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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

#291

Post by conanbatt »

AnthonyMouse wrote: post #265
conanbatt wrote: post #240

Earlier quoted context omitted.

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 operatin…

> 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.

Walmart makes up for the difference profit margins with amazon because of volume. Reducing operating costs at pure profit is already at walmarts disposable: what they could do is reduce the quality of products (worse chain of supply, worse produce, worse items) which is in practical terms also a tax in consumers.

They really are distorting.

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

#292

Post by sjg007 »

jimmywanger wrote: post #67
sjg007 wrote: post #58

Earlier quoted context omitted.

It's pretty clear. You are selling in the UK so the revenue would be taxed there. Post-brexit the French customer will pay customs duty. The Google ad revenue will be paid by Google based on the market. So the ad run in France generates EU revenue. Doesn't matter if the payor was an American or anyone else. If you are US citizen then you pay world wide income tax. You can deduct foreign taxes paid up to a limit. Bett…

> It's pretty clear. You are selling in the UK so the revenue would be taxed there. It's not clear at all. Your warehouse is in the states (or where ever) and the goods are never in the UK. For all cross-border shipments you have to pay customs tax. Just because somebody saw your product on a co.uk website you have to pay the UK for what exactly? And as you brought up, there are customs taxes as well as income taxes.…

I don't think you understand how international commerce actually works. If your warehouse is in the USA and someone from the UK orders from you, you can ship the product to them tax free but they will pay an import duty on that item based on the UK value of the item. Google has to pay tax on the advertisement to the UK buyer. This is because the revenue (aka the user clicking on the ad to buy your widget) was advertised in the UK and thus generated revenue in the UK. That's what the 3% tax is on. It doesn't matter if you hosted the ad in the USA or Thailand or on the space station. All that matters is that the consumer "purchased" the ad. The advertiser pays google the ad fee and google pays the state the tax. Simple and straightforward.

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

#293

Post by nl »

Mononokay wrote: post #217
nl wrote: post #179

Earlier quoted context omitted.

Having public officials on their platform is a benefit to them (network effects), and the marginal cost is as close to zero as to immeasurably different.

It's a negative to them - loss in quality of discussions on platform, with viewers of these politicians generally using more bandwidth than the host will be able to make up with ad revenue.

Good luck with that argument.

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

#294

Post by AnthonyMouse »

conanbatt wrote: post #288
AnthonyMouse wrote: post #268

Earlier quoted context omitted.

> 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 cos…

If it was in equilibrium before the tax, the addition of the tax would favor google.

> If it was in equilibrium before the tax, the addition of the tax would favor google.

If it was in equilibrium then they would both have the same margins. Something has to be different or everything is the same.

And by far the most common reason for a company to have higher margins is that it has higher risk. Otherwise the investors would already be investing only in the business model that makes more money without any countervailing disadvantage whatsoever, regardless of the tax.

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

#295

Post by MarkMc »

mattmanser wrote: post #283
MarkMc wrote: post #267

Earlier quoted context omitted.

> 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…

Way to move the goal posts. Regardless, you still don't understand VAT. The consumer pays VAT, not the business. It just happens to be collected by the business. VAT is not charged on exports. It's a consumption tax levied on individuals, not a tax levied on business profits. Google generates nothing as the money would simply be spent on something else. So I pay VAT, you pay VAT, companies do not pay VAT, they merely…

OK fine - the consumer pays VAT. In that case I would say that Google performs a certain amount of work and as a result consumers end up paying more VAT. I'm pretty sure that if Google stopped displaying ads in the UK then the total VAT collected by the UK government would shrink.

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

#297

Post by AnthonyMouse »

conanbatt wrote: post #291
AnthonyMouse wrote: post #265

Earlier quoted context omitted.

> 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 operatin…

> 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 comme…

> Reducing operating costs at pure profit is already at walmarts disposable: what they could do is reduce the quality of products (worse chain of supply, worse produce, worse items) which is in practical terms also a tax in consumers.

What you're missing is that the tax itself may give them leverage. If there is suddenly a 20% tax on retail goods then the cost of commercial properties may go down, because the retailers need to cut costs to cover the tax and the property owners will have no customers if the retailers go out of business, so it could be the property owners who end up eating some of the tax. They may have to lower rents enough to make retailing out of their space profitable. And the same for any other operating costs the retailers have. They may be able to pay lower wages because all retailers would have to do that in order to be profitable, so wages for retail employees go down across the board and the employees eat part of the tax.

And the same applies to offering crappier service so that the customer eats some of the tax. It's possible for customers to prefer that to higher prices. And when the tax causes that to happen across the board, the customers may have no alternatives so the store may lose no business. Customers still need bread, now all the bread in every store either costs more or tastes worse, so the customer picks their poison and the store stays in business one way or the other.

> They really are distorting.

Oh, a tax really will affect two different businesses differently. But the distinguishing factor isn't the size of their margins. Profits are just a different type of cost -- the cost of raising investment capital. You may be able to get the investors to eat the tax, but they may also walk away, just like a customer or supplier might, and then you're just as out of business.

The true distinguishing factor how easy it is to get some combination of involved parties to eat the total amount of the tax and still be willing to do business. In other words, whether the total surplus is more than the amount of the tax.

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

#298

Post by fruitzome »

andosa wrote: post #120
runeks wrote: post #118

Earlier quoted context omitted.

> Why are a large amount of people treaing access to other nations markets as a human right? Why would you want to restrict (economic) interaction between two parties just because they’re far away from each other? I’m sure some of the local companies in my area would love to prevent me from buying goods elsewhere, but why would I want to buy goods elsewhere unless they are either cheaper and/or of better quality? In…

Noone is restricting trade, they are simply saying that the fact that you are "far away" doesn't give you the right to dodge taxes that local companies have to pay. If anything it levels the playing field.

This is backwards.

It is the government that is threatening force (fines, jailtime) if the company/people do not hand over a portion of their hard earned cash.

These same thieves/politicians are the ones that wrote the laws and made these exceptions.

The companies are under an obligation to their families, employees, suppliers, shareholders, and the community at large to maximize value.

Or so you think that a government committee could build a cheaper, better, nicer iPhone?

Do you think a group of bureaucrats would make a cheaper, better, more efficient Tesla Vehicle?

We laugh at this, because we know the government is a bunch of people that on the whole have never employed people and created value from launching their own businesses. They do not know how to maximize wealth creation.

Why do we think that the government raking in Billions more is going to be put to create better, faster, cheaper and more efficient goods ands and services than a company like Tesla, Apple or Amazon?

Here's what's going to happen:

Billions will be raked in. And billions will be spent on duds. Look at Canada spending 1B on a scheduling app that got scrapped because government workers didn't give a shit.

Look at US gov spending on the billion dollar website.

The money will go to the pockets of more lobbyists, politicians, and will flow back to the companies.... and less quality service will be delivered , and at a higher price.

These companies employ so many people (who pay income tax from said revenues) and all kinds if intermediate taxes are paid in acquisition, and distribution of raw materials to final product to the door of the customer.

Quite literally a $700 iPhone would cost less than $200 had the government not levied/taken profits at each step from:

Land development, ore mining, glass and silicon manufacturing, assembly, distribution, packaging, shipping.

And then they want to stifle growth further and take a 3% cut of gross revenues?

I'm all for their cut during trade and VAT (20%!) But taking your hard earned profits to spend in wasteful ways while lining the surveillance communist state's pockets via broken and inefficient products is disgusting.

This will not end well. The EU is well on it's path to full blown centrally planned totalitarianism and communist level controls. You will see.

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

#299

Post by 3pt14159 »

kgwgk wrote: post #285
3pt14159 wrote: post #284

Earlier quoted context omitted.

I'm arguing that all companies should have the same VAT rate. If for some reason we want to apply a higher rate to a company it should be via lower base deduction.

The whole discussion is about targetting some particular companies. That explains why a VAT, which is paid by the consumer anyway, wouldn't be better. If you’re going to distort the VAT chain to be get something equivalent to a tax on the sales of specific companies, how is it going to be better?

Because by doing a standard deduction you're keeping certain mathematical properties that VATs provide, like the ability to sell a good multiple times without paying layered taxes. Standard deductions stop this warping while still providing the warping that is desired.

And saying a VAT is paid by the consumer is silly. All taxes are paid by the consumer ultimately. What matters is capturing the taxation in a locality where the infrastructure used is roughly paid for by entities utilizing it. If CocaCola sells $10B of Coke in the EU, a VAT captures that and it should. If a financial services firm sends someone out to consult the Saudi Government the transaction is (and should be) outside the EU. When the income is repatriated is when corporate taxes kick in to cover the infrastructure that is engaged with production.

Too high of a VAT and firms shift manufacturing jurisdiction since VATs naturally discourage exports. Too high of a corporate tax and firms keep corporate income offshore and lobby for reduced taxation rates.

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

#300

Post by throwaway77384 »

mancerayder wrote: post #261
throwaway77384 wrote: post #200

Earlier quoted context omitted.

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…

That is very interesting and does make a lot of sense. Thank you :)
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