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EU lost up to €5.4B in tax revenues from Google, Facebook: report

reuters.com

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Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#101

Post by kbwt »

ptaipale wrote: post #87
jakubp wrote: post #81

Earlier quoted context omitted.

Majority of revenue is coming from ads. If Google were taxed for each ad income based on the country of where the ad buyer is located, they couldn't manipulate it as easily. Also clients wouldn't be inclined to set up shop in tax havens, because why would they? It's not their problem. I'm not sure this is a good solution, it might also be possible to game it, but at least that would make sense from the perspective of…

What? In EU, Google is taxed for each ad income, as well as app sales, based on the country of where the sale takes place. It's called Value Added Tax. Countries can set the rate. Mostly the rates are in the order of 20 %.

VAT is not a tax on companies, it is a tax on consumer spending. VAT is merely collected by the companies on behalf of the tax authorities. What's the difference? Well, for one, the company cannot deduct VAT since it is zero-sum; they are only transferring it. Secondly VAT is exactly the same no matter which country the company operates in.

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#102

Post by theptip »

aembleton wrote: post #88
elgenie wrote: post #67

Taxing multinational corps is pretty difficult. Let's say a parent company UsTech, which makes money from ads on a ubiquitous digital platform, has an Irish subsidiary UsTechDublin,LLC and a German subsidiary UsTechBerlin,GMBH. UsTechBerlin hosts a bunch of very well paid engineers who work on app performance and backend infrastructure efficiency; UsTechDublin hosts a bunch of low paid customer service reps that prov…

Require UsTech to run their sales to their Ireland and German customers through their Ireland and German subsidiaries. Then tax them based upon the result of their (sales to Irish customers - Irish costs) and in Germany, the equavelent (sales to German customers - German costs). It's quite possible in those two places, they would pay no tax because their costs are higher, but this is also an incentive to keep employi…

A problem with this solution -- as a US company without a German subsidiary (but as with most online businesses, with German customers), do I now have to pay taxes in Germany?

If the former, the logical conclusion of that approach is that every startup has to pay taxes in all 195 countries of the world, as soon as they open for business. This could be on $0.01 of ad revenue.

If the latter, I'm strongly incentivized to move my labor from the high-tax countries to the low-tax ones, which will push business out of the former. (I.e. at the margin, if I have a small office in Germany, it's probably not worth my while to keep it open since it incurs a massive tax liability).

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#103

Post by ionised »

dangsmum wrote: post #41
latch wrote: post #13

Earlier quoted context omitted.

I get what you're saying, but I think it's fundamentally wrong for two reasons. First, it is "big" when you consider how that money could be used. Cynicism aside about funding wars and filling walls with cash, it could be used for substantive (read: big) social good Secondly, this is an important market. If they don't want to pay taxes, they have the legal option to not do business in Europe. So while you say "5B is…

"they have a legal option not todo do business in europe" Do you see any way to do that other than to prevent eu businesses buying ads from google? Because i think that might have a few severe unintented consequences for businesses in the eu, and have exactly zero impact on google.

You think Google no longer being able to do business in a market so large (~500 million people?) that it eclipses the US by a comfortable margin will have no impact on them?

That would damage Google a lot more than it would damage the EU nations.

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#104

Post by zerebubuth »

elgenie wrote: post #67

Taxing multinational corps is pretty difficult. Let's say a parent company UsTech, which makes money from ads on a ubiquitous digital platform, has an Irish subsidiary UsTechDublin,LLC and a German subsidiary UsTechBerlin,GMBH. UsTechBerlin hosts a bunch of very well paid engineers who work on app performance and backend infrastructure efficiency; UsTechDublin hosts a bunch of low paid customer service reps that prov…

I thought that a necessary part of the "Double Irish with a Dutch Sandwich" was that a company in a tax haven can license IP to its subsidiary at an arbitrary price. Therefore, that company can offset any profit its own subsidiary might make.

To do this requires two things:

1. That the license arrangement with the subsidiary is unique to that subsidiary.

2. That the license fee can be set to any value at any time.

For more concrete assets, for example a bag of coffee beans, it's easier to see when a parent company charges a subsidiary a different amount than the market rate. However, there is no comparable market for IP, so it's harder to see what a "fair" price for a copyright, trademark or patent might be.

One option might be to tax all IP licenses at the corporate tax rate. Another would be to adopt a "most favoured licensee" rule, requiring all licensees to pay whatever the cheapest rate was (or taxing the difference).

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#105

Post by Oletros »

ringtail wrote: post #68
Oletros wrote: post #53

Earlier quoted context omitted.

> It rarely works well with any multinational. how many multinationals have left any big market just for taxation?

Are you saying Singapore Co cannot receive payments from French consumers unless they pay corporate income tax to French Govt ? In other words, you are saying EU can deny its citizens right to buy foreign products ?

No, I'm asking how many multinational have left a big market (one of the biggest in the world) just for taxation.

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#106

Post by ionised »

whb07 wrote: post #58

I wonder what would happen if G/F just upped and "left" the EU? Ensuring to close every physical location as they did so. I wonder how much of a bind the politicians would be trying to remain in power as they would be in the position of trying to add Google and Facebook to the ban list or just continuing like normal except with less tax revenue. Does anyone here really believe that any EU bureaucrat would ban Faceboo…

Google and Facebook have a lot more to lose than the EU in this regard, which is why they will eventually submit to whatever the EU deems reasonable.

They are never going to withdraw from the EU. The money they would lose would be immense.

The fact that people think Google and Facebook have this kind of power over a developed market of 500 million people is hilarious.

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#107

Post by lucideer »

anonymousDan wrote: post #71
lucideer wrote: post #50

Earlier quoted context omitted.

> My other understanding is that the tax laws of all the EU countries are not controlled by the EU, but by the individual countries? This is partially but not 100% correct. Tax laws are controlled or "administered" by individual countries but overseen by EU directives. This means that while individual countries apply the law, their application must comply with EU guidelines. The Irish government has been found guilty…

For what it's worth, that ruling is strongly disputed by the Irish Government and is under appeal.

True, though Ireland currently has a minority government operating under a combination of coalition and confidence and supply[0], and the ruling is broadly supported not only by opposition, but also by independent coalition members. Opposition to the EU ruling is far from a popular position within Ireland, even within government. "Strongly" is an overstatement.

[0] https://en.wikipedia.org/wiki/Confidence_and_supply

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#108

Post by jakubp »

andreime wrote: post #94
jakubp wrote: post #81

Earlier quoted context omitted.

Majority of revenue is coming from ads. If Google were taxed for each ad income based on the country of where the ad buyer is located, they couldn't manipulate it as easily. Also clients wouldn't be inclined to set up shop in tax havens, because why would they? It's not their problem. I'm not sure this is a good solution, it might also be possible to game it, but at least that would make sense from the perspective of…

Strictly speaking of ads - what happens when someone is using VPNs, let's say because the are contracted by an american company? I like your idea, I'm just curious how this would work? Google might find themselves in violation of the law. What do you think? How about a yearly national tax proportional with the amount ad buyers pay for targeting a country - the argument here is that Google, Facebook, etc. are using a…

I don't understand the issue with VPN. The idea would be to tax the profit of an ad company based on the country of origin of the institution buying the service from them (not country of origin of the seller, which seems to easy to game). VPN can shadow users' location, but not corporate location of tens of millions of companies, at least that's my intuition.

I don't know anything about policy in general, but I'd rather reconsider existing taxes and their mechanisms before introducing even more taxes. Still, I'm guessing just shifting the taxation based on buyer's location would be groundbreaking, possibly not functional for many companies, and introduce a lot of extra work just to get some money from multinationals....

Yearly national tax probably reflects the instinct many people have, that other companies within these markets are taxed for similar activity, but multinationals aren't, and maybe they are getting too good a deal.

There is something similar going on in Poland and I'm guessing many other developing countries: foreign corporations open their shared services centers, recruit really well educated people but get significant tax benefits on this. Also supermarket chains are somehow exempt from some taxation. Supposedly this is to promote jobs locally, but in reality it seems more like a brutal scam: you get great, cheap workforce and do not have to pay as much for access to it in taxes.

Multinationals selling globally, but paying taxes where they like is similar. The sentiment among my friends is that the local corporations sucking in workforce, pulling it away from building our own products and services with international potential, AND getting tax deals is quite bad in the long term.

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#109

Post by elgenie »

alkonaut wrote: post #79
elgenie wrote: post #67

Taxing multinational corps is pretty difficult. Let's say a parent company UsTech, which makes money from ads on a ubiquitous digital platform, has an Irish subsidiary UsTechDublin,LLC and a German subsidiary UsTechBerlin,GMBH. UsTechBerlin hosts a bunch of very well paid engineers who work on app performance and backend infrastructure efficiency; UsTechDublin hosts a bunch of low paid customer service reps that prov…

What you are describing is exactly the issue with the current system, correct? That is, taxation based on physical presence only, and the arbitrary ways corporationsn can do intra-subsidiary transfers. A tax for megacorps based on revenue seems a lot simpler.

Taxing on revenue is simpler but utterly non-sensical.

If selling a phone that cost $800 to make for $805 incurs an 80x tax liability compared to selling hammer that cost $5 to make for $10, then the modern economy of long supply chains and specialization grinds to a halt.

Another way to think about it: a single year in which the tax on revenue is higher than profit would require the business to be go into debt or be sold to pay the tax man; except then what's the value of that business to a creditor / acquirer if it has that threat hanging over its head?

Re: EU lost up to €5.4B in tax revenues from Google, Facebook: report

#110

Post by Oletros »

whb07 wrote: post #58

I wonder what would happen if G/F just upped and "left" the EU? Ensuring to close every physical location as they did so. I wonder how much of a bind the politicians would be trying to remain in power as they would be in the position of trying to add Google and Facebook to the ban list or just continuing like normal except with less tax revenue. Does anyone here really believe that any EU bureaucrat would ban Faceboo…

And next Apple or Amazon leaving the EU?
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