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France Plans 5% Digital Tax as Governments Chase Internet Giants

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Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#231

Post by anoncake »

briandear wrote: post #177
BartBoch wrote: post #141

Earlier quoted context omitted.

In this case, this will be the race to the bottom and smallest countries will be able to charge 0% tax just for the sake of office space rented since their domestic market is small enough to not bring much of income tax (Luxembourg for example). The issue here is with omitting responsibilities. If a company makes hundreds of millions of income in a country, it should pay some taxes there. There is a huge push in Pola…

If a small country can afford a 0% tax, why shouldn’t they avail themselves to that competitive advantage? Unified tax rates amount to a tariff on more fiscally competitive countries.

The very post you replied to answers your question: You get a race to the bottom. Competition pushes taxes lower than they would be if the democratic government of each country could set them freely as they believe is fair.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#232

Post by BartBoch »

makapuf wrote: post #200
briandear wrote: post #177

Earlier quoted context omitted.

If a small country can afford a 0% tax, why shouldn’t they avail themselves to that competitive advantage? Unified tax rates amount to a tariff on more fiscally competitive countries.

They would have the right to do so. And other country might have the right to place a 150% tariff on this country goods. Or place those on the tax haven list. Other countries cannot stop them from applying a zero tax. But those same countries that provide all the markets, infrastructure, schools, manufacturing and support all the population to make it work can also choose not to trade with those.

It would be fair, but the EU prohibits it. So the company creates fake expenses in tax-flexible countries to avoid paying taxes in the country, where they generate revenue. That's the issue.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#233

Post by BartBoch »

AnthonyMouse wrote: post #184
BartBoch wrote: post #141

Earlier quoted context omitted.

In this case, this will be the race to the bottom and smallest countries will be able to charge 0% tax just for the sake of office space rented since their domestic market is small enough to not bring much of income tax (Luxembourg for example). The issue here is with omitting responsibilities. If a company makes hundreds of millions of income in a country, it should pay some taxes there. There is a huge push in Pola…

> There is a huge push in Poland now, to introduce non-refundable revenue tax (of 1.5%) on larger companies in place of income tax. This would solve the issue entirely. Well, only if you're content with a 1.5% tax rate and a tax that punishes smaller non-vertically integrated companies. They would probably be better off with something like DBCFT using a normal tax rate instead.

The idea is to support small companies. I don't see how this would punish small companies at all. Those companies, due to the inability to avoid/reclaim taxes pay more than 10% now (even with an accountant). I know a lot of companies (a few people large) to pay that much.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#234

Post by anoncake »

rb808 wrote: post #175
yann63 wrote: post #2

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?

You make it sound as if taxation is a good thing. In much of the world capitalism, retained profits and growing the economy is used to make people wealthier. The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly pe…

> Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave.

Maybe countries with high unemployment and poorly performing economies have a problem with companies paying too little taxes.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#235

Post by BartBoch »

sbacic wrote: post #208
BartBoch wrote: post #141

Earlier quoted context omitted.

In this case, this will be the race to the bottom and smallest countries will be able to charge 0% tax just for the sake of office space rented since their domestic market is small enough to not bring much of income tax (Luxembourg for example). The issue here is with omitting responsibilities. If a company makes hundreds of millions of income in a country, it should pay some taxes there. There is a huge push in Pola…

There would be no race to the bottom if there was a real, tangible benefit to being established in a high tax country - ie, better public services, a more educated workforce, more business friendly environment, etc. As it is right now, very few countries justify their tax rates and that prompts people and businesses to do the rational thing and go where they pay less for the same thing. I think it's very concerning t…

I think you are completely missing what's going on...

Google generates revenue in Poland. They have operations in Poland and all (so they use all the public goods like employees, infrastructure, safety etc.). They should pay taxes in tens of millions of Euros for this. But instead, they generate fake expense in Ireland, send an invoice to the Polish office, call it "branding" or something else, the invoice is big enough to generate a loss. They do not need to pay taxes in Poland since they are at "loss".

That's the issue. Not that Ireland has a different tax system. The issue is that companies are allowed to avoid taxes by generating fake expenses and the EU prohibits other countries from doing anything with it really.

IMO 1,5% fixed tax is very attractive rate.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#236

Post by anoncake »

kortilla wrote: post #142
tonyedgecombe wrote: post #129

Earlier quoted context omitted.

> Taxation is theft. No it isn't. Property rights are determined by the state, hence taxation by the state cannot be considered theft.

That’s not really a valid argument against “taxation is theft”. As a citizen born in a country, you never enter into an agreement that the government should be able to take a cut of all of your transactions, but that’s what happens and refusal to partake results in violence (an arrest and time in prison). It’s no different than the local mob going around giving beatdowns to get protection money from businesses. The p…

It's easy to establish the duty to pay your taxes even using "freedom of contract". By stepping foot on a public road, you accepted the terms and conditions.

Market extremism is a funny thought experiment, but ultimately absurd.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#237

Post by AnthonyMouse »

BartBoch wrote: post #233
AnthonyMouse wrote: post #184

Earlier quoted context omitted.

> There is a huge push in Poland now, to introduce non-refundable revenue tax (of 1.5%) on larger companies in place of income tax. This would solve the issue entirely. Well, only if you're content with a 1.5% tax rate and a tax that punishes smaller non-vertically integrated companies. They would probably be better off with something like DBCFT using a normal tax rate instead.

The idea is to support small companies. I don't see how this would punish small companies at all. Those companies, due to the inability to avoid/reclaim taxes pay more than 10% now (even with an accountant). I know a lot of companies (a few people large) to pay that much.

> Those companies, due to the inability to avoid/reclaim taxes pay more than 10% now (even with an accountant). I know a lot of companies (a few people large) to pay that much.

And a 1.5% rate isn't enough to replace those taxes, so it would be paid on top of them.

Moreover, revenue taxes disproportionately impact non-vertically integrated smaller companies. Megacorp is vertically integrated, they pay 1.5%. A supply chain containing twelve smaller companies pay 1.5% each, which compounds into nearly 20%.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#238

Post by petronio »

ip26 wrote: post #192
AlexTWithBeard wrote: post #172

Earlier quoted context omitted.

Sounds very reasonable. I'm sure there's a catch, but I don't see where it is. Taxing a business looks like a weird thing to do: a business can only spend money on business-related stuff pretty much by definition. In order for money to be spent on non-busines things, it should be paid out as a salary, dividends or something like that which we know how to tax pretty well. I'm certainly missing something, but what?

Not an economist so I don't know the official reason. But a corporation can theoretically accumulate profits indefinitely without making a payout, while governments need stable yearly revenue. Maybe more material from a public policy point of view is that we like to tax different things at different rates, to favor or disfavor spending on various things. Hard to tax a salary based on what the employer spent their mon…

There's many valid reasons for accumulating profits, such as planning buyouts or expansions. That being said, sometimes it can be done for reasons such as waiting for a preferable tax regime. Due to that, some countries have a separate accumulated earnings tax that is similar to individual wealth taxes to disincentivize accumulating without a business purpose.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#239

Post by barry-cotter »

anoncake wrote: post #229
sbacic wrote: post #208

Earlier quoted context omitted.

There would be no race to the bottom if there was a real, tangible benefit to being established in a high tax country - ie, better public services, a more educated workforce, more business friendly environment, etc. As it is right now, very few countries justify their tax rates and that prompts people and businesses to do the rational thing and go where they pay less for the same thing. I think it's very concerning t…

A country does not have to justify its tax rates before Facebook. A country should focus on serving its citizens, not multinationals.

A company does not have to justify its business practices to anyone but its shareholders. A company should focus on serving its shareholders, not politicians.

Re: France Plans 5% Digital Tax as Governments Chase Internet Giants

#240

Post by petronio »

benologist wrote: post #156
snarf21 wrote: post #62

Earlier quoted context omitted.

As others have said, it isn't evasion but avoidance. The issue is that there a lot of ways to put the money on the books wherever you want it. Let's say you want to sell mobile phones. You could create one company in France that builds, buys and sells phones. In this case it becomes pretty clear it is a French company and all the money will be taxed in France. But let's say you have that same company and split it up…

It's tax avoidance because we call it that, so why don't we start by not saying tax avoidance anymore and call it tax evasion like it literally is when a company invests massively in accounting to abscond with their taxes.

There's a big difference between the two. Tax evasion is breaking the law to pay less tax. Tax avoidance is working within the confines of the law to pay less tax.

Putting money in a retirement account is a form of tax avoidance, but it was provided and is working as intended. The issue is not the definition, it's that legal loopholes allows unintended tax avoidance. The way to correct it would therefore be to close the loopholes, and many of the remaining loopholes span international borders and are tough to close without negative unintended consequences.

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