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

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

#261

Post by mancerayder »

throwaway77384 wrote: post #200
shady-lady wrote: post #187

Earlier quoted context omitted.

What was the point of the European Single Market then? Or was that just meant to benefit the larger industrial nations(cough, Germany, cough)? It would seem to be sour grapes on the parts of France & Germany that they weren't chosen to the main entrypoint to the EU for some US companies.

Well, I think you are making a very valid point. Germany and France sure like throwing their weight around and have earned plenty of appropriate criticism for their actions. They will most likely continue to do so. Just like with the US on a global level, large, influential economies will often bully smaller ones into situations favourable to their own goals. I do not know what the point of the European Single Market…

I do not know what the point of the European Single Market was. In fact, I'd be interested to hear someone with the know-how tell me. Was it to create a trading zone where the same rules applied to everyone? Or was it just supposed to ease trade across borders by creating some kind of customs framework and abolishing tariffs, etc.?

I'm kind of glad someone asked that because the answer is pretty interesting, and not surprising given history.

It started as the European Steel and Coal Community as a way for nations that had been at war with one another to pool together power and steel resources (those engines of war) to make it harder or impossible for war to recur. It was France and Germany who essentially created it, and it included the Benelux countries. I believe creating a common economic powerhouse against the, at that time, giant newly invincible United States was a factor too. This was all in the backdrop of WWII.

(https://en.m.wikipedia.org/wiki/European_Coal_and_Steel_Comm...)

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

#262

Post by felipeko »

Joeri wrote: post #260
felipeko wrote: post #250

Earlier quoted context omitted.

1) Why would Germany and France care? They have not been collecting taxes anyway, race to the bottom until Ireland can't anymore. 2) It works for Ireland because other countries prefer not to engage. If Germany had the same tax rate it wouldn't work for Ireland anymore right? As what is now Ireland only revenue would be split between the two or more countries. When this happen wouldn't Ireland have to raise taxes if…

If all tax rates are lowered to ireland’s rate then there won’t be enough tax revenue to fund the existing social infrastructure. If lower taxes were always better why have any taxes at all?

That's my point, isn't it?

Ireland can't win a race to the bottom, and it will have to have higher taxes if others will lower theirs.

So all other countries have to do is lower taxes to force Ireland to raise its own, and reach a new higher taxes equilibrium, that is beneficial to all countries.

Isn't that what others are arguing for?

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

#263

Post by bulatb »

wallace_f wrote: post #176
lovich wrote: post #121

Earlier quoted context omitted.

As a response to several people stating that free trade is better for everyone. I've taken economics courses, I understand how free trade is better overall. However, those calculations only work when both sides follow the same rules. Once you have different groups of people with different values, whether it's the EU valuing privacy, China valuing domestic production, or the US valuing intellectual property, absloute…

Also an education in econ. Unfortunately with econ, our tools are maths, stats, logic and reasoning. We can almost never do actual experiments, which is fundamentally necessary for science. In my opinion, an unpopular but correct description of the state of economics is that the best economists are the ones who are able to make the arguments which others value the most.

Goodhart's law in action.

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

#264

Post by joejerryronnie »

felipeko wrote: post #262
Joeri wrote: post #260

Earlier quoted context omitted.

If all tax rates are lowered to ireland’s rate then there won’t be enough tax revenue to fund the existing social infrastructure. If lower taxes were always better why have any taxes at all?

That's my point, isn't it? Ireland can't win a race to the bottom, and it will have to have higher taxes if others will lower theirs. So all other countries have to do is lower taxes to force Ireland to raise its own, and reach a new higher taxes equilibrium, that is beneficial to all countries. Isn't that what others are arguing for?

How is this strategy working for OPEC?

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

#265

Post by AnthonyMouse »

conanbatt wrote: post #240
discodave wrote: post #112

Earlier quoted context omitted.

This is nonsense. Unless Google opens thousands of "walk-in-distribution centers" close to consumers, or 100% of commerce moves online, then there will still be demand for what Walmart sells. Walmart sells essentials like food, clothes, and medicine. In what world does a consumer need an Android, or the internet, but not food.

Some abstract thought here: the OP mentioned only 2 companies and I responded within that limitations, but in reality walmart competes with amazon. So if amazon has higher margins than Walmart because of the business model then walmart is disproportionately hit by the tax.

> So if amazon has higher margins than Walmart because of the business model then walmart is disproportionately hit by the tax.

Still not how that works.

Suppose a knickknack costs $1 at Walmart. They pay their supplier $.50, $.47 is the cost of operating the store (rent, utilities, staff, etc.) and $.03 is profit.

Amazon sells the same knickknack for the same $1 and buys it for the same $.50 but the cost of operating their store is only $.10 so they make $.40 profit.

Now the government says they must both pay $.20. Suppose both the manufacturer and the customer are completely inelastic. They won't change their prices at all. Which store is at a disadvantage? You still don't know.

It could be that Amazon needs higher returns to generate investment because online stores are higher risk. They have more competition and lower barriers to entry, their assets are heavily skewed toward goodwill and branding which are more susceptible to damage by scandal than e.g. real estate holdings, etc. It could be that if you cut their profits in half like that, they get no investors.

Meanwhile Walmart has to come up with the $.20 out of their store operating costs, but those costs are an opportunity to cut something that Amazon doesn't have. They could improve the energy efficiency of their stores. They could lay off some greeters. They could renegotiate the lease on their stores against the fact that all other retailers will have to pay the same new tax, which reduces the market value of commercial rental property.

There is no guarantee that Amazon is the one that comes out ahead.

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

#267

Post by MarkMc »

mattmanser wrote: post #255
MarkMc wrote: post #252

Earlier quoted context omitted.

There is already some form of taxation - VAT in the UK is 20%. Why does the UK deserve more than 20%, given that the vast majority of Google and Facebook's engineers and managers are in the US?

You don't understand how VAT works. If I spend £100 on AdWords as a company, the £20 VAT comes off my VAT bill. I pay £20 less. So Google's VAT bill is utterly inconsequential and meaningless. VAT is only paid once by consumers for products , advertising is a company expense that simply shifts the VAT one level down the chain. It doesn't get applied at every level on the supply chain, it gets passed down. So if Amy's…

> VAT is only paid once by consumers for products, advertising is a company expense that simply shifts the VAT one level down the chain. It doesn't get applied at every level on the supply chain, it gets passed down.

That's one way to look at it. Another way is to see it as a tax paid by each supplier based on how much value that supplier has added to the supply chain - a sort of 'value added' tax, if you will.

> So if Amy's Amazing Tours sells a £100000 tour round London, without any advertising, it generates £20000 VAT paid by Amy.

> If the same tour is sold by Mike, for the same price of a 100k, but with £50000 worth of Google adverts, Mike pays only £10000 VAT with Google paying £10000 too. Still adds up to £20000.

In this example Amy contributes £100k in value, Mike contributes £50k in value and Google contributes £50k in value. Essentially Google has allowed the UK government to collect the same amount of tax even though Mike has produced only half as much value as Amy. Isn't that nice?

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

#268

Post by AnthonyMouse »

conanbatt wrote: post #241
Buge wrote: post #127

Earlier quoted context omitted.

How would walmart raising their prices by 20% cause their employees to go work for google? Why would google even give them job offers?

If they raise their prices, people buy less, so profits are less, so its value as investment goes down, so it gets disinvested. Where would that money go? to any company with higher returns, in this case, Google.

> If they raise their prices, people buy less, so profits are less, so its value as investment goes down, so it gets disinvested. Where would that money go? to any company with higher returns, in this case, Google.

You're assuming that Google has higher returns. Higher margins doesn't inherently mean higher risk-adjusted returns. The higher margin company could be higher risk or have higher fixed up-front capital costs.

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

#269

Post by felipeko »

joejerryronnie wrote: post #264
felipeko wrote: post #262

Earlier quoted context omitted.

That's my point, isn't it? Ireland can't win a race to the bottom, and it will have to have higher taxes if others will lower theirs. So all other countries have to do is lower taxes to force Ireland to raise its own, and reach a new higher taxes equilibrium, that is beneficial to all countries. Isn't that what others are arguing for?

How is this strategy working for OPEC?

Can you elaborate on that?

I'm not sure how this is comparable.

Ireland's low tax works for Ireland because it has no competition, so it gets the "market" all to itself. If competition arrived, Ireland would have no option but to raise taxes to make it up for it - as it needs this funds. It would essentially force Ireland's hand on this issue.

On the OPEC side they have external and internal competition. Sometimes they can make it work because demand is higher than what external competition has to offer and what internal competition need, but if external competition has enough supply or internal competition need more than they are getting, it does not work anymore (and the price drops because of extra supply).

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

#270

Post by stale2002 »

jfasi wrote: post #204
adventured wrote: post #197

Earlier quoted context omitted.

> The best thing about this proposal is that it sets up a harmonious relationship It does the exact opposite. It spurs a further acrimonious relationship between the major economies of the EU and the US. Particularly France and Germany, which are a combined outsized share of the EU economy and represent ~80% of the trade deficit that the US has with the EU. This new tariff exists solely because the EU can't compete o…

You comment doesn't make sense to me. Face it: some form of taxation was going to appear no matter what. It's inevitable. You don't just roll into a country, make billions of dollars, and expect to pay no tax in perpetuity. As tax proposals go, this one is pretty reasonable. This isn't a punitive measure because it sets no one apart for any past behavior. It also isn't a "shield from competition" because all companie…

> Face it: some form of taxation was going to appear no matter what. It's inevitable.

And a retaliation from the US, via a similar trade tariff that exclusively targets EU companies, is also likely inevitable.

Lets the trade wars being. I wonder who will come out ahead.

> It also isn't a "shield from competition"

Imagine if the US added a 20 dollar champagne tax. By definition, "real" champagne can literally only come from the Provence of champagne, France. But technically the law applies to US companies, perhaps ones that own a vineyard in France.

Would you be OK with this theoretical tax? It is totally fair, and not targeted against anyone specific country!

Hopefully we will get more "fair" taxes like these in the upcoming trade wars.

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