France has approved a digital services tax despite threats of retaliation by US
bbc.com
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The idea behind taxes is that you use some public resource and you pay for that service. You own a home in a neighborhood, you pay property tax that funds the schools. You drive a car, you pay gasoline tax that funds the streets. You hire workers locally, you pay the tax to pay back all the contributions public institutions made to adding the skills to the worker.
But the idea that a company like Amazon owes some tax to France doesn't make sense. Sure the delivery person uses the roads, but they pay the gasoline tax and the delivery company pays taxes. What public resources did Amazon, a US company, use from France?
The other theories of taxation is that it should be used to raise revenue from the best means possible. I disagree with that framework but applying taxes arbitrarily hardly seems fair or the best way to raise revenue.
The other argument is that the government should "level the playing field". But again arbitrarily punishing or helping some corporations opens up the possibility of corruption and corporate meddling as corporations look for favors. Much of the edge Amazon has versus local retailers is that it is more efficient. It doesn't take up store space (and pay taxes on the land) and it doesn't have to hire a lot of local workers (and pay taxes on their salaries). It's simply more efficient and its services are appreciated by the consumers.
Digital infrastructure, anti-poverty programs that mean potential customers still have something to spend, financial infrastructure, legislation, ...
The tax is on "digital services". It's unclear if the tax is on physical services from digital companies.
VAT is basically a tax paid by people. Companies don’t really pay VAT, they collect it from the end-customers and pass it to the state.
Relying on VAT alone skews the burden of financing the state on the people only, which means no participation from the companies that make money without directly contributing to the country’s expenses they benefit from.
It also disproportionately disadvantages companies that also employ people and have a physical presence in France and have to pay taxes.
A business needs capital to get started -- otherwise the founders wouldn't have to give ownership stakes to capitalists. But the capitalists also have the option to put their money in real estate or bonds or companies that sell to other countries etc. A company has to beat the after-tax ROI of those things in order to raise the money it needs -- so if the taxes go up, the ROI goes down, and they need to squeeze somebody else for the rest of the money, like customers and employees. Which, when it happens to every competing business in your country, they can do since no one can undercut them for the same reason they can't charge any less or pay employees any more and still raise capital -- everyone now has higher capital costs. The capitalists can move their money to an investment in another country more easily than the customers and employees can move around, so who eats the cost?
Ah ha, you say, but what about the companies that are no longer raising capital? Facebook is an established business. They don't need to raise any further capital, so their capital costs are irrelevant and we can tax those foolish capitalists who invested in them without expecting us to raise their taxes just as they were starting to see a return on their high risk investment. Which is true, except that you just convinced investors that it's not worth investing in a prospective competitor and have thereby entrenched Facebook's market position. Oops.
This is Econ 101. Draw some supply-demand curves, compute total profit, increase costs, and see how the optimal point moves on the curve.
Historically companies do raise prices as cost to produce increases.
To make stuff fair - you'd have to cut all other taxes or institute this one.
(I'd prefer no taxes, but that's never going to happen)
When it comes to B2B VAT is inconsequential for Amazon. Amazon is only affected by VAT when Amazon is the seller of a physical product to a consumer. Otherwise there's literally no impact on Amazon.
If you want to tax and regulate Facebook, etc., I think the argument is much less clear, especially if those regulations are just going to cement Facebook's position against possible newcomers.
off the top of my head, I'm sure there are lots more:
- a large set of well-off consumers who got there because of free public education, parental supports, et cetera
- a safe society so drop shipping is possible
- roads & infrastructure for shipping
- a justice system that protects Amazon from cheating buyers and sellers
- a stable, accepted currency
- no need for large numbers of armed guards at warehouses, protecting shipments, et cetera
- a functioning health & welfare system so can get away with paying employees & contractors peanuts
- a pool of employees and contractors who were supported by society growing up
and much more, I'm sure.
None of this is true. It is a protectionist / anti-tax evasion measure primarily. It can be justified considering the threat that amazon poses in local markets
https://www.investopedia.com/terms/d/double-irish-with-a-dut...
> It is a protectionist / anti-tax evasion measure primarily
And they tax any company that fits the profile, be they German, Japanese, Chinese, French, or, god forbid, US-American.
That's precisely what a tariff is.
Their whole point was that the shipper would pay taxes. Which they do. This applies to most of your points as well, they do get taxed on their warehouses.
What I find most comical about all this is there's already a 20% VAT on everything Amazon sells there. They do pay taxes already, France simply wants more, and this tax is written in a way where it will have a much larger effect on external companies than internal.
This tax is a crude corporate income tax replacement.
This creates the incentive of further adding value to a product/service and thus creating more economic output.
Amazon may be paying other taxes, but VAT is paid by the consumer.
You could easily argue every tax on Amazon is a tax on the consumer. If you increase the cost of Amazon doing business, prices go up.
All money made on the white market in any country is facilitated by that government, and taxes are paid on all profits to pay for the services which allowed the profit to be made.
>The other theories of taxation is that it should be used to raise revenue from the best means possible. I disagree with that framework but applying taxes arbitrarily hardly seems fair or the best way to raise revenue.
It's not arbitrary to expect businesses to pay for services they benefit from.
So any taxation is justified?
> It's not arbitrary to expect businesses to pay for services they benefit from.
Any digital company with revenue of more than €750m ($850m; £670m) - of which at least €25m is generated in France - would be subject to the levy.
That sounds arbitrary.
Yes. We have income tax in the US. It's the same thing.
Google doesn't have to pay the tax if they're not operating in the country. It says right there that if their revenues are +$25m a year, they are subject to the tax. Conversely, the US can also levy taxes against French digital services, and maybe they should.
My guess is the cost of not operating in France is much higher than the tax to do so, so that would be a silly maneuver.
Tangentially, I find it hilariously hypocritical that the Trump administration is whining about unfair tariffs on digital services.
A corp will raise prices to whatever level the market will bear. Why shouldn't a society do the same with taxes?
Inter-country competition helps to keep them honest, and corporations get to choose the luxury of where they operate from and do business out of.
There's value in competition, because it's about the closest we've been able to get to evolution. The issue comes about when competition is lopsided - I can understand the complaint here from the French, but I don't care at all for their solution.
A corp exists in a competitive market and can rarely raise prices to "whatever level the market will bear". If I don't like their prices, I use their competitor.
What competitor does my mandatory government and it's confiscatory tax agency have? What alternative do I have but to hand over half my work to them to be frittered away on foreign wars and grants for indolence and incompetence?
Isn't that exactly what VAT tax is for?
>And where does your assessment comes from? Just guess?
An educated guess that I am strongly confident in, to the point of willing to bet most of my savings on it. And I am not the kind of person who would usually bet any money on anything at all. My most risky money bet so far is putting a portion of my paycheck in 401k.
And yes, this makes it very hard for new businesses to enter the market as they do not have the resources necessary to do tax optimization.
Edit: I don't work for Amazon, though my brother does. I also don't work at a company that has much of a stake in this fight.
That's a straw man. You're leaping from "some type of tax is justified" which is quite a bit more reasonable than "any tax".
And if you want to say it's a slippery slope or some such, well, ever single action if extrapolated to the extreme can be a viewed as such. If 3% is reasonable and then it's proposed to goes up and up, fight the increase, not the initial reasonable action. Of course this may be putting words in your mouth, so I won't attribute it to you, only that I preempt a logical counter to mine.
We can argue whether that's a good thing or not, but not whether there's a slippery slope when it comes to implementing a new tax.
> We can argue whether that's a good thing or not, but not whether there's a slippery slope when it comes to implementing a new tax.
Dude what? Wealth redistribution? Lots of countries have much higher taxes that actually redistribute that wealth. Don't call our system socialist, it isn't. Have you ever lived in socialism (I have)? It isn't even here in California!
And even if I couldn't name a tax that was repealed, many are way lower than in the past.
Peasants would rebel because they'd be taxed to (literal!) death.
Taxes get repealed all the time. My province just repealed its carbon tax a few weeks ago: https://www.alberta.ca/carbon-tax-repeal.aspx
Window tax. 1990s UK Poll tax. The luxury tax token system the US used before sales taxes.
No, it isn't.
Road tax pays for road maintenance. Municipal tax pays for municipal maintenance. VAT and Income Tax pay for government expenditure. Taxes are collected in exchange for a service.
Foreign businesses providing entirely digital services in France aren't actually receiving any kind of service back from the French government. In other words, this specific tax is just a mechanism for collecting money arbitrarily in exchange for nothing.
That's a slippery slope.
You've just ignored all the above posts without addressing them. The other posts make it clear without any counter argument from you that government provides a safe and stable addressable market to do business (and literally the currency).
Because the dollars being used to pay for the digital good have already been taxed, probably many times over, by the time the credit card transaction settles and the merchant account is credited at the end of the week (or whenever).
It’s reasonable to question if this particular tax was designed in a way to target specific foreign companies, without a compelling nexus, which would make the tax predatory.
Amazon doesn't pay taxes when they're the merchant.
How does a government quantify providing "a safe and stable addressable market to do business"? What was the formula used to determine the tax bracket?
Unless we have a clear formula we can reason about, the tax would be arbitrary. Is that not the case?
Moreover, shouldn't the cost of providing "a safe and stable addressable market to do business" be a constant? We know how many French citizens utilize the service, and we should also (somehow) have the overall costs of "keeping the French market afloat". If so, why does the government tax a percentage of the total revenues?
If you're looking for a simple and logically designed system, the international tax system isn't it.
Think of it backwards: if we agree that X level of taxes need to be gathered to maintain common good, the government needs to gather it in the least unjust way possible. Taxing internet giants, to europeans, seem mostly just.
Administrative burden limits are not arbitrary. They are used in many places all over the world.
By showing ads.
Ads only need eyeballs to make money.
Your answer makes no distinction between them so doesn't actually answer the question.
Then the US every decade or so gives a money repatriation tax amnesty, effectively providing huge subsidies to US firms dodging all these taxes.
So the government decided to setup a new tax they couldn't. Can't really blame them.
This is only possible because internet. So, they're imposing a tax on companies that serve French customers via the internet but aren't based in France, so that all companies pay tax again.
Does that make sense?
The time and costs involved to setup, maintain and enforce such a system would be ridiculously high compared to what it would bring in.
Another answer (still only considering foreign businesses) would be that for companies making so little, the burden could be much greater, hindering their growth (and future taxability).
And that's just from the tip of my head
As soon as you do business,you have to register yourself to the "tax office"..
Now you structure you company in such a way, that the company pays more money for the trademarks of your partner company, than you make.
Now of course, that is something a small company with 50 people can't do.
So the company with 50 people can't make ends meet, and the company which makes 200 million, continous to make money hand over fist.
Actually, this would be unconstitutionnal. French companies meeting the criteria will also pay taxes.
They try fooling around with said laws, but for them it's illegal and they better not get caught.
This tax is specifically on revenue that doesn't do that.
(Not that I am a proponent of this tax)
2. You don't need French schools to learn how to Google things
Political propaganda/advertising is a great investment in times of choas/crisis.
>How would french consumers pay for satellite access without a functioning economy?
Use crypto currency or foreign currencies.
(Also, arguably, French eyeballs are a resource belonging to France, which Google exploits.)
Why don't you try justifying that one? Because I posit that if the French government didn't exist the market would exist anyway.
Without a government the only way of maintaining your wealth is being a warring faction. Those rarely require advertising online.
Anyway, the ultimate authority on which taxes and to what percentage will be imposed is the guy with the most power to execute decisions in the country. In France, that guy is the France government. You may think that this particular new rule is unfair, but I think the lawmakers do not care. There are already many taxes that are unfair from certain points of view, such as income tax. Life in a country run by a government is not fair, if you interact with the country, you have to obey its laws, the government is not interested whether you agree with them (that is, unless there is many of you so you can get together and put pressure on the government).
They need a sufficient internet infrastructure. People with access to it.
People with money to spend.
People with enough peace of mind to spend it on something else than absolute essentials.
People with enough peace of mind and free time to leisurely waste on mostly useless websites.
People to whom the physical goods of a great number of their advertisers can be delivered (infrastructure & post system).
Eyeballs alone are worthless.
The differences in CPC between an affluent white male working in tech in San Francisco and a poor black woman selling peanuts on the street in Rufisque, Senegal (which isn't even the most extreme opposite one could think of) is proof of that.
>The differences in CPC between an affluent white male working in tech in San Francisco and a poor black woman selling peanuts on the street in Rufisque, Senegal (which isn't even the most extreme opposite one could think of) is proof of that.
Why then are advertising giants like FB so eagerly expanding into "3rd world" markets and offering "free internet"?
Where else could they expand?
I'd say it's pretty obviously a calculated risk that they'll develop in value once hooked. Didn't Facebook have a scheme that gave net access in the developing world that re-created the AOL model? Free internet, but it's only FB internet.
The complete or comparative lack of regulation in many areas probably encourages too.
Worked for tobacco companies, works for most other industries.
The French government.
As for expanding into "3rd world" markets, the average monthly Senegalese salary appears to be 139€. And this is a country considered to be doing well in the region.
They're expanding and offering "free internet" because there's nowhere else to go. Because even though it's poor now, there's growth, and they want to be established and deeply encroached when those markets will become worth it. Because they believe better and wider internet coverage will spur even more growth.
The only reason these companies can exist and be worth anything today is because of all the groundwork and investment that has been and continuously is made.
Ignoring for a moment that this rationale can support any tax policy at all (including 100% tax rates)... This holds for all businesses, not just large tech companies. So why is the tax focused on the latter?
Isn't that true for any rationale for tax? I mean, I wasn't talking about tax rates, that's a completely separate discussion...
>This holds for all businesses, not just large tech companies. So why is the tax focused on the latter?
Because other businesses are already effectively taxed by existing laws. Overseas tech giants are targeted because they were legally avoiding existing taxes.
Because they are those who could and had the resources (legal and financial teams) to avoid said taxes, until now, and they happily did so (ie billing through Luxembourg or Irish post boxes). Not that I'd condemn it. Countries and laws were just to slow in catching up.
Most other businesses couldn't (and still can't) go around playing with loopholes because they don't have the means to and most of their goods are, well... physical.
Many countries have laws that effectively say that you must follow the spirit of the law. This seems analogous. See GAAR in https://en.m.wikipedia.org/wiki/Tax_avoidance
Other than the reasons the other replies have mentioned, it is also possible that enforcement isn't worth it for the smaller businesses (i.e. if they did apply to everybody they'd just lose money overall trying to get everybody to comply).
And iirc Amazon already pays that in the form of VAT.
https://www.statista.com/statistics/220534/googles-share-of-...
You know perfectly well that this tax is exclusively to counter the tax burden shifting. If corporations were setting up companies in countries and paid reasonable taxes on profits generated in those countries... no one would raise the possibility of these taxes.
Also, those large tech companies can sell to French customers because French customers have money to buy from them. And the reason they have that money is largely due to the country/society/legal system/welfare/medical/etc. This is a "access to market" tax and it makes perfect sense.
Currently local businesses pay for the "right to the free French market", but remote businesses don't.
Now we can argue as to how much said tax is passed onto the consumer and whether or not the additional tax revenue towards various social services offsets the hit. Which is an important distinction to make when choosing what to tax, since some consumers (namely the poorer ones) have less in the way of dealing with modest price increases.
It also could be argued that companies are stealing money from nations they reside in by taking advantage of tax havens or various loopholes to reduce their tax burden. At that point companies starve the various social services and results in consumers being unfairly affected.
I'm not following this chain of logic. How is increasing the consumer price immoral? Regressive tax structure or something?
Here is a concrete example. According to economic theory, the competitive price of a good in a free market should be the marginal cost of the least efficient supplier in that market. If a tax increases your costs but you are (still) not the least efficient supplier, then prices should not change at all, and the taxes will entirely come out of your margins.
This tax is aimed at a handful of large internet-only businesses doing business in France. These businesses are large and profitable in part because they operate very efficiently, and are in competition with offline companies whose operating costs are much higher. It is unlikely that this tax will by itself make their margins higher than the competitors, and therefore is unlikely to make them raise their prices.
What is an interesting scenario, though, is that taxes + GDPR fines + complying with new copyright legislation + whatever else gets dreamed up becomes enough that internet companies decide that it is worthwhile to take a stand and exit various EU countries. They haven't for a variety of reasons (including that corporation vs country battles can make other countries wary of said corporation), but if France keeps picking a fight, those calculations could change.
One of the upcoming interesting battlegrounds along this line is from recent EU copyright legislation. It strongly implies that various tech giants will be required to put software chosen by various national governments on their network to proactively identify and block copyrighted content. Software out of their control that processes everything coming in and has legitimate reasons to "phone home". Maybe you trust countries like France and Germany to only require trustworthy software. But what about more corrupt countries like Romania? Do you trust their copyright filter software to not cross the line into spying and censorship?
And I think you're mixing your enviro-zealot metaphors; it's whale oil and dolphin tuna.
Some do.
Source: I'm French and I do :)
The US has issues with government corruption, but this seems at least in part to do with americans' disdain for their government, which is partly because underfunding makes it difficult for it to operate smoothly.
If we really want to compare, American-style plutocracy might actually be more democratic, because it's easier for a diverse array of citizen to become rich, than it is for French citizens to join the elite club from ENA [1] and co.
I'm not saying the USA is a Democracy, just making the point that the average USA citizen may have slightly more hard (=concrete, realistic) agency over their rulers than French citizens do.
But there is a cultural difference too. Many (most?) people around me accept that we pay for some freeloaders, as long as we also manage to protect and help those that really need it.
It seems to work [1] which is why we accept the taxes (more or less).
[1] Sweden scores high in most indexes trying to measure these things.
Edit: Maybe this is uncomfortable for people but it is true. If people are so comfortable paying taxes how come the social democrats are the weakest in decades? How come there is no wealth tax, no inheritance tax, no gift tax, no property tax, deduction for debt, low corporate tax, special tax deals for family businesses, some of the highest privates debt in Europe, as well as some of the highest wealth inequality, most rapid privatization and the highest retirement age? The amount of tax money spent on private sector health care has doubled in 10 years. There is a housing shortage pretty much everywhere, for employees and students alike. The Stockholm subway is run by the Chinese. Volvo is Chinese. So is what is left of SAAB, essentially all Swedish cinemas, mobile operator 3 and partly Spotify, the other Volvo, the Stockholm airport train etc. There isn't going to be any Swedish companies left in 30 years. The steel and paper mills, spirits and other traditional companies are increasingly owned by Finnish companies. Oh, and the right wing populist party with an agenda based on discontent are now the second largest in the polls. Soon enough they will gut public service media like in Denmark.
These are not the traits of a well funded state prepared for the future. People just aren't paying attention.
Firstly, "in general" is very vague. There are famous cases of rich Swedes who don't want to pay Swedish taxes and successfully avoid doing so. IKEA's tax structure is legendary isn't it?
Secondly, Sweden has cut taxes in the recent past:
https://iea.org.uk/blog/how-high-tax-sweden-abolished-its-di...
Obviously many Swedes weren't happy with high tax rates.
In this very left-wing article about how Swedes love paying very high tax rates, it is observed:
https://www.theguardian.com/money/2008/nov/16/sweden-tax-bur...
'The median voter is a woman who works for the public sector, and around two-thirds of the electorate draw most of their income from the state, either because they work in the public sector or draw benefits from it.'
So yes the average Swede is a net recipient of tax money and is thus going to think taxes are awesome. Obviously in a world where a minority are forced to pay for the living costs of the majority, "in general" the population will believe it's a good system. But is a good idea or sustainable over the long term, let alone moral?
The problem in Sweden is that if you for example you get $500k from you parents, buy an apartment that appreciates, go study for five years, have a kid and take parental leave for another two years you pay maybe 10-20% tax overall (on the appreciation mostly) and nothing for health care or education for yourself or your kids, which might go to semi private school.
While the average person who don't have rich parents, or maybe kids, and are trying to work their way up are paying 40-50% or more on their income and not getting much in return. And on top of that are paying for some of the highest property values and general prices in Europe.
Stockholm built the most expensive hospital in the world, yet has one of the lowest tax rates in the country.
I don't mind paying taxes, but I want them to be put to good use and not be some sort of discount system for those who are already well off so they can take more vacations. (I do realize that their is a lot of history behind that, but it is now getting warped into some form of crony capitalism).
"Do you think that taxes are being used properly?" is a better question, since having roads to drive on or unemployment if you get let go from a job are quite useful; both are taxes. This is a harder question to answer and reduces the emotional response they are looking for.
That is not even a dive into economic inequality; Person A having 10 personal homes in three different countries while Person B lives out of their car pay-check by pay-check.
It's true that in the US, the average person sees very little benefit to federal taxes. Most real, helpful things such as police, roads, schools and such are perceived to be only from local or possibly state taxes. This is not entirely true of course since Federal taxes do help for education and roads notably, but I would say that most people don't really think about it that way. There's also a very strong individualism in the US, which tends to make people overlook outside factors when evaluating success, the "if you work hard and believe in yourself anything is possible" kinda thing. Finally there's a general belief in the corruption and incompetence of big government, the idea that this money taken will just be wasted.
So taxes, especially Federal taxes, are seen as a burden, a form of robbery even. And by a bunch of incompetents no less.
In France, people do see direct benefits of paying taxes in their daily lives, mainly related to the medical system.
There is also a history of things like trains, the post office, ferries, electricity, telephone service, being handled by the central government (this is before the privatizations starting the 1990s), and crucially, people associating the involvement of the state in what were in some cases world class services. And the French don't generally see a problem in letting the government handle these sorts of things. As an example there is now a petition going around in France to keep the Paris airports under government control.
So, paying taxes in France is seen more as a necessary burden to having a functional society rather than highway robbery.
What does piss off the French is not everyone paying their fair share, which these new taxes are helping to compensate. Even if not much at all in terms of actual revenue for the state, it's more of a symbolic gesture to appease the population.
I disagree with this. The US’s civil service organizations have immeasurably improved the quality of lives of everyone. Organizations like FDA/FAA/CDC/FCC/NASA/research at universities/Civil Engineering Corp/Transportation/judiciary/etc are crucial to advancing society and most importantly, the people in these organizations are by and large not corrupted, which is a very under appreciated assets and once lost, will be extremely hard to earn back. Obviously there are and will be a few bad actors, but the reason people don’t have to worry about bribing/violence/etc is that there is a higher level of trust in society and not everyone is out to get theirs before someone else takes it.
Once that attitude changes for most people, I don’t see how it will be possible to get it back.
What I meant was that the average person doesn't perceive it as such, IOW they don't see the benefits of the Federal government, which is not to say that there are no benefits for the average person.
This is probably because there is a lack of publicity about how these types of programs improve people's daily lives.
Instead we get a lot of politicians talking about how wasteful these are, or how it's part of the nanny state, or stifling growth by taxes.
And the media doesn't generally oppose this viewpoint... As a example, I remember during the Democrat debate in Miami where Sanders was not asked how his healthcare would help people, but whether it would raise taxes.
Evidently they consider that a fair risk.
A company might raise prices to pay for an increased dividend. Companies have threatened the very existence of the company, or made a loss to pay increasing dividend.
And if I remember my classic macroeconomics class correctly, that share depends precisely on the elasticity of demand (slope of the demand curve).
This might be true for many businesses but likely not the large digital ones, which enjoy ungodly margins (hence why they grow so much and so quickly). A unicorn's back is strong enough to carry quite a few saddles.
Amazon will rise prices? That will be just wealth redistribution from rich through Amazon and taxes to poor who are going to buy local potatoes.
a) Don Vito sending goons with guns to hurt and/or kill me if I don't pay protection money and
b) "The lawful government" sending people with guns to arrest me if I don't pay taxes (and potentially kill me if I should refuse arrest).
The police ARE the state goons, so the outcome doesn´t change much .
- The French police rarely kills people, and certainly not for not paying taxes. You can argue some tax dodging is under-prosecuted.
As for access to the legal system? As far as I can tell this is a net negative for them. All I ever hear about around the combination of FAANG+European courts is rather overreaching and abusive attempts to force them to pay lots of money or do lots of things that were never previously required and arguably still aren't under law. I'm sure they would happily lose "access" to the French courts if it meant not paying taxes there - the flow of legislation is so overwhelmingly one way.
The French government is taxing businesses not because this is somehow morally right or efficient, but because it is easier than convincing its subjects/citizens that government services merit higher personal taxes.
It's not like they don't already pay taxes. This is an additional tax on top of all the other ones.
Staying out of the way? They can do that for free.
Economists have known for 100 years that land value taxes (LVT) are by far the most efficient way to raise taxes. After that consumption taxes are the next most efficient. Corporate taxes and taxes on investment income are one of the least efficient, most distortionary, forms of taxation.
Yet policymakers and voters show no sign of changing their opinions, despite how much economic evidence continues to pile up. LVTs are extremely unpopular, because home ownership is fetishized by the middle class as a vehicle for wealth accumulation. Even in progressive polities like California, there's always tremendous political will to keep residential property taxes artificially low.
VAT taxes are almost just as despised, especially in America. Meanwhile higher corporate and investment taxes are supported by large majorities. Despite the fact that they impose serious drags on productivity and growth. If your goals is having a more progressive tax code or increasing income equality, the much better strategy is to combine high LVT/VAT taxes with a UBI, rather than explicitly try to target poorly designed tax schemes at rich people.
Effectiveness of UBI is still an area of much debate and research. Early results of this research based on a few pilots is decidedly not positive.
It makes me wonder, now that cryptocurrency is a thing, if fiscal policy could be embedded directly in the monetary system. Rather than a separate tax that's charged and remitted to the treasury, it'd simply be the difference between what a consumer spends and what a producer receives, much like how transaction fees come straight out of the transaction.
They pose major problems in terms of tax fairness though. The reason for this is that VAT efects the poorer disproportionately (poor people spends almost 100% of their income, while richer people won't spend a larger fraction of their revenue) while LVT targets the middle class (AKA those that don't have enough capital to diversify their assets and invest beyond their home).
There's nothing arbitrary here, in fact they're attempting to partially address a perverse incentive to take all your business online and do some jurisdiction arbitrage to minimize corporate taxes. This gives you an unfair advantage over, say, a brick-and-mortar store or a physical ad agency in Paris that's trying to compete online.
Taxes are not just about revenue, they are often about changing incentives (for the better if used well, for the worse if used without regard for unintended consequences).
>Much of the edge Amazon has versus local retailers is that it is more efficient.
Much, but not all. This addresses an additional edge Amazon has versus local retailers.
> This gives you an unfair advantage over, say, a brick-and-mortar store or a physical ad agency in Paris that's trying to compete online.
Are you sure it's "an unfair advantage" and not just "an advantage"? Doesn't your position presume that the brick-and-mortar business model deserves special protection? If so, why? If not, what then is unfair about "jurisdiction arbitrage".
> Taxes are not just about revenue, they are often about changing incentives
What is the implied incentive in this case? It seems like it's just incentivizing a brick and mortar business model, but it's not clear why this is inherently virtuous.
> This addresses an additional edge Amazon has versus local retailers.
Doesn't this all point to a fundamental problem with "corporate tax"? Wouldn't it be better (fairer) to reduce or remove corporate tax and raise sales tax or similar, such that it doesn't matter whether the business has a presence in the country in question? I'm not very knowledgable about the topic, so I'm hoping someone can set me straight.
Because it employs more people and pays taxes locally. It's perfectly valid for the government to ignore that and focus solely on the consumer side (i.e. minimize prices), but it's also perfectly valid (and economically sound) to do what France is doing.
>What is the implied incentive in this case? It seems like it's just incentivizing a brick and mortar business model
No, it is not incentivizing it. It levels the playing field a bit by applying more consistent taxation.
>Doesn't this all point to a fundamental problem with "corporate tax"? Wouldn't it be better (fairer) to reduce or remove corporate tax and raise sales tax or similar, such that it doesn't matter whether the business has a presence in the country in question?
I can be persuaded by that argument (economists do love consumption taxes for a reason, after all), but either way it's not for Amazon to decide. In France, it is for the French people to decide, via their representatives. Whatever positive or negative consequences arise are also theirs to bear.
Well, now you run into the problem of progressive vs regressive taxation. Since consumption taxes, as the name implies, tax consumption, and the poor have a marginal propensity to consume of almost 1.0 while the wealthy can have an extremely low marginal propensity to consume, it's reasonable to conclude that consumption taxes are taxing the people who are least able to pay and who would already be spending that money anyways. You're taking away money that would already have stimulated the economy elsewhere.
Taxing the poor runs into these kind of zero-sum problems much more quickly. The rich tend to save or are more able to engage in activities which produce products of much more questionable economic value (i.e., bitcoin farms, copyright trolls, rent-seeking, etc.). Obviously investment has value, but in economic terms it may or may not generate a commensurate amount of wealth.
Good question. I thought there may be some kind of legal definition for this but it seems quite fuzzy.
You could take the view that these companies were paying all required taxes, so this would be fair. Or you could take the view that direct competitors were having to pay taxes that they were able to avoid, which would make it unfair?
I suppose ultimately its a moral judgement, so there isn't really a right answer.
Having the option to not comply with laws, is an unfair advantage.
>reduce or remove corporate tax and raise sales tax or similar
VAT is a sales tax, effectively, but even that is managed away fairly easy. It's an efficient tax, but when it comes to B2B activity it's effectively unpaid. Amazon, though is a retailer, has a very large amount of B2B business.
All parties in this scenario are legally compliant.
> VAT is a sales tax, effectively, but even that is managed away fairly easy. It's an efficient tax, but when it comes to B2B activity it's effectively unpaid. Amazon, though is a retailer, has a very large amount of B2B business.
How does its B2B business help Amazon evade taxes? When I think about AWS, the billing doesn’t seem to lend itself to any obvious sales tax evasion schemes...
They were complaint with the letter of the law, but the law makers decided that the companies were not complaint with the original spirit of the law. So they introduced a new law so that all parties can also be complaint with the spirit.
In software engineering terms, the written down code was not producing intended behavior. So new code has been written to deal with this bug.
Taking from foreigners so long as it isn't so much that they are discouraged from doing business is a plus in that it increases the welfare of your people at the expense of the other guys people.
This is the actual theory of taxation and everything else is after the fact justification.
> The idea behind taxes is that you use some public resource and you pay for that service. You own a home in a neighborhood, you pay property tax that funds the schools. You drive a car, you pay gasoline tax that funds the streets. You hire workers locally, you pay the tax to pay back all the contributions public institutions made to adding the skills to the worker.
Taxation is used to encourage activities the govt thinks are beneficial to society, and discourage activities that are detrimental. In the US, married couples and those with children get tax breaks. This in spite of the fact that children use government services, accruing greater public costs. However the powers that be find it beneficial to encourage marriage and family building, I suppose because it hypothetically leads to greater stability and encourages more long term participation in the economy (can't quit your job and travel the world if you have kids to support).
So in short yes, the government can and does tax (or exempt from tax) whatever or whoever it wants, within the limits of the country's constitution and their courts' interpretation thereof. There is no requirement that it be directly correlated to a service the government provides.
Leveling the playing field wrt the inherent advantages that a large tech firm benefits from (economies of scale) does seem to be within the reasonable purview of a government which wants to protects its constituents from a tendency of the free market towards monopolization. This tax encourages competition by smaller players, which keeps Amazon honest. It is only not necessary if you trust Amazon to always act in the best interests of the consumer even after stamping out all competition.
I think the real reason is that there will be someone to look after you when you're old and sick.
Why have 20% of Taxi revenue (or whatever it is) leave the country if basically all of the service is provided in country, and the internet taxi company takes the large cut over a sustained period through a combination of first-mover advantage an network effects? (Not that that's what's going on completely in the case of ride sharing, as Uber may still be subsidizing things at this point)
For other things it doesn't make sense, but in the case of many of these companies it is basically just citizens banding together through democratic decision making to not get taken advantage of through network effects that lock in certain services and shield them from competition.
Because the value proposition for a service like Uber is the technology to efficiently broker transactions between riders and drivers (and hopefully we can avoid the predictable digression that this brokerage is trivial). The aforementioned 20% pays for that technology while the other 80% pays for the cost of the ride (the driver's time, fuel, car mileage, etc).
Also, I don't think the first-mover or network effects are particularly strong in the case of Uber. I have a hard time believing that the overwhelming majority wouldn't jump ship immediately if a competitor arrived on the scene who could offer better fares for customers and/or better rates for drivers. By comparison, an upstart Facebook competitor wouldn't be able to compete even if they could "outprice" Facebook (I guess "outprice" would be "better data privacy" in this example) because Facebook's product is the network. Of course, being able to compete with Uber (i.e. offering better rates/fares) is still prohibitively hard for most upstarts, but that's different than first-mover or network effects.
I doubt French people will revolt against taxing Google or US Marines will invade France.
Herés a video in french explaining it better than i can: https://m.youtube.com/watch?v=dejeVuL9-7c
Maybe YT knows how to translate live ? (Nlp + gtranslate ?)
My point is: in order to understand this chess move (and judge for yourself whether its a smart one or not), you have to understand the previous moves on the board (from « allies » and « ennemies », or just « economic partners » as de gaulle would say).
The Alstom case (and, to a larger extent, the US justice system jurisdictional overreach) was really something ugly, I don't really believe it's even remotely comparable to this situation.
There's not really anything else to it.
That's pretty clearly not the operative principal behind most taxation. Even the examples you gave mostly contradict it: if the point were to make people pay for services they use, then public schools would just charge tuition. As for gasoline taxes, I mostly hear politicians discuss them as an environmental measure; it never even occurred to me that they could be a fee for using roads. And that's not to mention things like income taxes, where the the poor, who use the most public services, pay the least.
> The other theories of taxation is that it should be used to raise revenue from the best means possible. I disagree with that framework…
This seems like a very radical position. "x should be done by the best means possible" is almost a tautology. Can you explain what you mean?
I think that France should levy any taxes that would benefit its people. Some taxes are bad, because eg. they hurt the economy enough to outweigh the benefit of increased revenues. In other cases, it's the reverse. In any case, what matters in the end is the public welfare. Do you disagree?
> The idea behind taxes is that you use some public resource and you pay for that service
You are framing taxes as if the government is a business selling people health care, fire protection, security, and infrastructure.
I benefit from infrastructure I don't personally use. For example, even if I am a healthy individual, I benefit from healthcare! Healthy people get and keep their jobs, get paid, and spend their money on Netflix, Uber, Lyft, and/or Disney. Lemme look... Yup, Netflix, Uber, Lyft, and Disney are all customers of my employer, who pays me, so I benefit indirectly from Healthcare.
That is one tiny example, but the actual principle behind taxation works this way: Everyone benefits indirectly from a functioning society.
(We sometimes tax people just for the things they use, but generally we do this to limit undesirable "tragedy of the commons" problems. Consumption taxes, vice taxes, and the issue of regressive taxation is outside the scope of this reply.)
The idea behind taxation is that everyone benefits, therefore everyone pays. Now we are talking about a company located outside of a country, benefitting from that country being a functioning economy.
Just as I benefit from infrastructure I don't use because I benefit from my country having a thriving, healthy populace with disposable income, so does the company selling things to the exact same populace.
Now just move this such that we are discussing France instead of Canada, and there is the actual logic: These internet companies benefit from France having a functioning economy with a populace that has disposable income to spend, so they should support that by paying taxes.
In sum, the flaw in your explanation begins with your model for why people and corporations pay taxes in the first place, and how they benefit from those taxes.
We start with a discussion about whether this one particular tax is reasonable or unreasonable because of jurisdiction issues, and before long you realize that a bunch of the people arguing against that tax don't really care about the jurisdiction issue, their real agenda is that they don't want any taxes, any governments, or any societies.
You are entitled to your beliefs, of course, but you really shouldn't respond to me. You should just post at the top level that not only should France not tax internet giants, but it shouldn't tax its citizens or anyone else.
Well, I was arguing that the government is NOT in the business of selling services, and that is why taxes for the mot part are not based on consumption.
Ideally—from my perspective as a product member of the Socialist Republic of Kanuckistan—taxes based on consumption are not about “fairness” but about creating disincentives for undesirable exploitation of resources.
The difficulty for most Americans is seeing taxation as a long term benefit rather than as a penalty, as no one is able to look past the fact that they feel forced into paying them.
> no one is able to look past the fact that they feel forced into paying them.
This is rather dismissive of a broad category of valid complaints a group feels.
The US Government uses tax revenue to fund many things, but some of those things are horrifically misguided wars and a global military empire.
is that global military empire an investment? If I had the _option_ of contributing money to the US military, I would never pay a penny to it.
Do the benefit of these "investments" to keep (USA) society running smoothly outweigh the millions of lives lost to misguided wars over the last 50 years?
I'd say no. It's unethical for me to elevate my _possibly_ elevated standard of living over the lives lost and ruined via the Vietnam war, Afghanistan war, Iraqi war, and countless other instances where the US military has ruined communities and countries.
I agree on the war front but that can only be changed from within and would exist with taxation or not only without taxation it would be a far more violent experience for you.
Negative because of magnitude. I don't think anything except for the most die-hard libertarians want 0 taxes. Stop unnecessary staw-manning.
>The opposite idea is that taxation is an /investment/ by corporations and individuals, directed and designed by the government,
People dislike it because it is seen as a terrible investment. ROI is extremely low on tax dollars. There is just no incentive for efficiency. Arguably stuff like medicare and social security is just pure consumption. 0 wealth is generated there. Stuff that can be classified as investment takes like <20% of the budget.
>...to allow society to keep running smoothly.
Many argue that most of what the government spends money on is unnecessary. The amount of money absolutely necessary to keep things running smoothly is thought to be less than what is spent now. The budget could be cut in half, many people would be mad or sad, but its not like the country would fall apart. At its core, all a government __needs as a bare minimum to be classified as such__ is to provide is military protection and a legal system, because those things are what government cannot be defined without.
>The difficulty for most Americans is seeing taxation as a long term benefit rather than as a penalty.
You are making an assumption that tax = good and More tax = more good. This isn't a "difficulty in seeing" for those that disagree. Perhaps people who disagree aren't dumb or have the misfortune of not being blessed with enlightenment such that they agree with you.
Money transferred to the government doesn't become magically different or something. There is no 'moral correctness' in transferring money to the government. It just takes agency away from individual citizens and grants it to a bunch of people who don't care at all about losing a few billion here and there.
Go to China.
They steal your stuff without any chance of a legal battle?
Well... There is your reason for those taxes.
Well, that's taxation in Marxism. And to an increasing extent, in the European Union. And no, I'm not making this up; the socialists (whether they call themselves The Left, Green or Social Democrats) explicitly state it in those terms.
If Amazon bypasses it with gig economy logic then they are depriving the country of tax they would have paid through traditional means.
Amazon owes tax to France for as long as it maintains a workforce out there. They shouldn’t be able to dodge it by treating employees as contractors or having offices in Luxembourg.
If you want a simplified version, you are better off thinking of it something like this: The purpose of taxation is to capture a fraction of the economic activity and use that to fund the business of government.
(this doesn't capture explicit redistribution, but keeps it simple)
Like it or not, but this is designed into politics.
Its just as dirty and evil as it sounds.
It seems like you're contradicting yourself: why would you fund schools just because you own a property? By your reasoning, you should have a children tax, not a property tax.
This is not the idea behind taxes at all. There are plenty of services I don't use, but still believe should be funded by the government because they ensure a healthy society or because they care for our most at risk.
That place which is defended by the army, and wouldn't exist without schools, hospitals, and other services.
The don't need property rights either. No legal redress. Access to the economy enabled by having a stable, democratic system? Well they probably should only be allowed to have the customer base they would have if life expectancy was around 50 due to cholera and so on and that part of disposable income that remains when everyone is sick all the time. Contracts aren't binding to their counter-parties. And they are banned from hiring anyone who is educated. They can treat their own water, and put in their own plumbing systems, based on market rates for doing that themselves.
But then how do you deal with national defence contributions because obviously not being invaded is kind of useful. National parks? Well while the company doesn't use them, the people who make up the company do and user pays can't work for that. But even if individual people don't use them, they get to live in a place where people are happier because national parks exist.
Do I need to go on with this? They literally make zero profit and in fact can't exist at all without tax being paid.
Tax cheats just want to cheat the system and make someone else pay while they reap the benefits. Cheating is cheating.
IMO this is a fundamental misapprehension. The idea behind taxes isn't to compensate the state for resources consumed. The idea is that the state can tax you, so it does, to use that money for whatever its priorities are.
This is kind of a "purpose of a system is what it does" viewpoint on taxation, but I think it's also the most accurate. If you look at it from any other perspective, you're going to see weird inconsistencies like rich people paying more than they consume, deductions that don't match corresponding benefits provided to the public, etc.
- They have a monopolostic unfair advantage over some market which means that they can be very innefficient and still survive. They hinder real innovation.
- As stated in the article, they often pay little to no tax because of their accounting practices; they get all the legal benefits of being treated as an independent entity under the law but none of the costs.
- They are constantly lobbying politicians to change the laws to benefit them at the expense of tax payers.
- As a consequence of being well promoted on various stock markets, corporations tend to get a lot of easy money from investors; these investors include large 401k and superanuation funds which invest money into stocks without the knowledge of the regular working people whose salaries are paying for it. A lot of the new money which the Fed creates goes straight to corporations because of this.
- Corporations are also bad because they hurt free speech and they have the power to manipulate the elections by coercing their employees. The people who control corporations think in black and white and simplistic terms. They think they have all the answers to our socioeconomic problems. They don't understand that they are the problem. They don't understand that fairness is very difficult to achieve and that huge centralized power concentrated in the hands of a tiny number of financially incentivised decision makers opens up massive cracks (blind spots) in the system for the majority of people to fall through.
IMO, you cannot tax them enough. This is a great bold move by the French government. It's great to see a country in which democracy still works for the people.
How much do most uneducated people in mostly uneducated markets make?
How much disposable income do they have?
How much are they worth to advertisers and sellers such as Amazon?
Pretty much nothing.
And that's just for the schools part.
That's not the main way taxes work. Typically the government raises taxes from the well off to subsidise things like roads schools healthcare and welfare. So say a well paid developer may have to pay tax and it gets used to house a homeless person or bomb Syria. The fact that the developer is not homeless or wanting to bomb places is not a showstopper.
Paying for services you use is more just paying for stuff.
It is not the case at all. Yes the biggest tech giants that do not pay enough tax are mostly from the US (also other companies from other countries are affected too)
But it is not because they are from the US that this new tax is created. It is simply because they don't pay enough tax
Unfortunately in these cases, perception is just as important as the nominal reason.
Home town legal decisions are the norm. Gerrymandered electorates are the majority. The american exceptionalism of we can but you can't is openly embraced by all in politics and the media. Regulatory capture is the norm. Revolving door Washington lobbyists is not even a story anymore.
Cheating is an absolute way of life nowadays. Which is really, really strange because it seems to me that most Americans really don't like cheats and cheating. Brady.
The rest of your comment refutes this. They might pay it sometime in the future, but they are not paying it by parking it abroad.
By comparison, most European countries don't tax companies on foreign earnings at all.
Or they wait for good deals to come up to bring the funds back home at a fraction of the cost.
Meanwhile it's easy to get domestic loans based on foreign assets which gives them easy access to spend that same money locally.
Put it in safe low yield securities on the other side, take out low interest loans here and profit on the tax money which should have been paid at the expense of small competitors who don't have the scale for tax scams or the lobbyists to legalize them.
You call this a "scam" when in reality it's the system working as designed, so I don't think you have a particularly good grasp on this subject. Again, in most countries companies don't pay taxes on foreign income at all.
Things are indeed working as designed, designed by the people who it benefits through regulatory capture, lobbying, and campaign finance, that part shouldn't be hard to understand.
If it were "working as designed" there wouldn't be a trend of global cooperation in closing these tax loopholes and you wouldn't be reading an article about France working to close one.
>If they bring the money back in to pay back the loans they'll pay taxes on it.
While profiting from the capital which should have been paid in taxes for decades, and more importantly out competing their smaller rivals out of the market because they didn't have the resources, scope, or moral infortitude to engage in similar behaviors.
Would that it were we all could avoid our financial obligations and paying our fair share long as we did so eventually while being called heroic.
Again, most countries - including most European countries - don't Levy taxes on foreign company earnings at all. If Google were not a US company, they wouldn't be taxed on any foreign earnings even without any kind of money parking abroad.
If I lived in Nevada instead of California I wouldn't have to pay state income tax so by your logic I should just stop paying?
Once companies get big enough they get to arbitrarily choose which sets of laws to follow?
People don't have to pay for groceries at food banks so we can walk around the checkouts at Safeway?
No, my point is that Californians shouldn't point to Nevada and say they're not paying their fair share of taxes.
Google isn't dodging any French taxes, and isn't dodging American taxes either. What people are complaining about is the fact that American companies' foreign earnings aren't taxes until those earnings are brought into the country. This is not against the law, since companies aren't forced to move that money back into the country. And to put the cherry on top, most countries don't tax companies on foreign earnings at all.
So France is trying to say that they are being disadvantaged because these companies are delaying payment of American taxes, on earnings that wouldn't be taxed at all in France or most other European countries. This is blatant hypocrisy. France is complaining that American isn collecting taxes too slowly on earnings that it and it's peers don't tax at all. If European countries think corporations should pay taxes on foreign earnings, maybe they should begin with taxing their own corporations' foreign earnings first.
They can do convoluted accounting with loans and subsidiaries and the like to bring it into the country anyway with the unwinding and tax paying left into the far future.
https://www.theguardian.com/technology/2018/aug/02/amazon-ha...
From the article: "On average the thousands of staff who handle orders received about £3,000 per person last year. Senior staff will have taken home considerably more.
Amazon’s share price has surged 84% in the last two years. Last year the shares vested at an average stock price of $992, in 2016 it was $704 and in 2015 $467.
The payouts will have reduced Amazon’s tax bill because under UK tax law companies are required to deduct the vest value of the shares provided to employees."
I really don't think it's sour grapes so much as trying to address the Irish/Luxembourgish tax schemes
France is a lovely country, but one of the worst players when it comes to tax policy. The never ending appetite to increase the spending of the state does not stop...
Also, consider the fact that tax evasion is a crime in most countries and that this is a very bland measure when compared to what these companies (and their executives) really reserve.
also, tax-evasion and tax-reduction are two different things, equating them is an argument in bad faith
I beg to differ, the only difference is that one is by definition illegal and the other is by definition legal. Tax reduction can mean chasing tax incentives responsibly, which is fine, but can also mean deliberately engaging in weird financial engineering that violates the spirit of the law but not the letter.
Like if I max my 401k and HSA, get a $600k mortgage to max out the mortgage interest deduction, and count all my professional electronics as business expenses I am reducing my taxes but I am following the spirit of the law because I am reducing my tax burden by making decisions that tax policy is meant to encourage. If I incorporate in the Cayman islands and declare all my income through a Virgin Islands subsidiary operating through Panamanian bank accounts so that I can sell off shares of my business to a trust which I also own, all so I can turn personal income into capital gains earned in a different country even though I do my actual business and live in the US, I would definitely be violating the spirit of the law.
But what if I have businesses in Poland, the UK and Belgium and I can book my investment gains in either of those countries? Am I evading tax because I book it in the country with the lowest taxes? No. You'd be crazy to book it in the highest tax county if you have the freedom to not do so.
The spirit of the law is an extremely hairy discussion, exactly because different people have different views on this. In my view only the exact letter of the law can be interpreted as a set of rules to determine whether you're breaking the law or not.
True, and that's what happens in practice. Which is why it's fine and understandable, to me, when countries take measures to close tax loopholes.
"But what if I have businesses in Poland, the UK and Belgium and I can book my investment gains in either of those countries? Am I evading tax because I book it in the country with the lowest taxes? No. You'd be crazy to book it in the highest tax county if you have the freedom to not do so."
Yeah, that makes sense. But going out of your way to create an optimal corporate structure of subsidiaries, licensing agreements, etc. all based in particular tax advantaged countries based purely on tax law is a lot more involved than that.
You have a point here, but what really is at stake here is tax-evasion, not reduction.
The company declares no profits in France (and thus pays no tax) because its profit is fraudulently passed as costs to pay for IP or services for the mother company in another country.
If a US company develops IP in the US, is it not normal that they then get to charge a royalty for use of said IP globally?
If a French company develops IP in France, is it not normal that they then get to charge a royalty for use of said IP globally?
If you have a centralised office somewhere supplying back office services to all entities within Europe, does it not make sense to allow companies to tax deduct these expenses?
It seems like an easy thing to fix, but it's not. Particularly because multinationals _do_ actually operate in many countries and can pick where to base their operations.
The French themselves will protest if they feel the tax is too much (so if they can't get cheap enough iTunes/Spotify/Netflix and their local versions).
A reasonable middle ground would be to tax google on their central profits and take a cut based on the fraction of business done in France. That way no tax would be owed if google makes a loss, regardless of French revenue.
Tax on revenue disincentivizes progress and R&D.
Not sure I follow
Taxing only very large corporations - that's a little more questionable, but plenty of countries (including the US) treat small businesses preferentially, so it's not like it's unprecedented.
They could pick arbitrary ways to bisect the set until they get the desired result.
About 30 companies will pay it - mostly US groups such as Alphabet, Apple, Facebook, Amazon and Microsoft. Chinese, German, Spanish and British firms are also affected, as well as the French online advertising firm Criteo.
26 companies fall under the required threshold. Not all of them are US based and there's even a French one (criteo).
Here is the full list [1]:
• Sales of goods: Alibaba, Amazon, Apple, Ebay, Google, Groupon, Rakuten, Schibsted, Wish, Zalando.
• Services: Amadeus, Axel Springer, Booking, Expedia, Match.com, Randstad, Recruit, Sabre, Travelport Worldwide, Tripadvisor, Uber.
• Advertisement: Amazon, Criteo, Ebay, Facebook, Google, Microsoft, Twitter, Verizon.
[1] http://www.lefigaro.fr/conjoncture/2019/03/20/20002-20190320...
FYI, Alibaba's revenue (~56B) exceeds that of Ebay (~10B), Uber (~11B), Expedia (~11b), Twitter (~3b), Groupon (~3v) and Tripadvisor (~2b) combined.
Yes, Amazon/Apple/Microsoft/Google/Verizon are still huge. But it doesn't mean there aren't other big fish out there.
This is just another example of Americans (and hey, I’m American) feeling they are permitted to do whatever they want, even outside of their own borders. It’s peak arrogance.
It's funny that the US is allowed to tariff anyone who breathes at them wrong under the guise of protecting US jobs/etc. but they are up in arms when another country decides to implement anything remotely seen as "against the US".
yeah, so taxes make sense to pay for the roads, bridges and healthcare that these ads are using.
E.G. An oil company being taxed for the revenue it made during an oil project does not get ear-marked for oil-only usage by the government.
You may not agree with that philosophy, in which case you can decide to stop doing business in France. Considering the amount of cash GAFAs make, I would wager they will continue doing business in France and pay that 3% tax rather than miss 65M wealthy customers.
In that case you, the vendor, would need to pay taxes where you sold the game.
The problem with these large companies is that they basically pay little to no taxes _anywhere_, an optimisation that only large companies can really afford.
The sale can trivially be said to occur in a different jurisdiction or they can make zero profit because that money is owed to a another company that exists to facilitate them not paying taxes.
The only thing that they can't move is the customer which is why this makes sense.
I'm writing this via a glass fiber connection supplied by "Orange" (formerly known as France Telecom)
Google only pays VAT on purchases (for its own use) that it will sell on to customers.
They absolutely do. They implicitly use courts, police, customs, trademark/contract enforcement, etc.
On the other hand, I would argue that the market of people who would come to your country to buy your product is significantly smaller than the market of people who buy it on the internet and have it delivered---and it's fairly typical for companies sending products to France to be asked to collect any duties, customs and taxes from the purchaser. Why would electronic delivery be different ?
Yes.
Yes, by the commonly and globally accepted definition of "doing business" in a country, selling into a country is doing business in that country.
It seems to me it should be treated the same as French person coming to my country, buying my game and going back home.
No, it would be more like your company going to France, selling the French guy the game, and then coming back to the US. The burden of tax compliance is placed on you, the seller, because you are the one profiting from the activity and therefore morally (and legally) should shoulder the burden.
In fact I think it's both not very consistent with general tax law principles nor practical as the burden of complying with regulations in every country you sell to even if you don't have presence there means many companies dummy won't sell at all to smaller countries.
It's exactly consistent with general tax law in the US and internationally. It's not practical, but that's the price you pay for choosing to make money in another taxing jurisdiction. If you don't want to deal with it, make money somewhere else.
That being said, the US has a good treaty network so that the situation you describe generally wouldn't result in income tax to the US seller unless they had a physical presence in the country of the buyer. Which is exactly why the French tax at issue is an excise tax (not subject to treaty restrictions) and not an income tax (covered by treaty restrictions).
I don't think that's as clear as you try to make it be. Both parties (seller and buyer) are doing something that is in their best interest, one is acquiring a product/service for some money, the other is selling it for the money. In both cases it serves their interests, both have a moral responsibility in regards to the exchange. And you see this reflected in tax laws too where both companies and consumers pay taxes relevant to a transaction.
The seller is making money. That's what matters from a moral and legal perspective. Everywhere. It doesn't matter that the buyer is possibly also getting a benefit.
And you see this reflected in tax laws too where both companies and consumers pay taxes relevant to a transaction.
Please list even one location where both the buyer and the seller pays the transaction tax. Here's a hint: there isn't one. Either the buyer pays, or the seller pays. However, for nearly every transaction tax, the seller collects the tax on behalf of the government and remits that amount to the appropriate tax authority. (In Hawaii and Australia, the seller actually pays the tax--GET or GST, respectively-- but is permitted to pass along the tax to the customer as a separate line item on the invoice. In Hawaii, the seller then owes more tax for the additional charge to the customer.)
Note also: withholding taxes on cross-border payments are not transaction taxes. They're income taxes, which is a very different thing.
On the other hand, most revenue is probably B2B and business reclaim their VAT.
You are free to argue that the playing field can be likewise leveled by lowering corporate taxes to Ireland's levels. That's a debate for the French to have, as citizens of a sovereign country. It is not a decision to be forced on them by global tax loopholes.
https://en.wikipedia.org/wiki/List_of_companies_of_France is a good list to look at. There is only one other software/internet company founded in France since 2000 in the 'Notable' list - 360Learning. About a third of the list was founded before 1900. A very different list than what you'd see in the US.
Sogeti merged very soon after it was formed. It's never really been known as its own company.
https://en.wikipedia.org/wiki/Vivendi https://techcrunch.com/2017/06/21/snapchat-buys-zenly/
While there are some French tech unicorns (BlaBlaCar, Criteo, Veepee, Doctolib) a lot of French founders just create their company in the US (Docker, Lending Club, Wit-AI) because the labor code is simpler and there are more VC funds.
The current administration is trying to change that with Station F and by making it easier to get foreign workers visas but it's a long shot.
DoJ is constantly "exporting" US law around the world by methods that border blackmail or even sometimes taking hostages.
Fighting back has been long due. Though of course France should begin with EU free-riders, Luxembourg and Ireland...
Could you explain what do you mean by this, and provide specific instances?
Concerning US embargoes, the DoJ has extorted many billion dollars from foreign companies for breaking these. However there was no embargo between, say, Germany and Iran; as some transactions happened to be in USD, DoJ consider that Deutsche Bank, by providing services priced in US$ to Iran, violated the US embargo. Ditto other European banks. This looks like blackmail: US Treasury grabbed more than USD 14 billions from European banks using this tactic. Also the US blocked various arms sales between various countries because the weapons used some US-made parts (typically some electronic chip deep inside), only to keep the deal to themselves.
Basically that means that any company making transactions in US$ must comply to US law, always and everywhere. If my company sold some product to some Russian company with a price in USD, it could be sued by a US prosecutor. Then when visiting a friend in the US, I could be jailed (even if I hadn't no direct relation with the targeted sale, simply as a company board member or manager).
If my product includes any US-made part, my international sales are depending upon US goodwill. Which, in the case of billion-dollars contracts, will probably enter the scene.
Seems preposterous? It actually happened many times. It happened to the VP Asia of Alstom, jailed nearly 4 years in the US to blackmail his company for the sole benefit of General Electric. One of Deutsche Bank VP was extradited from Croatia to the US while on holidays, and jailed in a high security prison like a murderer. Etc.
If there are no alternative to AWS, Google Adsense, or an American SaaS in France; the French people will be paying all of the tax. The big tech giants will just slap them with a 3% surcharge for being in France.
This is different from US-China tariffs. If the US can source from other suppliers, the Chinese will need to lower their prices. Effectively making them pay the tax. It is a complicated and messy situation.
The big tech giants are named that way because they are big and dominant. This makes them able to make the rules and circumvent the current ones. You'll need the whole EU (or maybe the EU/USA) to get them in line.
France has been digging its own graveyard for a while. It seems that they didn't learn their lessons and now going full speed. If you are a French startup, you'll be less competitive. People hate paying more and it's not clear if they can deduct this tax (like VAT).
If internet companies are the future of the economy (see: Stripe's opinion), why wouldn't you do everything you could as a country to support your own companies?
Supporting your own companies at the expense of the rest of the society isn’t good. You’ll be forcing consumers to pay higher prices for a completely nationalist reason.
No reasonable economist would favor protectionism.
What do you mean by unwanted externalities? Unwanted by who?
How would you measure that? Does paying more for a worse product and raising the price of the better one benefits society?
If the product was better it would already be in the market.
What are the negative externalities of AWS and the likes?
You cannot compare pears with apples.
… you won't get taxed under this law until you get more than 750M€ of revenue. So, all thing being equal, a French startup would be more competitive (of course things aren't equals, but that's another matter).
Just like VAT is passed on to consumers? I don't think the goal is to make specific companies pay; rather, the goal is to have every type of economic activity to contribute a fair share to the society they benefit from. Digital activity currently contributes relatively little due to being more amenable to tax evasion schemes, so this tax mitigates that. How the exact amount is subsequently distributed among the parties in that activity is not that relevant.
VAT is a consumption tax. It is - by definition - only paid by consumers.
Edit: companies -> countries
Also, no. Social media existed before the current big general-purpose networks. See Usenet, email lists, IRC, forums, etc. A single big network with no particular purpose or common interest provides different benefits, better in some ways and worse in others, but niche networks still have their own worth.
You said: Or do you expect these companies would continue to operate in the EU with no net profit.
A tax doesn't have to eat up all the net profit. Googling "how much is a Facebook user worth" comes back with about $158 dollars, whether that's accurate or not is beside the point, some value can be derived[1], France can say "we want a X% tax on that value". If the tax is too high FB leaves the market and France gets nothing so there is little incentive to do that[2]. FB then has to take the cost of servicing a user against their value minus the tax and decide if they want to continue as is, offer a paywall option to avoid the tax, or leave the market altogether... I don't understand why this would be so controversial?
[1] Whether FB or regulators should set that value is up for discussion.
[2] Some would see FB as such an overwhelming societal net negative they would want to tax it out of existence, but that could be true for any industry (fossil fuels, tobacco , meat, etc...)
Making people pay to access Facebook etc would be the best possible move for society ever.
E.g. facebook could be forced to give you discounts for your card or sth.
Regulators are not quick, give them a year or two to deliver the fines.
1) between Facebook/Google and advertisers based in France?
2) between Facebook/Google and any advertiser as long as the ads are shown to people in France?
3) between Facebook/Google and any advertiser as long as the ads are shown to French people?
If it is the first, then I don't really see a problem. FB and co can either stop doing business directly with French advertisers, or eat the tax, or increase the prices.
If any of the others, then how would one go about determining how much money to pay without infringing on people's privacy? What would stop FB from either declaring a token amount of "business done in France - as per the options 2 and 3" or even say no business happened? How would the French gov check that? Get the list with all ads shown by FB over a month along with who they showed the ad to so the gov can check if those people where in France or not?
I think it would be closer to checking which French company bought ads from Facebook and for how much and taxing this.
Retroactively they'll have to eat the cost though.
Ordering French ISPs to block the web service of that company thereby breaking the fundamental human right of freedom of speech and no censorship.
If they don't have French customers, the French government blocking them would have no impact.
France informs their customers that they need to withhold part of or even all of their payments to said company under penalty of criminal sanction. Customers comply, non-French company receives less money.
Non-French company then has 2 choices: accept defeat and pay the French tax, or cut the French customers and accept less revenue.
Is this tax functionally different from tariff?
It will likely act much like a tariff as I doubt any of these megacorps will pull out.
Since the yellow vests protests started last year(yes, they are still happening, although the number of protesters has been decreasing rapidly), the French government has been under pressure to stop taxing the middle class and go after other entities/individuals to raise money.
It is no secret that France and most of the developed world is technically broke. With a debt to GDP ratio approaching 100%, the French leaders have to find money quickly or the whole welfare state will come to an end sooner than later.
Considering the fact that this tax is supposed to bring in 400m per year, it is basically a drop in the ocean.
But, what will happen is that Macron will spin it as a success and will tell people: "See we are taxing the bad guys."
In the meantime, he will keep on increasing the taxes on the middle class covertly.
The problem is that in a normal functioning democracy, the proceed of the taxes is used to increase the well being of the population.
In France though, all new taxes raised are not used to create or maintain infrastructure or even subsidize basic services for its citizens.
Most of the proceeds are actually used to pay off the debt. See the carbon tax from last year when the government admitted that only 50% would be allocated to actually fight climate change and the rest would be used for some other unrelated things.
France as a whole has never been more taxed than now, and yet public services and public infrastructure(or whatever is left of it, after they nearly sold everything to private corporations) is falling into disarray.
Emergency rooms are closing(They have been on strike for the last 3 months now), social services have been cut back, roads on the countryside are full of potholes, electricity/gas prices keep on increasing.
The middle class is being bled dry by an overzealous state that does not know what to do anymore to fix the problems it created in the first place.
For the last 30 years politicians from all sides of the political spectrum have done one thing and one thing only. Instead of reforming, they just tax, tax and tax more. Until there nothing left.
That's why France is dying. That's why people like me who do not like what France has become have left to create companies/ pay taxes somewhere where I don't feel like I have to share 50% of my money with a state that provides very little to me.
Taxing big, multi-national companies is something that I can live with, strangely. I know it's wrong, but still less wrong than having poor/middle-class directly pay the bill. In the end they have the money to pay tax consultants and the money to deal with it.
Edit: From the French newspaper Le Monde [1], it was Ireland, Sweden, Danemark and Finland which opposed the idea. And from this article [2], Germany didn't help a lot, fearing tariff on their car industry.
[1]https://www.lemonde.fr/economie/article/2019/07/11/le-parlem...
[2]https://www.lemonde.fr/idees/article/2018/12/06/taxe-gafa-un...
Facebook, on the other hand, isn't something that anyone really needs. What value does Facebook actually provide anyway, besides giving people a forum to post boring family photos for grandma to look at? I guess Facebook Marketplace can be sorta useful for selling your old junk, but that's the only thing that comes to mind.
Remember also that there's only two players in the smartphone market: Apple and Google (which makes the software and app store behind Android). If you loose Google and Android, that means everyone's going to be sorta forced into buying an iPhone unless they want to go back to flip-phones. Do you really want an Apple monopoly in your country?
No matter what happens to FB, you're safe here.
1. cheese 2. wine 3. ....
After a couple minutes on the discussion, they came up with Airbus (not strictly French and made outside of France).
Isn't that largely due to EU laws and the decisions of Ireland and a couple other countries.
Just remember that the United States are subsidizing tech companies (tax amnesties) and all the upside (high salaries, innovation, stock market growth etc...) is going back to the US while the downside of tech companies (electoral manipulation, teen depression, tax avoidance, privacy breaches) is only felt in Europe with no upside.
Off topic, did the China tariffs had any good side effect so far?