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Might anyone have insights on why they're stopping at 5%? If the idea is to tax the internet giants on the business they do in France, why not seek to tax them at the usual corporate tax rate? The internet giants will, I presume, fight it either way, and it's not like a tax is going to stop them from serving French customers.
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Companies dont pay VAT. And google's reveneus are mostly ads for companies.
Companies do pay VAT when buying ads (but it’s Google Ireland doing the sale, I think).
Selling fake goods between companies and applying for the VAT refund for all the fake transactions is known as a VAT carrousel.
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The difference between avoidance and evasion is only relevant if you have tax law interpreted to the letter only. Tax law should be interpreted by the lawmakers intention and companies should be ready to be fined or uptaxed if authorities find they pay less taxes than is reasonable given global profits and relative turnover within their jurisdiction. Constructs such as paying “royalties” to parent companies, or takin…
That would be a nightmare. First, tax laws don't have clear intentions to begin with -- if a tax law passes with 51 out of 100 votes in the legislature, all 51 representatives could be supporting the "letter" of the law for 51 different actual intentions, many of which might not be noble in the first place (e.g. give a particular local factory a tax break to win more votes next election). Second, because of this, "in…
Example for interest rates: Credit risk and intrabank/central bank rates are considered by courts when judging whether a rate is “too high”.
Swedish tax authority guidelines from past cases
https://www4.skatteverket.se/rattsligvagledning/edition/2019...
Summary - interest rates should be based on market conditions and credit risk
- internal loans should not use significantly higher (or lower) than loans between independent parties.
So: the authority already makes a judgment of e.g credit risk. If the tax authority thinks the interest rate was too high, they will say what would have been reasonable - and the company will be taxed for the increased profit as a result of the lower interest rate.
I don’t see anything controversial about this and I assume this is how tax law is interpreted and enforced globally.
It should be noted that such cases are usually lost by the authority - that is, the courts do usually not find the tax authority could prove that the interest rate wasn’t a normal rate based on market rates and risk. I don’t think that’s a problem, but I think it’s important that this is how it works.
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That would be a nightmare. First, tax laws don't have clear intentions to begin with -- if a tax law passes with 51 out of 100 votes in the legislature, all 51 representatives could be supporting the "letter" of the law for 51 different actual intentions, many of which might not be noble in the first place (e.g. give a particular local factory a tax break to win more votes next election). Second, because of this, "in…
The usual solution is a "General anti-avoidance rule" (GAAR). This doesn't get into the intent of the tax law, only into the intent of the business action . If there would be a simpler, more natural, and otherwise cheaper way to do it, but it's been done a particular way to avoid tax, then it's unlawful.
I am not an accountant, but couldn't most corporate structures be reimagined by taxing authorities as an idealized "single company"?
Then calculate the difference between taxes that would be owed by that company vs the actual structure?
If there's a statistically significant discrepancy, require the company to provide a rationale. Or pay some penalty.
Couldn't we just ban tax evasion? What makes it so hard? (honest question) A recent European study has shown that the more company win money, the less they pay in taxes (in percentage). Is it because of bad laws? Corrupt politicians? Something else?
My guess: Big corporations often have more potential to outsource, and are better known, and have a stronger PR and legal department. These traits give them a much better negotiation position (don't remember that governments profit from taxes, so it's a bit of a demand and supply thing: If taxes are high in one country, a big company will threaten to move to another, which costs the country money in the end). At leas…
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The difference between avoidance and evasion is only relevant if you have tax law interpreted to the letter only. Tax law should be interpreted by the lawmakers intention and companies should be ready to be fined or uptaxed if authorities find they pay less taxes than is reasonable given global profits and relative turnover within their jurisdiction. Constructs such as paying “royalties” to parent companies, or takin…
I disagree. Tax laws should be simple and explicit. The people in charge change over time. I don't trust that the people later will interpret the laws the same way as the people today, or that either will interpret the laws the same way they were intended, or that the group of people that wrote the laws all had the same intent.
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Companies do pay VAT when buying ads (but it’s Google Ireland doing the sale, I think).
Everyone pays VAT but if you’re a company you get reimbursed (by having your accountant compute all paid VAT and asking the state for a refund IIUC). VAT is only supposed to apply to the last transaction with the consumer, hence the “value added” in the tax ;) Selling fake goods between companies and applying for the VAT refund for all the fake transactions is known as a VAT carrousel.
Can anyone comment on how this interacts with the idea of the single market? Why can Google Ireland Ltd. be charged a special tax for doing business in France? In my (limited) understanding I thought this was not supposed to happen, and that most goods and services could automatically be sold EU-wide. France could not charge import duties on Guinness trucks, nor demand that beer good enough to be sold in Ireland is n…
On the other hand, the really quite high threshold might well be subject to complaints on the basis of distorting the single market. All the large multinationals that would hit the threshold reside in Ireland / Luxembourg, whilst lots of French firms don't hit the threshold and thus gain a competitive advantage.
I'm neither a lawyer nor a tax advisor.
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To complicate the situation, a French citizen, living in Spain, the sole owner of a company incorporated in Ireland, buys software from an American company to run for a customer in Brazil. Which country/countries should be able to tax the revenue?
The company would pay corporation tax in Ireland. The French citizen, if resident in Spain, would probably pay taxes in Spain (generally countries tax residents). The customer may need to pay sales tax on the purchase to Brazil, if Brazil has such a thing. But I agree with your point - it does get quite complicated and bureaucratic.
You'd assume that, but you could also very well be wrong. Depending on tax treaties and the "effective place of management" principle, he could be liable for corporation tax in Spain or in both Spain and Ireland.
One reason why tax laws get very complicated very fast is because every country wants to tax everything it can which inevitably means that two different countries end up taxing the same thing. To avoid this, you get double taxation treaties and loopholes.