the corporate tax rate specifically? or put differently, whose pocket do you imagine this money comes out of?
the owners are already taxed on any income or capital gains they derive from ownership, employee pay is taxed on both sides, and retail customers pay sales tax. none of those taxes are necessarily optimal, but their impact is at least better understood than corporate tax.
If a global company like Google pays a global company like Apple $K billion to be the default search engine on iphones, should Apple consider that revenue to be all in the US because Google is headquartered in the US even though it's purchasing something that will apply to people in lots of countries? Does it matter if Google uses local corporations in a number of companies to each pay Apple? If Google pays through its subsidiary in the jurisdiction with the highest corporate taxes, can it force Apple to realize revenue there?
VAT in France on the subscription makes sense, but figuring out where the profit lies, is more nebulous.
A 3% tax on total revenue is the same as a 15% tax on the profits of a product with 20% profit margins.
It also discourages long-term investments, and further rewards short-termism (which everyone seems to dislike).
One of the biggest policy problems with revenue taxes is that the effective tax rate is much higher on smaller companies than larger companies. A large vertically integrated company like Apple would pay a lower effective tax rate on an iPhone than any of their competitors, giving them a natural advantage. These are pretty dis-economic policy outcomes and the main reason no one seriously considers revenue taxes.
Revenue is recognized as the size of a sales transaction. The number of sales transactions required to build and sell a given product can vary enormously based on the structure of the business, usually as a product of optimizing for efficiency and specialization. When you tax revenue, businesses have a large incentive to restructure their business to optimize for minimizing the number of sales transactions in the course of building the product, because revenue taxes essentially compound as a function of the number of transactions which is then a cost of business. The compounding is why revenue taxes are so low, usually around 1%. Being tax efficient lowers your costs more than being business efficient, leading to bloated and non-competitive companies.
I've operated a business under one of the few revenue tax regimes. The perverse incentives to verticalize the business structure are very real. Revenue taxes add up quickly.
I'm here all year, tip the waitress!
Don't think so.
Profit only happens when there is revenue.
Cost is a negative influence on profit, revenue is the positive influence.
If you have zero cost, you still have profit (provided you have non-zero revenue).
If you have zero revenue, you don't have profit.
So it is obvious that the profit is where the revenue is, even though revenue ≠ profit.
The fact that it matches the revenue exactly shows that its not a real lisencing deal
I strongly support immediately jailing anyone found to be playing these licensing games. They're parasites who have no place in society until they've shown reform.
Stupid games, stupid prizes, etc.
If I have a warehouse in France, some of the profit was in France and some was where it was made in the US. Same thing here where there's lots of small pieces done wherever.
Not sure but I'm seeing 2 different conversations here: flat tax on what you pay at the pump... and what the company reports as profit at the end of the day.
France doesn't care if you make a profit or not on the 8.50... just like Apple doens't care when they take 30% off the top.
Am I reading it wrong? Is it 15% off the top ala Apple Store? or 15% off of profits? both of which are different conversations.
Looking at the article, it seems like a nothing burger until it's voted in officially... The Paris Accord was "passed"... and then left because it was just a verbal agreement. What's enforcing this and stopping the next POTUS from leaving it all together?
That is not the tax that is being referred to here, which is Corporation Tax - the tax on corporate profits.
Giant tech company, pay your 15% based on local advertising revenue from local customers. We all know you'll still be making huge profits regardless of your costs. Your whole business is built on fixed costs and infinite scaling of revenue.
If you really can't afford to pay 15% then leave the market, someone will certainly take your place.
That's a cost, not profit.
> the content was made in X
Cost, not profit.
> the deal for the content was negotiated in Y
Negotiating the deal also sounds like a cost to me.
> network source is Z
Cost.
The profit is made where you get money, not where you spend it.
Why not replace income tax with VAT/sales tax if sales is the basis of taxation anyway?
It puts the government in a weird spot where they really don't want any businesses that primarily sell to foreign countries since they don't get tax revenue to fund public services for that company.
It would not be that difficult to pay EU taxes based on % of revenue attributed to each country. I.e. if you made $1B, and 70% of your revenue came from The Netherlands, and 30% came from Germany, you'd pay Dutch taxes on $700M and German taxes on $300M.
Where were the profits from that device made? Surely not entirely in Australia (or any of the other single jurisdictions), as actual value was added in several different locations.
Say a US company's French subsidiary sold something for $10 in France. If the software is developed in the US, then the US company will sell it to the French subsidiary for $9, so then they only have pay profits on $1 in France. Then in the US, they will say they paid $3 in costs and sold the software to their French counterpart for $9, booking $6 of profits in the US at a lower rate.