I know this gets said a lot, but I live for the day the world sees innovation and quality tech companies from Europe instead of taxation and regulation.
Honestly, you have to be pretty ignorant to hold this opinion.
Tech giants face 2% UK digital services tax
131–140 of 238 posts
Re: Tech giants face 2% UK digital services tax
#132This looks like it is on gross sales? If so that would hurt low-margin companies quite a lot; I imagine Amazon would be essentially forced to increase prices by 2% for example.
Re: Tech giants face 2% UK digital services tax
#133I was scared for a minute. I thought this was about taxing consumer for accessing internet. It's fine. It's about taxing giant corporations who are evading taxes.
They aren’t evading taxes. If they were evading they’d be prosecuted rather than a new tax being introduced. They’re avoiding. Like we all do with our ISAs and pensions. If you misuse the terms it makes it harder for everyone to talk precisely about the issue.
I believe the GP's incorrect 'by the letter' use of the term was intended to point out that this kind of avoidance is more like evasion in that it is against the spirit of the law.
Re: Tech giants face 2% UK digital services tax
#134This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax. Sure maybe the local companies could then undercut Amazon if they somehow don't have to pay the tax, but eventually they'll just raise their rates to match because why give up the profit margin if they don't have to? It doesn't matter anyway, the tax will never happen. They're just using it as a point of…
>Those companies will just raise their prices to cover the tax How exactly will Facebook raise prices in a way that it will hit the average consumer?
If this is a tax on sales, rather than impressions, they could prefer international sales by 2%. If this is a tax on views, then this is harder.
Facebook could also raise the reserve price for auctions for UK ads.
Re: Tech giants face 2% UK digital services tax
#135This looks like it is on gross sales? If so that would hurt low-margin companies quite a lot; I imagine Amazon would be essentially forced to increase prices by 2% for example.
The problem is for highly global, IP based companies it is very difficult to tax profits.
You can just create a 'cost' (platform license fee, trademark cost) in another sister company (that is in a low/no tax jurisdiction) and charge it to the UK based one that is equal to the profit. Boom, no profit due to tax.
Not really sure what the best solution is. The UK isn't really big (or competent, depending on your outlook) enough to make tech giants like the US, so tech US companies dominate.
This has led to a massive outflow of tax revenue to these US giants. Eg, most advertising revenue pre internet would have stayed in the UK and been taxed in the UK. Post internet it is all flowing out to Facebook, Google et al who pay close to zero UK tax on tens of billions of (very high margin) sales.
Re: Tech giants face 2% UK digital services tax
#136Why would that bother anyone but the customer? Tech giants will just add it to the tab. People have no idea how much digital service is worth so if they want it, they pay whatever is the price. I don't think 2% (or even 10%) price hike will cause them to not advertise online their one simple trick to improve health of your joints. What are they gonna do? Print newspaper ad?
And how would that work? Google and Facebook could charge more for ads which impacts mostly the advertisers, Amazon could in fact increase the prices impacting average Joes in the UK, but they would lose the advantage over smaller competition unaffected by this kind of tax. This is a globalisation tax that would most likely not affect "normal" people while still bringing quite a few pounds to the national budget.
Re: Tech giants face 2% UK digital services tax
#137This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax. Sure maybe the local companies could then undercut Amazon if they somehow don't have to pay the tax, but eventually they'll just raise their rates to match because why give up the profit margin if they don't have to? It doesn't matter anyway, the tax will never happen. They're just using it as a point of…
> This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax. If amazon could charge an extra 3% without losing customers to other suppliers, why wouldn't they do that with or without the tax? Currently if amazon charge £10 and argos charge £10.20, amazon wins, if amazon charge £10.30 (to 'recover' the new tax), argos wins.
A rational company optimizes profits, rather than just revenue, when your costs go up, you may be interested in raising your prices, even if it reduces the number of items you sell, because part of the revenue has to be paid to someone else. You can see this trivially if a business only has a 1% profit margin on an item.
It's likely going to fall on some combination of business and consumer that we won't know a priori.
Re: Tech giants face 2% UK digital services tax
#138I know this gets said a lot, but I live for the day the world sees innovation and quality tech companies from Europe instead of taxation and regulation.
There's lots of innovation and quality tech in Europe. We just don't see it because Europe has much greater diversity of language and culture than North America. This means that companies can target a niche in their country that has zero relevance to Americans.
Not everything of value needs to be a billion dollar unicorn. There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.
Re: Tech giants face 2% UK digital services tax
#139Earlier quoted context omitted.
The global arguments about multinational tax usually conflate at least two issues: - total tax the corporate pays globally; and - share of the cake paid 'locally' vs in the home jurisdiction This measure seems to me to be more about the second of those than the first, but politically thats a hard sell so you see all the statistics about how much tax they paid 'in the UK' etc etc. Most people misread that. Politically…
The fairest way is to pay tax where you do business, you know, like you’re supposed to. It’s not really different for tech companies or global companies.
But it's much more complicated than that because the system is not meant to either incentivise or disincentivise insourced vs outsourced functions (and what you seem to be suggesting would create incentives for offshore outsourcing for them, which would be politically unpopular). And corporation tax is a tax on profits, not revenue (VAT already exists and is a tax on revenue and Amazon UK pays a very large amount of VAT).
Maybe a couple of examples: if I buy clothes from Amazon's own brand/white label, which are manufactured in another country, what is the appropriate amount of profit that Amazon UK should be allocated and taxed on for my purchase? Now what if Amazon sold that operation to someone else? Should they then be allowed to deduct it? If you get that wrong, then you create a tax incentive to either insource or outsource functions (since for the same cost structure, one will save tax over the other), which is an undesirable outcome.
Or let's say I'm a UK Amazon Prime subscriber. I use some of that for video content, some for other services like postage. Some of that video content was created by their own studio in the US or Canada and is only available on their platform; some was licensed from a third party. How much of my prime annual fee should be allocated to the Amazon UK operation? How much to the internal Amazon studio? What about other bits of Amazon which are involved? Again, how do you ensure that that doesn't created a non-level playing field vs third-party studios? Third-party hosting services or CDNs? Third-party payment processors? Etc
Then consider that until last year, Amazon in the US would have also been taxed on the whole empire's worldwide profits but been able to deduct taxes already paid under various double tax treaties. So if the UK taxed amazon more, the US would have received correspondingly less. This is still partly true.
None of this involves anything which is tax motivated - it's all business motivated. Layer in tax incentives various government put in place for other policy reasons and it becomes even more complicated.
"Fair" is very hard when you get to the level of complexity involved in these types of businesses.
Re: Tech giants face 2% UK digital services tax
#140I know this gets said a lot, but I live for the day the world sees innovation and quality tech companies from Europe instead of taxation and regulation.
Honestly, you have to be pretty ignorant to hold this opinion.
Actually it is more informed than ignorant. Remove Sweden and UK from the the European list and you have needles in a haystack.
Even if you account for the 'unicorn' adge there is barely have innovation in Europe. On the social front too too, European pay and ownership is more concentrated in the hands of the leaders and is less evenly distributed than American counterparts.
Your comment strikes me a bit as if it comes from a defensive point of view instead of taking a hard look at things.