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Three European Countries Block Tax on Tech Giants

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Re: Three European Countries Block Tax on Tech Giants

#111

Post by kodablah »

jpdus wrote: post #102
kodablah wrote: post #40

To save some of us outsiders from researching, can someone give a brief overview of the proposal? Specifically why new taxes are needed and how the targeting is specified (i.e. who is affected).

Its relatively easy. All the big tech crops are paying effectively below 1% of their profits in Europe and are moving almost all of their profits to tax havens. As these companies are very creative when measuring their localized profits, its easier and more fair to impose a tax at the revenue level. I don't understand all the negative comments here. Look at the big profit margins of all big tech companies (maybe with…

I was trying to avoid giving my opinion. My curiosity was specifically around what conditions make a company subject to this new tax and its purpose.

Aside from my opinion on corporate taxing and government approaches towards it in general, I will give an opinion on new taxation policy in general developed as a counter to avoidance. More and more frequently, legislation is drafted to combat the lack of enforcement of existing statutes. And that same legislation is similarly unenforced like its predecessors. Most watch this history repeat and cheer it on with incredulity towards disagreement. Some believe this time will be different, others believe the same institutions that are failing at their obligations shouldn't be given a mandate to fail using the same approaches. It adds more codified word and less substantive meaning. Replace tax structures (only if you must), enforce, move on. Don't pile on, leave unenforced, and keep giving pitchforks to the citizenry while ignoring the responsibility of the collectors.

Re: Three European Countries Block Tax on Tech Giants

#112

Post by matt4077 »

adam_klein wrote: post #83
digianarchist wrote: post #45

Earlier quoted context omitted.

Ireland have already been given some lucky charms by the EU. For example, they were given permission to set their corporate taxes to a ridiculously low 12.5%.

Not given but negotiated, as a part of EU treaties. Similarly to the subsidies for French farmers or the access to Irish waters for Spanish fishermen.

All nationalistic jingoism aside, it's pretty hard to deny that Ireland reaped huge profits from EU membership. Considering it started as one of the poorest countries of Europe when it joined in the 1970s, subsequently received billions in direct transfers plus favorable conditions as outlined above, and today is among the richest countries in the world.

That's not to diminish Ireland's accomplishments in the least. The combination of a well-educated population and speaking (something akin to) the English language alone made them predestined to catch up eventually. Being able to engage with their former enemies in the Good Friday Agreement was also exemplary and undoubtedly returned fantastic dividends, both economically as well as morally.

But to deny that being part of the world's largest free trade block was an essential part, or to insist that when Ireland joined 40 years ago the EU was expecting, and motivated by, any short-term financial interests just seems...unnecessary petty?

Because there's nothing dishonorable in that story. Nor are those two aspects contradictory.

Germany does pretty well with an origin story far darker: not only to have started far lower than Ireland has ever been, and receiving far more support at a time where the idea of short-term returns were laughable (the Marshall Plan). But to have caused that same miserable situation pretty much single-handedly, and being the recipient of gratuitous support by essentially the same countries they had devastated in that mad crusade less than a decade prior.

Re: Three European Countries Block Tax on Tech Giants

#113

Post by nradov »

oliwarner wrote: post #94
nradov wrote: post #74

Earlier quoted context omitted.

Why would a sovereign state even need permission from others about purely internal matters such as corporate income tax rates?

Because it's not just internal. The EU allows for free cross boarder trade and movement of assets within the EU. Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there. It's an automatic incentive. There are rules here because otherwise it would be a race to the bottom. Each country wants Amazon, Google, etc for their employees' income tax. The whole EU l…

Then let's have a race to the bottom.

Some people seem to assume that high corporate income tax rates are a good thing, but there's really no proof of that. We would all be better off if every country eliminated corporate income taxes entirely, and made the change revenue neutral by increasing taxes on high income investors and employees. This would encourage economic growth by eliminating resources wasted on tax accounting and avoidance.

Re: Three European Countries Block Tax on Tech Giants

#114

Post by _Codemonkeyism »

7000skeletons wrote: post #11
Lio wrote: post #5

Earlier quoted context omitted.

Yes they're an obvious one. I was surprised though that Luxembourg wasn't listed whist Sweden and Denmark are. I'd be interested to here their objects if anyone can point at a fuller article or discussion of the issues.

This is from earlier this year, so the debate may have progressed since then, but Sweden and Denmarks' concerns seem to stem from the way in which the EU aims to apply the tax. >“A digital services tax deviates from fundamental principles of income taxation by applying the tax on gross income, i.e. without regard to whether the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena Andersson, and her…

The way tech companies are reducing income to zero by shifting around IP and IP license costs it's sadly impossible to tax income. So either tax revenue (or at VAT to digital goods delivered in a country like ads) or close IP license loopholes.

Re: Three European Countries Block Tax on Tech Giants

#115

Post by _Codemonkeyism »

7000skeletons wrote: post #11
Lio wrote: post #5

Earlier quoted context omitted.

Yes they're an obvious one. I was surprised though that Luxembourg wasn't listed whist Sweden and Denmark are. I'd be interested to here their objects if anyone can point at a fuller article or discussion of the issues.

This is from earlier this year, so the debate may have progressed since then, but Sweden and Denmarks' concerns seem to stem from the way in which the EU aims to apply the tax. >“A digital services tax deviates from fundamental principles of income taxation by applying the tax on gross income, i.e. without regard to whether the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena Andersson, and her…

"Yet the Nordic countries, which are home to several large digital companies like Sweden-based music streaming service Spotify (SPOT.N) [...]"

Re: Three European Countries Block Tax on Tech Giants

#116

Post by stickfigure »

kachurovskiy wrote: post #99
bsaul wrote: post #82

As a french, seing french government officials trying to impose their knee-jerk « let’s tax it » reaction to any kind of problem makes me absolutely sick. They’re just a bunch of jealous incompetent insufferable pompous politicians than don’t understand a thing about the private sector and so instead of trying to fix the numerous reason why we don’t have any competitor to google / facebook etc ( such as our best engi…

Please help me understand why is it okay to tax people on income but not corporations?

The best analogy is that taxing corporations on revenue would be like taxing you based on the # of hours you work, irrespective of your wage rate.

Folks that work low-wage or volunteer jobs would suddenly have negative income. The only viable jobs left would be bankers and software developers.

Re: Three European Countries Block Tax on Tech Giants

#118

Post by matt4077 »

nradov wrote: post #74
digianarchist wrote: post #45

Earlier quoted context omitted.

Ireland have already been given some lucky charms by the EU. For example, they were given permission to set their corporate taxes to a ridiculously low 12.5%.

Why would a sovereign state even need permission from others about purely internal matters such as corporate income tax rates?

Because it's in all these countries interest to avoid a race-to-the-bottom and being played against each other by companies that only need to move a mailbox to change jurisdictions.

For examples of the same mechanism: Amazon's HQ2 farce aptly shows what happens when jurisdictions cannot effectively coordinate and are forced undercut each other. Is there any doubt that Amazon would settle in some city and hire people and pay taxes without their little version of Hunger Games? So the net effect is simply some city being marginally better of but forgoing the jackpot that would usually come with being chosen, and therefore those citizens having to pay instead. Plus the harm that comes from Amazon making decisions based on money alone, to the detriment of other factors such as quality-of-life for its employees.

That's why any trade deal includes provisions prohibiting subsidies not covered by a few narrow exemptions: they distort the competition and simply lead to losses in a zero-sum game between nations and private corporations.

Re: Three European Countries Block Tax on Tech Giants

#119

Post by CompelTechnic »

cure wrote: post #75
CompelTechnic wrote: post #49

Earlier quoted context omitted.

Let's say you operate a low margin business, such as a gas station. All numbers are before tax. For the year, you spend $1,000,000 paying for fuel, convenience store supplies, electricity, wages, etc. You get $1,050,000 in revenue from your customers, for a fairly realistic margin of 5%. Now let's say you run a software business. You pay $500,000 in electric bills, computers, wages, etc, and collect $1,000,000 in rev…

> Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties. You are being a little bit funny here. This paragraph basically proves the OP's point. Because companies would never abuse the taxation rules, of course.…

Your argument advocating that the gas station increase its prices 4% does not fully consider the fact that businesses are risky, and it does not consider how unfair the situation remains for the owner. If this 4% increase did occur, the new revenue figure is $1,092,000. With $92,000 of profit before tax, the owner is now paying $43,680 of taxes, leaving $48,320 of profit after tax (much better than before). They are still paying 47% taxes on their profit before tax.

The degree to which businesses generate expenses is the majority of the degree to which they take on risk. It's pretty well understood that most economies are already too risk-averse. We should not further punish those willing to take risk.

The thrust of my argument is focused around the fact that low margin businesses would have an EXTREMELY high sensitivity to variable cash flows. I should have focused more on how unfair this is to small businesses, which already are a risky proposition. It is strange to me that multiple people have replied without having any acknowledgement of this.

The benefits of taxation must be balanced against the potential for abuse and the damage it does to the businesses that are taxed.

Taxing revenue would likely have less potential for abuse, but I would argue the damage it would do to the economy would be much larger than the benefit this may provide.

Re: Three European Countries Block Tax on Tech Giants

#120

Post by logifail »

ionised wrote: post #85
adventured wrote: post #80

Earlier quoted context omitted.

It's an increasingly low corporate tax rate world. Ireland's rate is no longer as unusually low relative to other EU nations as it used to. The average EU corporate tax rate is getting close to being in the teens. For example: Hungary 9%, Bulgaria 10%, Lithuania 15%, Romania 16%, Croatia 18%, Poland 19%, Czech 19%, Slovenia 19%, UK 19%, Estonia 20%, Finland 20%, Latvia 20% Even Denmark is at 22% and Norway is at 23%,…

I don't think the popularity of these low rates is a justification. It just highlights how it has become a race to the bottom.

Regarding multinationals which might place their EU "tax address" in any of 28 countries, those countries which choose to set low taxation rates have (logically) decided they would rather attempt to have a low percentage of something than get a higher percentage of nothing at all.

Q: How many companies would site a corporate office in Luxembourg if there were no tax advantage?

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