Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan • Hacker News Board

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#101

Post by lovich » Sun, Mar 18, 2018, 6:32 AM UTC

Why are a large amount of people treaing access to other nations markets as a human right? I can see the argument behind saying you should have access to your local market be realtively free, you have to live somewhere, and you and your local societies interests are relatively aligned.

However,when it comes to foreign markets many people here seems to want the best of both worlds. It's a paraphrase but it seems like saying "let me work however I want in your home, but don't limit me at all", seems to be the rallying cry.

How is this not hypocritical?

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#102

Post by AnthonyMouse » Sun, Mar 18, 2018, 6:34 AM UTC

harryh wrote: post #66

spectrum1234 wrote: post #26

If you are gonna have a form of corporate tax, a tax on revenue is the best way to do it. This will raise prices of goods the least and directly target the largest companies.

This is 100% wrong. Walmart buys[1] goods for 97 cents and sells them for a dollar. Google produces technology for 50 cents and sells it for a dollar. A 5% tax on revenue would make Walmart a money losing enterprise while being a minor annoyance for Google. This is why we tax profit and not revenue. Different industries have radically different cost structures.

> This is why we tax profit and not revenue. Different industries have radically different cost structures.

That is completely irrelevant as long as the tax is only collected once at final sale and not every time the goods change hands within a supply chain.

If Walmart has 97 cents of cost per dollar in revenue then the sum total profit within their supply chain is 97 cents. Somebody is getting every penny in the dollar.

If the government says that for every dollar in revenue you have to pay 20 cents in taxes then Walmart will either raise prices by ~20% or require their suppliers to lower prices by ~20%. In no event do they go out of business, because their customers still need what their suppliers produce.

It's possible for a tax to destroy a market, but it has nothing to do with margins of the final retailer and everything to do with how much total surplus exists. If the government demands a certain number of dollars in taxes and either the manufacturers or customers can eat that and still be willing to engage in the transaction, that's what happens. But if there isn't that much surplus in the transaction, it no longer happens. Because before somebody was spending an hour to make a certain amount of money and after they have to spend an hour to make only 80% that much money, which can cross over the threshold where they say screw it and fold up shop. That has nothing to do with whether you call it sales tax or income tax.

It's true of any tax on any product. There are products with high margins that a small tax could nonetheless destroy because the industry is high risk, so investors won't invest without high returns. If the tax makes the risk-adjusted returns fall below what it is for other investments, the product ceases to exist despite high margins, because the high margins may be entirely necessary to compensate for the risk.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#103

Post by thaumasiotes » Sun, Mar 18, 2018, 6:35 AM UTC

bluecalm wrote: post #72

Shivetya wrote: post #64

Earlier quoted context omitted.

well many people unfortunately do not understand that taxes like this get past on to everyone. most only see the tax on their receipt. embedded taxes are the greatest tool of the tax collector

And where do you think money for corporate tax on profits come from?

Rolled into the "price" of the item on the receipt, rather than being itemized like the sales tax is.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#104

Post by conanbatt » Sun, Mar 18, 2018, 6:42 AM UTC

AnthonyMouse wrote: post #102

harryh wrote: post #66

Earlier quoted context omitted.

This is 100% wrong. Walmart buys[1] goods for 97 cents and sells them for a dollar. Google produces technology for 50 cents and sells it for a dollar. A 5% tax on revenue would make Walmart a money losing enterprise while being a minor annoyance for Google. This is why we tax profit and not revenue. Different industries have radically different cost structures.

> This is why we tax profit and not revenue. Different industries have radically different cost structures. That is completely irrelevant as long as the tax is only collected once at final sale and not every time the goods change hands within a supply chain. If Walmart has 97 cents of cost per dollar in revenue then the sum total profit within their supply chain is 97 cents. Somebody is getting every penny in the dol…

> If the government says that for every dollar in revenue you have to pay 20 cents in taxes then Walmart will either raise prices by ~20% or require their suppliers to lower prices by ~20%. In no event do they go out of business, because their customers still need what their suppliers produce.

You are assuming there is no elasticity here. People would stop working for walmart and go work for google, in this example, so yes, the tax would destroy walmart.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#105

Post by conanbatt » Sun, Mar 18, 2018, 6:44 AM UTC

throwaway2048 wrote: post #100

Shivetya wrote: post #64

Earlier quoted context omitted.

well many people unfortunately do not understand that taxes like this get past on to everyone. most only see the tax on their receipt. embedded taxes are the greatest tool of the tax collector

this is something that gets thrown around a lot, but its manifestly untrue, if corporations could easily charge more, they would, and they would pocket the difference as profit. Taxes in general reduce profit, they do not increase prices.

The nuance of passing down taxes is that it depends on the elasticity, which generally is about the capacity for the consumer to substitute the goods.

If you put a tax on tobacco or alcohol, it definitely gets to the consumer. If you put a tax on pork, then people switch to chicken and the producer gets hit.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#106

Post by conanbatt » Sun, Mar 18, 2018, 6:45 AM UTC

8note wrote: post #30

gt_ wrote: post #19

Earlier quoted context omitted.

You are mischaracterizing the proposal. Let’s be clear: the EU has no intentions of enforcing taxation outside of their jurisdiction and of course they have every right to enforce taxes within it. It’s pretty normal stuff.

even if they were taxing outside their borders, they determine access to something the tech companies want: European users.

Talk about walled gardens.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#107

Post by germanier » Sun, Mar 18, 2018, 6:47 AM UTC

cromwellian wrote: post #51

toomuchtodo wrote: post #34

Earlier quoted context omitted.

> I don't think trying to claim extra-territorial extra-jurisdictional revenues is a legitimate tactic. Taxing revenues derived from users in your own country is not extra-territorial taxation. > I fear a real storm on the horizon with all of this growing nationalism. You've got right wing movements cropping up in the EU, you've got nationalism in the US, EU, and China growing. As a nationalist in the US (which does…

> Taxing revenues derived from users in your own country is not extra-territorial taxation. They are taxing on revenues that Google/Facebook/Twitter make on US citizens, advertising to US users, from US sales offices. That's extraterritorial taxation. If they merely taxed % of global revenues made on EU citizens, I wouldn't object. Let's say you estimate a company makes $10 per yearly active user per year, so if you…

I'm not sure where you suppose we should read the proposal (as it's not made public yet) but all summaries of journalists that have seen the document itself seem to pretty clearly indicate that it's indeed targeted at revenue generated from EU users only. Some even cite passages on how to determine location. If you have other information please share them.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#108

Post by TomK32 » Sun, Mar 18, 2018, 6:50 AM UTC

Jyaif wrote: post #36

Out of curiosity, is there any European tech company that has 750m in taxable annual revenues?

SAP had 22.1 billion in 2016, freenet 3.3 billion, United Internet 3.9 billion, Software AG 879 million. And that's just a few from DAX and TecDAX.

What Europe doesn't have is a Uber, running a few billions of loss per quarter.

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#109

Post by jon_richards » Sun, Mar 18, 2018, 6:58 AM UTC

candiodari wrote: post #88

bluecalm wrote: post #71

Earlier quoted context omitted.

The lower margin businesses will raise prices, and higher margin businesses will be forced to lower prices long term as people will have less money it's not a problem. Taxing profits encourages all kinds of undesirable behavior: buying expensive company cars, conferences in exotic locations, other perks because you get a huge discount (tax deduction) on them. I would argue it's immoral because you're taxing both effi…

And taxing revenue punishes economic activity per se. For small firms, it will force them out of business, and only high margin ones will remain (as explained). In other words, for the 2/3rds or so of the economy that is small and medium businesses this will be a tax on having economic activity at all. That's why it'll never fly (or should I say never be enforced). And don't worry, as usual, for large businesses ther…

I think a better explanation is that taxes on revenue favour vertical integration.

Imagine a product that requires building widget A, then turning that into widget B, then turning that into widget C. If we have the following companies:

C: revenue $6m, purchase costs $4m, other costs $1m

B: revenue $4m, purchase costs $2m, other costs $1m

A: revenue $2m, purchase costs $0, other costs $1m

then taxes are paid on $12m.

If we instead have:

Alphabet: revenue $6m, purchase costs $0, other costs $3m

then taxes are paid on $6m, even though the same amount of stuff is being made with the same efficiency, same profits, etc.

Whether this is relevant for tech giants is another matter. Software tends to be quite vertically integrated (financially speaking, at least).

Re: Tech Giants Set to Face 3% Tax on Revenue Under New EU Plan

#110

Post by themihai » Sun, Mar 18, 2018, 7:16 AM UTC

TheCoelacanth wrote: post #82

themihai wrote: post #69

Earlier quoted context omitted.

>> More competition is better for the market at a whole, Hold on...they will be different companies just on the paper...more like Google1, Google2 and Google3.. instead of one big Google.

Are they listed separately on the stock exchange? If so, then they really separate companies, not just different on paper. Their ownership of the different companies will eventually diverge from each other and the companies will need to compete with each other to satisfy their owners. If not, then the taxman will probably be smart enough to send the bill to the parent company instead of the mini-Googles.

>> If so, then they really separate companies, not just different on paper. Their ownership of the different companies will eventually diverge from each other and the companies will need to compete with each other to satisfy their owners.

You don't get it... the tax man proved not to be that smart to send the bill to the parent company. You may want to google: "What is a shell company?"