Is there logic behind France’s rumored €1 Billion Google Tax?
rudebaguette.com
rudebaguette.com
Google is not going to insist on making X% net profit and will not put up it's rates just because a tax rate changes.
You can't pretend that Google dropped their rates in the UK by a few percent when the corporate tax rates dropped last year?
End result : less sales, customers paying more, and Google earning less.
I do think you should consider that this will only raise prices for advertisers in France though. So it will be even easier for out-of-country advertisers to undercut France's local suppliers.
The problem is that most citizens don't realize just how big the state's take on a normal wage is. You believe it's ~55% of your income. Well, no.
In France, a business has to pay taxes to pay you, then you pay taxes on what you get (to make matters more complicated, these taxes are collected by your employer). In reality your bruto pay is about 130% of what you get quoted (just due to taxes). Out of that 45% remains (taxed at 55%). Then you have local taxes, since you have to live somewhere, these are at least 2% of income. And you add VAT 20% on most things you actually buy. This ignores various other things, like the fact that keeping track of all this requires people, and obviously the state doesn't pay for those, so they yet again increase costs for businesses.
But let's calculate. Out of what your employer pays you in France, you get to spend ... 100% * (100/130) * 45% * 80% = 27,6%. So the tax rate in France is 72.4%, for a person having a decent job in IT. We're not talking bank director here. And of course the French state is raising these levels. Also these are MINIMUM levels (for a decent wage), it's assuming you aren't investing in stock, assuming you don't own a house (or God forbid - more than one house), you don't own a car, ... If any of those are not true, you'll be paying even more.
I think it's beyond obvious that this tax level, even if it weren't going up, is not sustainable.
You have totally ignored my point that changes in profit do not necessarily get passed onto the consumer. And my example was that Google pricing in the UK did not go 'down' when the tax rate went 'down'. So why would the price go 'up' when the tax rate goes 'up'.
On one extreme, Google keeps it's prices static and it's customers don't change their buy resulting in the tax coming only out of Google's profit.
On the other extreme, Google raises it's prices exactly proportional to the tax, it's customers buy the same amount of ads and raise their prices exactly proportional to the increase and you pay them for service or good $x. Your income stays the same but it buys less because everything is more expensive.
The real result is in the middle, google eats some of the loss from tax, raises it's prices and customers somewhat lower their ad spend and somewhat raise their own prices eating some of the loss from tax. Which extreme any individual believes is more accurate has more to do with political bias than truth.
A very real problem indeed. But it's not a Google problem. It's a France/Hollande problem. France is in recession (agian or still).
French private sector contracts as Germany’s grows Business activity in the eurozone’s two largest economies is diverging sharply, with France’s private sector contracting after two months of growth while in Germany it accelerated to a 10-month high, according to a survey. http://www.ft.com/cms/s/0/87e4a572-5285-11e3-8586-00144feabd...
French officials warn of social tinderbox as economy contracts again The latest data show a continued erosion of France’s industrial base and export share. It risks shattering the credibility of President François Hollande, who has been talking up recovery for months. http://www.telegraph.co.uk/finance/financialcrisis/10450889/...
This article is about International Companies avoiding taxation in Europe, which is, believe it or not, a real problem in terms of finance and ethics.
They make money out of EU citizens and get out of it with 0% taxes when EU business have to pay between 15% and 35% of their benefits in tax.
I'm not a fan of this french government but I have to admit that it's not an heretic idea to say that a company should be taxed on its revenue.
Sorry for the tone but I'm so used to the comparison with Germany by people who seem to forget that the Euro is tailored for countries with an strong export oriented economy, like Germany.
Euro is more the core problem than France/Hollande or the fake North vs South Europe fight.
The problem is not the "citizen" part but the market or soil one.
The fact that I, as a french company, am able to sell products on the U.S. market is, in part, due to the fact that the U.S. as a country has a litterate workforce, infrastructures, a stable legal system, etc...
This costs money and tax is supposed to put some fairness in this. Otherwise, we would all be trying to make money in Afghanistan with a 0% tax on revenue.
Realising this was a mistake everything was renamed in 2011, apparently.
Disclaimer: I'm French too.
This sounds like the main problem here, to me:
EU law makes it easy for a company to do business anywhere in EU and only pay taxes in its headquarters, on the assumption that it doesn't matter a lot where the company pays its taxes as long as it's inside the EU. But at the same time, EU law doesn't regulate corporate tax, so some countries can easily take advantage of that by lowering them (or completely removing them) so companies will be attracted there.
They are basically living as parasites to the other countries, and the only solution to that seems to be harmonizing taxes accross the EU.
Edit: could you explain the downvote a bit? I'm curious to hear what you don't like in what I said.
God forbid anyone try and make a country a good place to do business.
I'm for closing the various loopholes, because big companies should have to pay the same taxes that smaller companies do. But I am also very much in favor or countries trying to compete and improve in order to attract business.
> Edit: could you explain the downvote a bit? I'm curious to hear what you don't like in what I said.
You call other countries who don't want to import the crappy, unfriendly business climate of countries like France or Italy (where I live) "parasites".
This kind of investment would heavilly rely on taxes, but would also create the ideal conditions for internet giants to make lots of business.
These internet giants chose to put their headquarter in a small EU country that chose to lower the taxes to attract companies. This country doesnt care for fiber, and doesnt make investment at all, but its no big deal, it only represents a tiny part of the EU ppl.
This is a nonsense to pay taxes in a country for business made in another one. Unfortunately this nonsense is part of the UE.
Should other EU countries have to import Italian bureaucrats just to even the playing field some? I bet the Germans wouldn't be so competitive with the addition of a good selection of public employees from Rome.
But still, a country lowering taxes to a point where it would attract most of the income of companies operating throughout EU is acting like a parasite, the host being the EU, the blood being the income.
Lowering corporate taxes should be made at the EU level. Because the EU was not intended as a playing field with EU countries competing against eachothers but rather as something more symbiotic where countries specificities would help compete against the rest of the world.
Makes for good political rhetoric, but I don't think it bears much relation to reality.
Germany for instance is not 'shriveling up and dying' because of Ireland, and neither is France for that matter.
Also, the economy is, fortunately, not a zero sum game with a fixed lump of money to go around.
You only need to look at the US as an example: California and NY are not low-tax states, and yet... and yet... there are a lot of companies and a lot of business there.
And yes, US states compete.
You are taking this the wrong way. It's not that Ireland does not want to import corporate tax from France and Italy, it is that they substantially lowered it, expressly to take advantage of the other EU countries.
You can also see that I didn't advocate higher taxes for Ireland or lower taxes for the rest of EU, since it doesn't actually matter as long as they are the same in all EU.
Good. That's called competition. They want to attract companies to their country. There are plenty of things Ireland can't compete on, like having a decent climate (IMO), so they do what they can.
> You can also see that I didn't advocate higher taxes for Ireland or lower taxes for the rest of EU, since it doesn't actually matter as long as they are the same in all EU.
Then why doesn't France lower theirs? "Harmonization" is just a way of saying "they should raise their taxes".
I believe competition has no place, or should have no place, between EU countries. But that's my personnal opinion, which seems less and less shared accross Europe.
> Then why doesn't France lower theirs? "Harmonization" is just a way of saying "they should raise their taxes".
Huh, I'm not part of the Ministry of Finance, so I don't think I have to justify myself for France not lowering their taxes, but it's probably because France is more dependant now on corporate tax than Ireland was when they decided to lower them (France still has some kind of industry, while Ireland didn't then). It's not up to France (or Ireland) alone to make a decision to have the same taxes all accross EU anyway.
Harmonization means levelling taxes accross the EU, I didn't say a single word on how they should be raised. You are reading way too much in my words.
Edit: formatting (and the bit about how the EU is more than just France+Ireland).
Wow.
How would you harmonize the weather between, say, Ireland and Sicily so that people wouldn't be attracted to the better weather down south?
No competition is unrealistic and unhealthy. Competition, within limits, makes people/countries/businesses/whatever improve.
It doesn't necessarily lead to a "race to the bottom". Look at California in the US, which is not the best state to do business in, with the lowest taxes. It still does pretty well, though.
> France still has some kind of industry, while Ireland didn't then
That doesn't sound fair. Did France offer to send its industries to Ireland to help out, and avoid competing?
You can read up on the history of Arianespace and Airbus to see how France did play the Europe game.
But that was in another era, at a time where EU countries were trying to integrate their economies rather than directly compete against each other.
Apart from that, the "within limits" part of your comment is exactly what I've been talking about all along our discussion.
US states have a set of policies and compacts so that corporations doing business in multiple states pay taxes to each state divided according to a formula.
The corporation attributes income to each state in proportion to a weighted average of its sales in the state, its total employee compensation in the state, and its business capital and equipment present in the state. Then each state sets its tax rate and takes that fraction of the income attributed to the state. Over time, the states have created counting rules to prevent cheating the system.
Europe may need to organize such a system if the other nations are really tired of being scooped by ie. There's still the classic scheme of putting intellectual property in a tax haven and paying franchise fees to a foreign subsidiary there to avoid having profits. They may want to try closing that loophole, too.
Why?
EDIT: I was just curious to hear more.
Google quasi-legally avoids a huge amount of tax. Everyone accepts that reducing your tax burden is legitimate, but there comes a point when it is taking the piss.
Paying tax is part of being a member of society. People and corporations not wanting to pay any tax should not be able to claim the benefits tha result from that tax burden. Google benefits from UK education. Google should fucking pay for it.
The scary thing is that Google isn't that bad compared to other companies. The scale is huge but the techniques are run of the mill. See some of the water companies who have baffling corporate structures and who use international intra-business loans in order to avoid corporation tax, all while paying massive bonuses to staff, increasing costs to consumers, under funding maintainance, etc. it's infuriating.
Back in the days, the nobility had also exempted itself from taxes. I see no reason for this state of affairs to continue.
They recently passed a similar tax in Italy, and the whole thing was about how the big bad American companies are making money and not investing in Italy. This, at the same time Fiat is decamping from Italy because the business climate is so shitty. So what's their creative answer to improve things? Another tax!
.ie is the loophole, most of the time.
http://www.theguardian.com/business/ireland-business-blog-wi...
Disclaimer: I am Irish
Because all other companies are being taxed when offering products or services to citizens of the given country, within the legislation of that country. Certain Internet companies use questionable tax planning strategies (in Europe as well as the US) to pay a ridiculously small amount of taxes and thus gaining an unfair advantage.
> Or Why should taxes exist at all?
Because running a country costs money which is required to provide services such as law enforcement and a regulated banking system. These services are required by citizens and corporations alike.
But going further down this argument is obviously not in the scope of this discussion thread and will not end up being a fruitful conversation. We're talking about a small-ish change to the tax system rather than a full blown anarchist revolution here.
Google and Apple (among others) are renown in Europe for paying virtually no taxation[1]. And while once upon a time no one really cared, now it's hard to swallow for voters being crashed by the financial crisis, so either this will change or some political figures might lose additional points in the next elections.
I'm not angry with Google. I'm angry with our corrupted politicians who've done nothing to fix this, all over Europe, not just in France and not just for Google.
Since we have the technology to tackle the issue at hand, everything else sound like an excuse.
[1] http://www.dailymail.co.uk/news/article-2549379/Fresh-questi...
1. Imposing taxation on foreign Internet giants in Europe. Needless to say, that would lead to divisions of the Internet, which we all want to avoid.
2. There should be an international act signed between Europe and USA providing Internet companies certain degree of independence from national-level surveillance, which would protect privacy of citizens of each country involved in the act to the same extent.
If France alone stands up for this one, it's meaningless because they'll find a loop (or carry on with the Double Irish and Dutch sandwich) and we'll just look like communist heaven (hyperbole) while not reaping anything.
We need to do it at the EU level, with a law which overrules local business taxations settings if the company is owned by a non EU entity.
Of course, the only way to push for it is to have champion country doing the dirty work, so I guess we're stuck with that.