I never understood the logic behind taxing large internet businesses.
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.
Those large tech companies can make money in France because the french government provides all that is necessary for a free, fair and functioning market. How could Google make money in France if there was no french police force, education system, market regulation, court system, contract enforcement?
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.
> Those large tech companies can make money in France because the french government provides all that is necessary for a free, fair and functioning market. How could Google make money in France if there was no french police force, education system, market regulation, court system, contract enforcement?
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.
Markets exist without governments and often despite them (see the illegal drug trade for an example) but I have never seen a successful government without markets. You may have the causation backwards.
Black markets exist, but they pay a different sort of tax: the muscle and violent losses required to keep their property. Lawful governments do that better, and that’s what taxes pay for. Google and Facebook have access to the legal system in France, not to mention the wires that run the internet itself. You can argue about what the optimal taxation scheme is but arguing that it’s not necessary, or that the internet is somehow special, is tiresome.
Yeah, I must say that I have never really understood that idea. In times of increased productivity it seem like you would want to tax the machines, the markets and the networks. Now it is people that are paying for housing, education and internet connections while finance, insurance and tech companies makes profits. Putting a huge burden on the one thing that doesn't scale, the input. Rather than what does, the output.
The companies that create the wires are already taxed in France. Having "access" to those wires seems a poor basis for taxation - that would imply the whole world should pay the French government tax merely for the privilege of France existing and being connected to the internet at all.
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.
I fail to see the qualitative difference between
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).
- You can vote Macron out, but Corleone can only give up power by getting assasinated or dying by natural causes. Either way, this creates massive conflict within the organization, and it probably perishes with the death of the boss. Contrast with Hollande losing the election, Macron assumes power but no civil war has started (maybe a metaphorical one with appointed positions, but without violence (non-verbal at least))
- The French police rarely kills people, and certainly not for not paying taxes. You can argue some tax dodging is under-prosecuted.
It´s basically one of legitimacy, as you point out with "lawful government" (so I guess you disagree).
The police ARE the state goons, so the outcome doesn´t change much .
Possibly because there isn't. The police were created to be state-sanctioned goons.
Don't you think that a company might just raise their prices to pay for those taxes?
It's up to them to figure out where's the right trade off to maximize their gains.
Sure, but assume they somehow pass the tax 100% onto the customer. So now French citizens are the ones paying for the "right to the free market" of their own country. Does that seem fair?
Yes, otherwise why should citizens pay more for local services? Or should we just remove all local taxes instead to make companies even?
Currently local businesses pay for the "right to the free French market", but remote businesses don't.
This typically doesn't happen. Companies don't pass the increases in taxes 100% to the consumer. By that argument all taxes would be immoral since they directly increase the prices consumers pay.
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.
> By that argument all taxes would be immoral since they directly increase the prices consumers pay.
I'm not following this chain of logic. How is increasing the consumer price immoral? Regressive tax structure or something?
Companies don't receive money from the ether. They receive money from their customers. Ergo, 100% of taxes paid by companies are indeed paid by customers. Any increase will indeed be passed on to the customer. Any decrease in profits to the company is temporary and will be made up by the customers in the near (if not immediate) future. Companies won't just sit idly by while their profits decrease due to tax - they'll "innovate" their business method, or change the company organization, or restructure their pricing to 'hide' the increase.
The fact that the money to pay taxes ultimately comes from customers does NOT mean that increased taxes will be levied on customers.
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?
That’s not how taxes work. Look up “economic incidence of tax.”
Seems fine to me. Maybe it will make local businesses more competitive with Bezos airdropping junk from 747s powered with dolphin oil.
Yes, because all those local businesses are selling nothing but artisanal, locally-sourced, organic goodness; nobody other than Amazon imports goods from China.
And I think you're mixing your enviro-zealot metaphors; it's whale oil and dolphin tuna.
Companies raise prices based on demand curve, not cost.
An individual company sets its prices to optimize revenues. That depends only on the demand curve and is independent of costs. However, it's a rare market where even the most marginal suppliers earn enough producer surplus to make up for significant increases in production expenses. If the optimal revenue isn't enough to turn a profit then the business will close. That decrease in supply with no change in demand allows the remaining suppliers to raise their prices—though not necessarily by the full amount of the increase in cost, because only part of the decrease in supply manifests as an increase in price. The rest manifests as potential consumers doing without the good altogether, perhaps turning to lower-priced (but less satisfactory) substitutes.
That’s not what they say when the subject of tariffs comes up. “We’ll have to pass it on to consumers”.
But in reality, a share of the tariff is paid by the supplier and a share is paid by the consumer.
And if I remember my classic macroeconomics class correctly, that share depends precisely on the elasticity of demand (slope of the demand curve).
This is correct.
Economic facts pay little heed to economic rhetoric.
Companies only ever tell the truth of course.
This is unequivocally false. A 3% increase could make their costs higher than revenue. They would increase their prices or go out of business.
> A 3% increase could make their costs higher than revenue.
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.
Clearly the solution is no taxes and all the things the government does will just automatically exist out of thin air.
Which makes local businesses better able to compete. Win-win.
(replying to sibling)
Source: I'm French and I do :)
Out of curiosity, would you say most French people think the same way? I ask because I'm American and we really hate taxes here.
I'm American and I support the French doing this. Some Americans "hate taxes", but I have enough money. What I don't have is enough control in a country ruled by oligarchs and corporate fiefdoms. Governance is all about fostering a healthy society, by balancing incentives and disincentives. If you don't do that actively and carefully, curbing abuse and exploitation, then they grow to a breaking point.
So you believe paying more taxes somehow gives the taxpayers more control over their country ? Giving away more money doesn't mean you have more control over how said money is used. The most direct consequence actually goes in the other direction, you have now less agency (=money). There's no obvious mechanism that makes a monopoly (=government) more accountable the more money it's given.
I don't believe taxes give me more control. What I believe is that taxes aren't inherently bad and that we should express more concern over where the money goes and what economic effects it has, not paint all taxation as bad. Effective democracies do have an explicit mechanism to make government accountable: votes on issues (like where taxes are gathered and how they're spent) and representation. Through an effective democracy, using government as a proxy, people can also keep bad behavior by big amoral profit-motivated corporations in check. We don't have an effective democracy in the US. That's because it is overtly influenced by money, which, amorally or immorally, goes to help the spender.
There's very little democracy in France as well. Corporate lobbying might not be as prevalent (simply because they don't have as many humongous corporations), but it's still the same old self-serving oligarchy story.
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  and co.
America legalized corruption (Citizens United), so I fail to see how is this more democratic.
Money is more fluid and impartial than political club camaraderie. It crosses and fills the moats dug up by the ruling class better than the occasional "working class", "diverse" guest-candidate could ever hope to.
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.
It does enable it to spend on things like healthcare to prevent monopolies (or oligopolies which are often just as bad) from exploiting people. At least in theory a government is a benevolent monopoly, which is often better than one which only cares about profit.
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.
I am not French, but Swedish, We have similar total tax burden. In general Swedes accept taxes. As it pays for: education, childcare, healthcare, a functional bureaucracy, defence, police and legal system etc. If you don’t get those or they don’t function well, then I can see that people are more hesitant.
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  which is why we accept the taxes (more or less).
 Sweden scores high in most indexes trying to measure these things.
Maybe at one point. Today it is all borrowed against the future in the form of private debt, a propped up property market, sold off companies, and tax breaks. Of course people accepts taxes when it is primary labour that is highly taxed and they made hundreds of thousands in the property market so they don't feel like they need to work much any more. It is very unlikely that people would accept taxes to properly fund infrastructure, pensions, the military and whatever else these days.
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.
"In general Swedes accept taxes" overlooks some rather important facts.
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:
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:
'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?
That isn't really how the Swedish tax system works. A lot of that is paying yourself in one form or another.
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 like paying taxes?", is question politicians abuse frequently because it is an easy question for your system 1 to answer and creates an emotional response.
"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.
I would consider myself both.
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.
>It's true that in the US, the average person sees very little benefit to federal taxes.
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.
I completely agree, my wording was perhaps ambiguous.
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.
Hard to say, this is matter of political option so it changes regularly :) my easy guess is that most people like benefits paid thanks to the taxes but do not like paying them :D
I'm not so sure a French citizen would see it that way.
Win-win, until you realize that this action is pretty much the opening shot of a trade war, precisely because it helps local businesses. Imagine if the US responded in kind and tailored some new rules that targeted European businesses in US markets with similar taxation.
> Imagine if the US responded in kind and tailored some new rules that targeted European businesses in US markets with similar taxation.
Evidently they consider that a fair risk.
At least one French company is affected though. The taxes apply based on total worldwide revenue.
> a company might just raise their prices to pay for those taxes
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.
and the problem is?
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.
> 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.
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.
>so any type of tax is justified?
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.
> "That's a straw man."
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.
> 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.
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).
That argument reduces down to “because a market exists” — is that really a compelling justification for this particular additional tax?
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.
No government, no juicy market. Also > the merchant account is credited at the end of the week (or whenever).
Amazon doesn't pay taxes when they're the merchant.
> 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).
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?
Of course tax is arbitrary. Just look at the chicken tax  which despite its name, is a tax on light trucks - unless they're shipped to the US with extra seats which the dealer removes before the truck is sold.
If you're looking for a simple and logically designed system, the international tax system isn't it.
In spanish we have two different words: tasa is what you are describing: a tasa is imposed to pay for a specific thing. Whereas an impuesto is a different thing that is simply put in a common account to pay for everything that is public, in whatever way the government sees fit. No need to link source and destination.
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.
They do use communication networks and, in the case of Amazon, actual roads.
All taxes are a slippery slope. Name one that has ever been repealed. Income tax in the U.S. started out as a modest 3% on only the highest incomes and look where that has ended up: full on wealth redistribution.
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.
> Name one that has ever been repealed.
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
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.
It's an easy question, have three.
Window tax. 1990s UK Poll tax. The luxury tax token system the US used before sales taxes.
In 1944 the highest US tax bracket was 94%
How many people actually paid that top rate? Or was that on paper only?
I'd happily go back to the effective rate of tax in 1944 if you are so willing.
If we're being facetious then I'm sure there will be plenty in France that are willing to compromise even more and go further back and implement the effective tax rate of 1794 on high earners.
GP asked for a tax that was repealed, not reduced.
The US just repealed and lowered some taxes a year and a half ago. Look back 4 or 5 decades US incomes taxes were way way way higher. You're simply wrong
> All taxes are a slippery slope. Name one that has ever been repealed. Income tax in the U.S. started out as a modest 3% on only the highest incomes and look where that has ended up: full on wealth redistribution.
> 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!
> So any taxation is justified?
A corp will raise prices to whatever level the market will bear. Why shouldn't a society do the same with taxes?
A corp will raise prices to whatever level the market will bear. Why shouldn't a society do the same with taxes?
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?
What competitors will Amazon have in France if all the local competitors cannot escape paying local corporate taxes and Amazons of the word just throw a few millions at lawyers to shop around for the most convenient tax haven.
Ah yes, it is the lack of this tax that was preventing France from having their next Amazon. I am willing to bet significant amounts of money that even in 10 years France will have nothing even of remote resemblance of what Amazon was back in 2010, not even going to set the bar at what Amazon is today.
They are talking about physical shops. Which are also competitors of Amazon. And where does your assessment comes from? Just guess?
>They are talking about physical shops. Which are also competitors of Amazon.
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.
VAT is a tax on consumption, corporate taxes are on profits (revenues in this case). If Amazon does not have to pay as high corporate taxes due to transfer pricing, then it can offer a lower net (pre-VAT) price so their products end up being cheaper to consumers driving away sales from other retailers. While competition, you may say it is 'unfair' competition.
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.
There is a "French Amazon" : cdiscount. They pay there tax in France. Amazon does not. How is it fair to them ?
I hope you're right. What Amazon is today is a grossly dysfunctional "marketplace", and I hope to see the end of it.
If tax was the burden from a French "Amazon" from founding, they also could easily have a shell in Ireland or Luxembourg. I don't see this at all as France trying to tax Amazon, et all from doing business in France. I see it as a pure money grab. Truly, this isn't really a tax, but more of a tariff. It should be called as such. Maybe it's equally applied against domestic companies and wouldn't be strictly a tariff, but it's intent is most certainly as a tariff.
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.
Because it's short sighted to over tax your citizens from both sides?
To this extent, countries compete on taxation and value-add for services. Perhaps country A charges more in taxes, but offers more education to its people, and a more educated workforce to hire from, while country B offers fewer of those amenities in exchange for lower 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.
What's missing is the luxury for individuals to also choose their countries based on the same parameters.
That's a very thoughtful reply to my off the cuff response. Corporations and people do get to shop both taxes and benefits, but most individuals seem to treat them like a genetic condition.
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.
'Progressive' taxation (taxing higher individual incomes at higher rates) seemed arbitrary when it was introduced, too.
> That sounds arbitrary.
Administrative burden limits are not arbitrary. They are used in many places all over the world.
That does not make it not arbitrary, there is no logic in that statement.
Welcome to social rule making.
All of it based upon what’s agreeable to the negotiators.
Was just reading about term limits in the Constitution are set at a number the decision for which was negotiated by those invited to the party. Absolutely no argument given at the time addressed age or anything real. Just how many 4 year terms they felt was long enough.
It’s the same with all cultural laws and norms.
> So any taxation is justified?
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.
> Those large tech companies can make money in France because the french government provides all that is necessary for a free, fair and functioning market. How could Google make money in France if there was no french police force, education system, market regulation, court system, contract enforcement?
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?
>Ignoring for a moment that this rationale can support any tax policy at all (including 100% tax rates)...
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.
> This holds for all businesses, not just large tech companies. So why is the tax focused on the latter?
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.
> Because they are those who could and had the resources (legal and financial teams) to avoid sales taxes.
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
Because these large tech companies don't pay taxes currently. The current tax laws have a huge loophole in respect to large foreign internet businesses. Now they're trying to close that loophole.
I think it is impossible to sell anything in the EU without VAT, which is a much higher taxation rate than profit (not as percentage, but as money: VAT is 20-25% of the product or service price, profit can be as low as 1-5%. What the likes of Amazon, Google or Facebook are not paying is profit tax, pretending they have no profits. French companies that have no profits also don't pay profit tax.
Before the new VAT rules Amazon had a deal over VAT with Luxembourg, similar to the deal with Ireland on income tax.
> 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?
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).
Just a reminder - some US states have sales taxes applied to Amazon purchases, even though they weren't charging them before. This is pretty much the same.
You sell a product, you pay a sales tax. Those states simply leveled the field for Amazon to compete on the same level as local retail stores that pay the sales tax, so everyone pays the same. Makes perfect sense.
And iirc Amazon already pays that in the form of VAT.
A free market transaction benefits both parties; both buyer and seller feel like they are better off as a result, otherwise they would not agree to the sale. Therefore, just as the French government can say that the American company is benefiting from French citizens, so the American government can claim that the French citizens are benefiting from American companies. A tax by either government inserts friction into the transaction and makes the deal less profitable on the party or parties that pay for the tax.
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.
What about the money the French make by using Google services? Desktop search traffic originating from Google is 90% - presumably for a good reason.
The market already rewards Google for their services by the absurd amount of money they make. The government is generally not in the business of rewarding businesses for their services.
Well Google lost about 70 billion recently
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.
How much of that money is money that was going to be spent anyways? It's only money Google "made" for the French if it wasn't going to be spent in France in the first place.
It's not the quantity of money spent that matters, but rather the value received in exchange. People spent their money at e.g. Amazon because that is where they expected to receive the most value for it. Take that option away and the money will still be spent but the value received in return will be less.
Those large tech companies can make money in France because the french government provides all that is necessary for a free, fair and functioning market.
Staying out of the way? They can do that for free.
Capitalist governments do not stay out of the way - take a look at the volume of corporate law. (That's in addition to healthcare, education, policing, building industry regulation, etc)
It's not free and fair if a tax is written to target 30 companies, is it?
How is it any less fair than the tariffs that Trump is throwing on anyone that pissed in his corn flakes that morning?
> How could Google make money in France if there was no french police force, education system, market regulation, court system, contract enforcement?
It's not like they don't already pay taxes. This is an additional tax on top of all the other ones.
>How could Google make money in France if there was no french police force, education system, market regulation, court system, contract enforcement?
By showing ads.
Ads only need eyeballs to make money.
Ads don't make money from thin air; someone pays for those ads. Google accesses a market of French advertisers, and that market exists because of French government.
(Also, arguably, French eyeballs are a resource belonging to France, which Google exploits.)
There are plenty of global advertisers/propagandists willing to pay Google to manipulate the french people. Claiming someone's eyeballs are owned by a government is silly.
> Google accesses a market of French advertisers, and that market exists because of French government.
Why don't you try justifying that one? Because I posit that if the French government didn't exist the market would exist anyway.
Yeah. In the same way the Somalian market did in the 2000s.
The market would exist, but it's value wouldn't be anywhere near valuable for online advertising.
Without a government the only way of maintaining your wealth is being a warring faction. Those rarely require advertising online.
Without government or with a dysfunctional government that is not able to enforce security and laws that businesses rely on, there would be chaotical environment leading to increased poverty, see the Middle East mess. There would always be some demand for things and thus some kind of market, but it would look quite differently from markets in western countries.
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).
The great lawless free market utopia that every libertarian wet dreams of
Please don't post unsubstantive comments here, and especially not ideological flamebait. It leads to ideological flamewars, which are a low form of discussion that we're trying not to get sucked into here.
How does your comment respond to my question? Your comment adds nothing to the discussion, it's just lazy nonsense that a child could have come up with.
Please don't respond to a bad comment by breaking the guidelines yourself. That only makes this place even worse.
How can the eyeballs in France view ads if there was chaos outside, and gangs started to cut internet cables? How can eyeballs view ads if they didn't learn from French schools how to go to Google.com and enter search queries?
You missed the question. why is France charging tax to these particular companies? As opposed to all companies?
Your answer makes no distinction between them so doesn't actually answer the question.
The reason is because they setup their company legal structures to avoid paying tax, either in France or the US.
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.
that's the point the French are bringing up. French companies pay French taxes. Internet companies serve French markets, take French money, but pay taxes elsewhere, and often they pay no taxes because they can shop around to find a friendly tax haven that doesn't charge them taxes.
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?
Why isn't the solution then to force all companies doing business in France to register with the French government and pay taxes on the portion of revenues derived from France?
How do you think the tax system works?
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.
It is almost already the case. However, there is a loophole. To avoid crashing starting businesses, the current tax is on profits, not on revenues. What big internet companies like Google and Apple do is splitting their companies in several entities. One entity is making the revenues. The other is "administrative services". The administrative one, located in a low-tax country, bills (highly) the one that makes the revenues. So the revenues are made in rich european countries, but the profits are made in the low-tax ones. (The example is oversimplified, but you get the idea). This is clearly cheating, but it's legal. Europe didn't manage to close the loophole because of the countries who profit from it. And no single cheated country has yet acted because the US backs this behavior.
Considering only foreign ones (local ones are already covered), the first explanation I can find is that for most of them it would just be an expensive and pointless exercise.
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
It's probably forbidden by EU regulations.
Then they would shift net profit to a more favorable environment, i.e. by paying some contrived royalties to the Irish sister company?
That's exactly what they are currently doing. Current tax law applies to profits, so they shift them to ireland.
> So, they're imposing a tax on companies that serve French customers via the internet but aren't based in France
Actually, this would be unconstitutionnal. French companies meeting the criteria will also pay taxes.
Companies providing services in France typically pay VAT, corporate income taxes or similar.
This tax is specifically on revenue that doesn't do that.
(Not that I am a proponent of this tax)
One cannot sell adds to French companies without paying VAT. That is plain illegal and there is no way to go around it, it's on the invoice.
Because other companies are already covered by tax laws.
They try fooling around with said laws, but for them it's illegal and they better not get caught.
2. You don't need French schools to learn how to Google things
Why would anyone advertise to french customers if there is no functioning french economy, and thus no money to be made there? How would french consumers pay for satellite access without a functioning economy?
The next installment of the Mad Max franchise will focus on a fearless Amazon courier driving around in the lawless postapocalyptic wasteland, delivering smart speakers and juice presses to scattered communities of ragtag survivors.
>Why would anyone advertise to french customers if there is no functioning french economy
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.
I'm devil's advocating here a bit, but how do you make money showing ads when the people those ads are targetting can't read, have no money and don't own a computer?
Advertising needs a luxury tax for wasting peoples attention, preventing them from being productive and encouraging unhealthy habits - like alcohol and cigarettes.
Agreed. Also don't forget the massive contribution advertising has to ecological destruction by creating insatiable consumerism.
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.
Nah, the internet functions fine without the French government, and people are always looking to exploit the poor and helpless.
>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"?
So, you think the French networking infrastructure builds and maintains itself? Companies tend to only build infrastructures in very populated areas where it will quickly turn to profit. French government and collectivities have to incentivize, legalize and pay for them to properly cover the territory. (and to this day there are still a few zones where internet is only available through satellite).
Who do you think built most of the historical (56k & ADSL) network in France?
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.
They have saturation, or as near as they are likely to get, of the valuable eyeballs.
Where else could they expand?
Why would they invest so heavily there if there was nothing to be gained?
Not nothing. Market maximising - if there's nowhere else to sell in the developed world, go to the developing world and take 5% or whatever their margin is, on a much lower value of sales (for now).
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.
"What public resources did Amazon, a US company, use from France?"
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.
>- roads & infrastructure for shipping
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.
As far as I understand VAT's role in the economy, the Value Added Tax is offset to the last link of a value-adding chain: the consumer.
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.
It's a sales tax. In the EU it's fitted into the price the consumer sees. From every sale Amazon makes 20% of that is going to the government.
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.
Just because the seller is responsible for transferring the tax revenue to the tax office does not mean that the seller is the one paying it.
In France businesses do not pay VAT, only consumers do. Business do collect it (on behalf of the state), but they never have to pay it themselves (technically: they get a refund when they do)
Vat isn't paid on the ad space these companies sell to other foreign businesses.
They do though?
VAT is an interesting one, since Amazon isn't even affected by VAT. It's easy to reduce VAT liability altogether.
This tax is a crude corporate income tax replacement.
Amazon cannot go around VAT, it is paying it in full to the state; Amazon's customer can deduct VAT if the customer is a business and it is using the product in the production of other products or services that are sold and VAT is collected. The state collects VAT in the end, no matter what.
Amazon doesn't pay the VAT it collects it for the state.
All of those can be applied to any company however. By this logic, they should add a +3% tax on every foreign business.
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
I don't know why you just ignore to comment on the justification given: that big tech companies engage in blatant tax evasion.
not sure what you mean
Double Irish with a Dutch Sandwich. Companies like google can charge their profitable branches in other countries royalties to use Google software or platform moving the profits out of a higher tax country like France into Ireland where there's little to no tax. Even after they patched the Dutch part that allowed even the marginal Irish taxes to be avoided companies can still artificially lower their profit by transferring IP to an Irish company and charging for it's use.
Has any country explored options for shifting to a revenue tax to eliminate such games entirely?
It is done intentionally by countries like Ireland that otherwise would have zero interest from any investors. And this loophole is actually the foundation of the EU free market: you can produce something in a country, sell in another one, pay VAT in the destination country but pay profit taxes in the origin country. What France and others want is to pay profit taxes also in the destination country, on top of VAT.
This tax is exactly that.
I don't know honestly. Seems like a tough road to go down because there are legitimate ways for a business to have high revenues relative to their profits like low margin businesses and you don't want to stamp them out accidentally targeting this kind of dodge.
Tax cross-country licensing fees at some absurd rate.
yes of course how did i ignore to comment. i said
> It is a protectionist / anti-tax evasion measure primarily
He's saying that this tax exists because large tech companies are in a position to easily evade the taxes that most businesses have to pay.
Foreign business which are not internet based pay taxes. Your point is irrelevant.
Foreign businesses that deliver products and services from local branches, without IP value shifting - pay enough taxes to not be a problem.
> All of those can be applied to any company however.
And they tax any company that fits the profile, be they German, Japanese, Chinese, French, or, god forbid, US-American.
> By this logic, they should add a +3% tax on every foreign business.
That's precisely what a tariff is.
And those large corps are providing jobs to those employees nurtured by the state, being paid taxable income.
>I disagree with that framework but applying taxes arbitrarily hardly seems fair or the best way to raise revenue.
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.
I'm trying to follow the argument in good faith, so bear with me...
> 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.
>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?
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.
> > 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?
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.
I think you meant to respond to me as the quoted portion is mine. Anyway, this is a really interesting perspective that I hadn’t considered. Is this a pretty accepted perspective on consumption tax? If no, what is the counterargument?
> Are you sure it's "an unfair advantage" and not just "an advantage"?
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.
> Having the option to not comply with laws, is an unfair advantage.
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...
> All parties in this scenario are legally compliant.
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.
That seems like a reasonable history of the events, but I don't think it supports the original position that these tech companies had an unfair advantage. Or if it does, only for some definition of "fairness" that is subject to the whims of (biased) French legislators.
"Are you sure it's "an unfair advantage" and not just "an advantage"? "
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.
Who says we even need brick and mortar anything? Why would the government artificially support that way of delivering goods and services?
With respect, you do not understand the logic behind taxes, much less the logic behind taxing international businesses.
> 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.
Prosperity is causally prior to taxation, not the other way around. To quote the great Bryan Caplan, "It takes a colossal host to sustain colossal parasitism."
The flaw of this argument that government is selling services is that the government is not selling, it is forcibly collecting money for some vague promises of services. When you buy something in the store the owner doesn't point a gun at your head asking for the money.
Your reply is a great example of why talking about taxes in an open forum is often a waste of time.
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.
You made the point of the government selling services, not about France taxes. I responded to that point.
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.
You don't understand it because it is strictly a philosophical difference of yours. You operate in the paradigm of taxation == fees or penalties imposed on people and corporations by the goverment. It is seen as strictly a negative thing. The opposite idea is that taxation is an /investment/ by corporations and individuals, directed and designed by the government, to allow society to keep running smoothly. You may not always see the effects as they often are indirect, but they are important.
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.
I don't "feel" forced into paying them. I AM 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.
Whether you feel forced or not has little to do with whether you are forced to or not. I don't feel forced to even though I am because I understand and appreciate what I get in return. I would want to pay for these things anyways if taxation didn't exist.
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.
Taxation is mandatory and evading taxation is punished by prison in most cases. Investments are optional and not investing does not carry prison sentences. It's the same difference between consensual sex and rape: the consent.
>It is seen as strictly a negative thing.
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.
> What public resources did Amazon, a US company, use from France?
Digital infrastructure, anti-poverty programs that mean potential customers still have something to spend, financial infrastructure, legislation, ...
Shouldn't that be covered by the 20% VAT that Amazon pays on goods and services sold to entities in France?
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.
...Who do you think ultimately owns these companies? Something besides people?
Those are not the people that pay VAT, especially not if they're not located in the country that charges the VAT.
Not only that, what makes you think corporate tax is paid only by shareholders rather than customers and employees?
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.
And you think this new surcharge won’t be passed onto the consumers in France?
It will be, ending the unfair competitive benefits of tax avoidance big Internet companies currently enjoy in much of Europe.
It will, but it'll not be above what the market is willing to bear. Right now digital services are charged at the level that a market can bear, but only digital services are the ones that don't get taxed.
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)
This is the biggest fallacy about taxation, if they could charge whatever the price+tax is, they already would be.
It’s not a fallacy. They charge to maximize revenue. If they charge more, people buy less. If their cost to produce goes up, their optimal price likely goes up, depending on elasticity.
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.
Is VAT paid when Google shows an American ad to a French person?
The tax is on "digital services". It's unclear if the tax is on physical services from digital companies.
Amazon is not paying the VAT, the customer is. They are just here to collect it.
it doesn't really matter who pays the tax; it's pretty much orthogonal to tax burden. see https://en.wikipedia.org/wiki/Tax_incidence
It should. And if it were just that, then we'd not have this conversation at all. This is a very specific law targeting specific economic activity.
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.
Amazon doesn't pay VAT, the consumer does
In the case of Amazon there's a clear protectionist argument to be made. It will kill local businesses and send a bigger share of the profit to an American company. Replace jobs in those small independent businesses by underpaid corporate jobs at Walmart 2.0. Amazon is in a position where it can sell items at a loss for years just for the sake of killing small competitors. Granted, maybe it's the role of antitrust laws to take care of that rather than taxes, but I'm generally in favor of slowing down Amazon, if only to give other players a chance to grow before Amazon takes everything. The problem with antitrust laws is that they will come and slap Bezos with a tiny fine 3 years after Amazon has unfairly killed competitors.
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.
Rather than focusing on a particular company (Amazon) or even a particular industry (retail), they're addressing a more fundamental problem - digital businesses using arbitrage to virtually "move" profits around and minimize corporate income tax - something that's inherent to their business model and creates an (allegedly) unfair advantage.
The idea behind taxes is that society needs government and government needs money, that’s it. Some taxes are connected to the use of specific public resources, but many are not. What do my income taxes pay for? The answer is basically “everything.”
The actual principle behind taxation is that we siphon some money off to pay for the common needs because the free market is great at allocating the correct number of shoe stores to a town and worthless at making it possible to live in that town.
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 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.
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.
Much of this is because of information distortion - when the state directly collects an LVT from homeowners or a VAT from consumers, every individual citizen is aware of that tax and feels the pain of it. When they collect a tax from corporations, only the corporation feels it as a tax, and they raise their prices to compensate for losses from it, and the consumer instead sees it as simply the price of goods. The consumer has no information for what things would have cost without the tax, so they simply accept it as how things are. Meanwhile, the beneficial effects of an LVT or VAT all appear in reduced opportunity costs (the price of housing comes down, the prices of consumer goods more truly reflect supply & demand), so they're completely unaware of them.
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.
> 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.
LVT and VAT are considered effective because they're hard to dodge and easy to collect.
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).
> The idea behind taxes is that you use some public resource and you pay for that service.
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?
Your stated view of taxation is oversimplified. Certainly some taxes can be viewed as fee-for-service, others are protectionist or strategic, or otherwise effect policy.
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)
Even staying with the framework of "public resource use". They benefit from the attractive market created by the country. An educated, safe and healthy population with high bandwidth internet with disposable income ready to buy on Amazon.
The idea behind taxation is "the government needs money to function, and it alone has the authority to take it by force". Anything else is a post hoc justification.
Exactly. The French government decided that businesses should be taxed for profits made from French consumers. Some businesses found a loop hole using the laws of other EU countries to avoid paying those taxes, and now the government of France decided to plug that loop hole simply because they have the will and the way.
There's not really anything else to it.
Yeah I think Americans often look for economic incentives behind policy and think taxes are carefully chosen. Most Europeans know basically if there is money there it'll get taxed sooner or later.
It's simple, in France there is this idea that everyone should contribute to "national solidarity" according to how much they can afford. Internet giant are very rich so they should contribute a lot, and currently there is a sentiment that they don't contribute as much as they should, so this law is simply starting to fix that.
And it's a bit rich that, at the same time the US is unhappy with France france over this, the US is imposing on the French economy via FATCA and FBAR.
> 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.
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.
As much as I loathe to word it way, the public resource is the French citizen. Or, the citizen of the country.
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.
Amazon is paying taxes for the employees in France; when using contractors, the contractors pay their taxes there. This law is about something else.
The logic behind taxation is that if governments are able to extract money from any activity without causing a revolution or foreign invasion they do it.
I doubt French people will revolt against taxing Google or US Marines will invade France.
You don't like those taxes?
Go to China.
They steal your stuff without any chance of a legal battle?
Well... There is your reason for those taxes.
Totally. Don't tax them. They don't need it.
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.
Corporations are terrible for many reasons.
- 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.
> I never understood the logic behind taxing large internet businesses.
> 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.
>(can't quit your job and travel the world if you have kids to support).
I think the real reason is that there will be someone to look after you when you're old and sick.
The reasoning is much simpler than that... the house wants its rake, that's it
> The idea behind taxes is that you use some public resource and you pay for that service.
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.
> I never understood the logic behind taxing large internet businesses.
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.
> 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?
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.
> The idea behind taxes is that you use some public resource and you pay for that service.
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.
>The idea behind taxes is that you use some public resource and you pay for that service
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.
Pretending you're based in Switzerland or some other tax haven to avoid local sales tax gives you a massive advantage over national companies.
I'm not really sure it is the role of countries to enrich American shareholders at the expense of their own populace.
Nah, that’s overthinking it, I think. States are also like participants in a market. In exchange for access to French citizens, France charges some people some amount. It’s really no different from what Facebook charges you for running an ad on their platform. It’s decoupled from cost because it’s not about cost.
If Amazon is so efficient it will still be competitive against local retailers when the local retailers and Amazon have to pay the same sales tax. Which actually is not Amazon or Local retailers paying but the customers they just have to collect it.
How much do most uneducated people in most of the world make?
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.
> But again arbitrarily punishing or helping some corporations opens up the possibility of corruption and corporate meddling as corporations look for favors.
Like it or not, but this is designed into politics.
Its just as dirty and evil as it sounds.
Maybe France subsidizes it's telecommunications industry with monetary or anti-competitive advantages and so in return it wields greater control over the taxation of its products?
The thing the taxation is paying for is the French marketplace.
That place which is defended by the army, and wouldn't exist without schools, hospitals, and other services.
I think it comes down to economic warfare. The us abuses it with its allies and thats just retaliation.
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).
> So, they're imposing a tax on companies that serve French customers via the internet but aren't based in France
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.
That's not how taxes work. Government is not a corporation that you pay for using it's resources/services.
Amazon delivers stuff to my house. It uses all the local government run resources, like roads, to carry out that business.
Amazon does not deliver packages. A local delivery company in France does. They pay local taxes (corp, gas, etc) which are passed on to Amazon when Amazon pays for shipping.
They want silicon valley out of Europe. The European Union have wanted this for a long time.
You misunderstand. The purpose of taxation is to take away the ill-gotten gains of the rich and redistribute them to the oppressed poor. Because, you see, all humans are equal, so if one is richer than another, he must have become rich by exploiting someone else.
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.
Please don't take HN threads on generic ideological tangents. It's against the site guidelines because it makes all discussions the same and nasty.
The US administration is presenting the new tax as if it was specifically targeted to US companies because of their origin. Like a tariff.
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
The US is big into tariffs these days, why do they complain when the same treatment is applied in return?
The US loves a cheat.
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.
An easy rebuff to the US is simple: if they are American companies, why aren't they paying American taxes on their European business activities?
They are. The US taxes companies on profits made abroad. The issue is that these taxes are only collected when the money enters th US, so companies park this money abroad.
> They are.
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.
They can't spend it when it's parked abroad either. It's less that they're not paying taxes, just that they aren't paying taxes on it yet.
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.
They still pay taxes, though, even if politicians did set a lower rate for a period of time. If they bring the money back in to pay back the loans they'll pay taxes on it.
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.
The personal slight isn't necessary.
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.
> 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.
What's your point?
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?
> 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?
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 don't have to "spend" it. They invest the money. Then the investment vehicle uses the money (now not directly tied to the foreign earning) to fund projects anywhere around the world. (For example in the US too.)
They can't spend it, or they can't spend it in the US?
They can't move it into a US bank without paying taxes on it.
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.
Lest we forget tax holidays where congress allows repatriation of funds for the taxes they would pay. Vastly lowering actual taxes paid
Maybe because of Ireland?
I suppose it's just like how the tax law changes in the US were not designed to hurt high-tax liberal states more than low-tax conservative states, but that the high-tax liberal states were just taking advantage of the standard deduction.
Unfortunately in these cases, perception is just as important as the nominal reason.
How can you tell that they weren't? There are always pretexts and blindly trusting face value explanations for a policy is dangerously naive.
I apologize for not being more clear as I agree with you completely: I cannot tell and neither can I tell about this French tax.
How much tax is enough tax?
more than 4 milion on $11.3bn of revenue
Stock based comp expense. If Amazon paid these employees cash instead of stock, Amazon's cash profits would have been lower. Instead they pay in stock, and employees pay the tax (which they're happy to do because the stock keeps going up). Furthermore if Amazon sold that stock in the public markets to fund those cash payments to employees, it wouldn't be revenue at all, and still not taxable.
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."
Taxes are not paid on revenue. They pay sales tax on these goods sold in any case.
Part of me originally wanted the US to retaliate since this theoretically threatens my paycheck, but a 3% tax on revenue generated within the country is pretty low and seems reasonable considering how ineffective taxing profits is due to loopholes.
I really don't think it's sour grapes so much as trying to address the Irish/Luxembourgish tax schemes
Correct in theory. But have you looked at french tax policy? The issue with new taxes is that often it starts at 3%, then goes up gradually to 5, then to 7, and before you know it you have a 15% turnover tax.
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...
Which is actually a good idea: increase tax on revenues for companies using tax-evasion schemes until it is no longuer profitable for them to continue doing so.
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.
increasing taxes makes tax-reduction-strategies _more_ profitable, not less
also, tax-evasion and tax-reduction are two different things, equating them is an argument in bad faith
What I was arguing is that raising taxes revenues instead of profits (when companies declare no profits as part of tax-avoidance schemes) will eventually make them declare and pay taxes on real profits.
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.
What you call fraudulent is not actually fraudulent. It makes a lot of sense to allow this.
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.
Tax reduction strategies can include things like paying employees higher wages. Turnover taxes are inane because profit margins across vary widely across different industries.
>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.
To each their own view, but the more wealth someone builds up, the more complex their tax affairs become. Especially if operating internationally. The 401k example is good for a normal employee.
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.
"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.
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 tax on revenue is very different than a tax on profit.
A tax on profit is almost useless in this case because most internet giants would buy “services” or pay “royalties” to countries with zero taxes, to keep profits zero whereever there are nonzero taxes.
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.
You can't just tax a company. Well, you could, but then you'd be a Libyan dictator or something.
Tax on revenue disincentivizes progress and R&D.
> You can’t tax a company
Not sure I follow
A tax on revenue makes sense in a very high margin business like software
Taxes on revenue disincentivize spend on R&D
Given how much after-salary profits the big tech companies make do you really need to be worried about your paycheck?
to be more clear, perhaps they could demand those taxes from Ireland, or Luxembourg where amazon is. This is like california taxing startups because they are based in Delaware.
Taxing digital companies based on digital presence certainly makes sense to me, as a layperson. A company that's selling ads to a French company that wants to show those ads to French users is doing business in France, end of story.
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.
Taxation/regulations can place an undue burden on smaller companies. So I think it's perfectly acceptable to use size as a component of taxation. It's like progressive taxation applied to business.
Exactly. A company with only 1 person has to spend a large share of its time-resources just complying with taxes and regulations. The more people in the company, the lower the proportion of those time-resources are needed. With a large company, it's easy to employ someone (or a team even) to do that work full-time, but for a tiny company it's impossible; they wouldn't get any actual work done to keep the company running. This would have the effect of killing small business, which would provide a huge inertia advantage to large businesses (which started small, when they didn't have so many regulations).
No matter how the law is written, if the result is that the exceptions only apply to French companies and not to the US, it’s bullshit :).
They could pick arbitrary ways to bisect the set until they get the desired result.
Who said it was only targeting US companies?
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 :
• 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.
Wait Sabre is a real company?
Most of those are still American businesses (twenty of twenty-nine, or over two-thirds). Another interesting way to look at it would be by revenue breakdown - I suspect the total revenue of American companies may be disproportionately high.
Yeah right, who'd even notice Alibaba?
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.
But what’s Alibaba’s revenue from France? I suspect the proportion is quite low compared to American companies.
What's Verizon's revenue from France? I suspect the proportion is quite low compared to Chinese companies.
Well, let’s compare tax rates the foreign companies pay with the local French companies. Something tells me that the American companies are making out like bandits compared to the French ones that have to pay all local taxes. I see this as as an attempt to equalize the competitive playing field.
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.
Why? Is only the US allowed to practice protectionism?
Very salient point.
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".
Please don't confuse the US with our government! (or, rather, with the subset of people in our government who happen to be talking at a given time---there are many levelheaded, effective people working in our government who never enter the spotlight)
I try to avoid painting with a broad brush wherever possible, but I was also trying to be sufficiently succinct. There is, of course, good to be found within the US government. Although, to an outsider, it feels like one has to look much harder to find that good now adays.
No, China is the protectionism King.
That's not the case. Per the article:
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.
Not to refute your point, but they surely already charge VAT. However, this is commonly described as a tax for the buyer, not the seller.
On the other hand, most revenue is probably B2B and business reclaim their VAT.
Customers buying from local businesses that compete with them also pay VAT, so the consumer side of it is fair. But local businesses themselves pay much more in corporate taxes, which is not.
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.
I was not argueing anything.
> company that's selling ads to a French company that wants to show those ads to French users is doing business in France, end of story.
yeah, so taxes make sense to pay for the roads, bridges and healthcare that these ads are using.
Where the taxes are coming from and what they are used for do not need to be in the same industry or sector. Maybe it's different where you live?
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.
Taxes make sense to pay for the court system that's enforcing contracts, just to name the first thing that comes to mind.
Taxes in France (and in many other more [than the US] socialist countries) are not just about paying for the public infrastructure that you use. It's about contributing to the development of the society by taxing very lucrative businesses and individuals (and also taxing not so lucrative businesses sadly). If you are an individual in France, and you are well off, you will pay much more taxes than what the state pays in infrastructure for you, why do you think it should be different just for internet businesses?
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.
Given the effect of social networking products on mental health, in this light it absolutely makes sense for countries with nationalized healthcare to tax big tech
well, it only "makes sense" in case you are literally insane
Could you please review the guidelines? You've been breaking them quite a bit and eventually we ban accounts that won't stop.
Completely ignoring the cables that carry their data.
Aren't the cables already paid for by the fees that subscribers pay to their ISPs for internet access?
ISPs generally don’t own the land cables run over/under
It's really not that simple. They don't use any of the country infrastructure or workers. If I make a video game and sell it to a person in France does it mean I do business in France? It seems to me it should be treated the same as French person coming to my country, buying my game and going back home. We've just skipped on unnecessary traveling. Those things are subject to debate and power struggle but it's clear that: I sell it to you so I do business where you live isn't story-ending argument. 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.
If I make a video game and sell it to a person in France does it mean I do business in France?
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).
> 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.
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.
I'm an international tax lawyer dude...
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.
>France does it mean I do business in France? It seems to me it should be treated the same as French person coming to my country, buying my game and going back home.
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.
They pay taxes where they are located. I am opponent of corporate income tax as I think it's the worse possible way to get about taxation. France is already collecting VAT on what Google sells there. They could increase that if they want. Why should it matter to them if Google turns profits or not? The concept of "profit from sells to France" isn't really well defined either, their profit depends on cost of operating and those depends on laws and regulations of the place they actually use to make their product.
>They pay taxes where they are located.
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.
>It's really not that simple. They don't use any of the country infrastructure or workers.
They absolutely do. They implicitly use courts, police, customs, trademark/contract enforcement, etc.
It's true that when a French person comes to your country to buy your product, then goes back to France, the burden is on them to pay the relevant customs and taxes.
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 ?
>If I make a video game and sell it to a person in France does it mean I do business in France?
apart from that they take advantage of there even being people who can be advertised to (i.e. who have the means to buy stuff, to be even worth advertising to) facebook etc certainly make use of the digital infrastructure in place.
I'm writing this via a glass fiber connection supplied by "Orange" (formerly known as France Telecom)
Try bringing much more expensive items across a border and you will see what happens ( you will be taxed at the border ).
Yeah, I will pay VAT and maybe tariffs. Both are perfectly fine taxes. Google is already paying VAT on sells to France. France could increase those on electronic advertising if they want to and Google will pay that.
Google does not pay VAT. The buyer pays VAT, and Google collects and remits it on behalf of the buyer.
Google only pays VAT on purchases (for its own use) that it will sell on to customers.
it is more like, you are putting your product in their shops and not paying any tax on it!
That doesn't make any sense. I am actually delivering it to customers myself, run the accounting, run the store. I don't use their real estate, their roads, electricity, anything. How is it anything like putting my product in their stores?
How are you delivering it to the customer without using their roads, electricity, or "anything"?
Interestingly, the only recent French tech company to be even remotely globally relevant (Criteo), is also affected.
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.
France is an ecosystem where smaller (tech) companies get acquired by massive conglomerates (Vivendi, LVMH...). Or more recently like Zenly's acquisition by Snapchat.
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.
Sogeti is also very large, founded in 2002.
Looks like they were acquired by Capgemini
It's not a tech company. It's a contractor body shop, like Accenture.
Sogeti merged very soon after it was formed. It's never really been known as its own company.
The US has long been using their legal system to skew free market rules and favour their domestic markets and companies.
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...
> DoJ is constantly "exporting" US law [...]
Could you explain what do you mean by this, and provide specific instances?
For instance the 1977 (79?) law against corruption of foreign officials has been in almost all cases involving large companies, only been used against foreign ones, except in once case, Halliburton. In fact in that very case Valourec (French) was working on a common contract with Halliburton and was attacked first, but they negotiated by implicating their partner (both were punished).
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.
This is a stupid move. The tax is not payed by big tech giants. Not by both, either. It's complicated and depends on who needs whom the more.
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 you are a French startup
… 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).
I mean a French startup using the American services.
> 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.
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.
>Just like VAT is passed on to consumers?
VAT is a consumption tax. It is - by definition - only paid by consumers.
Exactly. Yet VAT is a thing, and consumers are doing fine.
This would incentivize competitors in France. That’s a good thing for France.
With that argument, protectionism will incentivise competition. So why don’t we close the economy a bit?
Whether you're /s or not, I wholly agree; I both fully support using public policy, tariffs, and other economic mechanisms to support "at home" companies over those abroad, as well as supporting local labor over that outside the country.
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?
Because protectionism isn’t only economically bad but also immoral. You can’t force everybody else to pay higher prices.
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.
Strawman, nobody is arguing for supporting companies at the expense of the rest of society. The parent is arguing for supporting companies for the benefit of the society. Both can happen, it depends on how and to what extent it is executed. Economists disagree a lot and they have only partial say in policies, countries are not run solely by economists.
“For the benefit of the society”
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.
Supporting local businesses and local jobs. This may lead to worse or to a better product, it depends on many things. There is no necessity of a catastrophe where the local product is worse and everybody is worse because having to use it. See China.
How much oil has been burned without paying for its environmental costs? Does that make it a better product? That’s the point. Cheaper does not necessarily mean better.
We are not talking about environmental externalities here. That’s another issue altogether. B
What are the negative externalities of AWS and the likes?
You cannot compare pears with apples.
Morality is subjective and open to interpretation. Sometimes consumers should pay higher prices to avoid unwanted externalities.
No, morality is not subjective.
What do you mean by unwanted externalities? Unwanted by who?
From what I can tell, it will incentivize competitors everywhere, as long as they don't have revenues over €750M.
Which is a good thing, too, as it incentivizes decentralization.
Good. Next step, have EU countries come up with an estimation of the value of their citizens' private data that FB and Google gobbles up and tax them on that too.
Edit: companies -> countries
Isn’t this tax on ad revenue already a good proxy for the value of user data?
Does that mean that EU citizens should also pay for these services? Or do you expect these companies would continue to operate in the EU with no net profit.
> Does that mean that EU citizens should also pay for these services?
Making people pay to access Facebook etc would be the best possible move for society ever.
I would agree. Even something as low as $1 a month or $10 a year would change everything.
they make money out of you, you're already paying.
Yes, they should. FB doesn't want to get taxed? Create a non-tracking version and paywall it, I would actually pay for that myself.
You and maybe a dozen other people. Social media is worthless without widespread adoption.
It could potentially share the backend -- track only those people who are on the free version, but keep everyone on one network.
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.
I should have expanded more on your original reply in my parent response but rather than editing it I'll continue it here.
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, 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. 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?
 Whether FB or regulators should set that value is up for discussion.
 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...)
We already implemented that last year. That's called the GDPR.
Regulators are not quick, give them a year or two to deliver the fines.
Why not google and FB pay the users directly?
Would I get paid per search when I use Google and per post when I use Facebook?
Bing has a rewards program, I have a few friends who use Bing just to collect something like ten bucks of Amazon gift card every month.
Many ways. Even a tax would do, as long as the tax collector gave it back to the users proportionally to the time spent on either site.
E.g. facebook could be forced to give you discounts for your card or sth.
Why would they purposefully reduce their profits?
Previous discussion: https://news.ycombinator.com/item?id=20409591
It's interesting to compare the general sentiment of the comments on that post, which was posted 8 hours earlier than this one. Presumably those comments are more from Europeans, and comments in this post are more from people in American time zones.
Who is this going to affect? The business:
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?
> 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.
This is the case no 1 in my post. What you quoted refers to points 2 and 3.
Sorry, I misread your post. I think that the tax don't apply for points 2 & 3, since it only concerns revenus made in France.
This tax is on sales and not profits, so won't it just become another line on the bill for French consumers? I imagine they'll just break it separately from VAT.
Retroactively they'll have to eat the cost though.
Yes, but only for larger tech firms, so this will somewhat level the playing field between large and small companies (offsetting the economies of scale that larger firms benefit from). This would hypothetically lead to greater consumer choice, which is probably a good thing.
What happened to a company who has no physical presence in France refuse to pay the tax on the ground that France has no jurisdiction upon them?
Ordering French ISPs to block the web service of that company thereby breaking the fundamental human right of freedom of speech and no censorship.
I'm not sure the assumption that other countries give a damn about what the U.S. Constitution says is correct.
If they have French customers, the French government has jurisdiction.
If they don't have French customers, the French government blocking them would have no impact.
I'm not sure that fundamental right is correct, at least, outside of America. There's no fundamental human rights of freedom of speech and no censorship in New Zealand for example, as enshrined by law.
There are no freedom of speech laws that would apply to a corporation rather than a human, that I know of at least.
Newspapers etc. regularly use Article 10 (freedom of expression) of the European Convention on Human Rights to protect their ability to publish.
That freedom of expression is for the journalists, not the newspaper - that is my point.
France is already censoring Internet.
Blocking a website is not “breaking the fundamental human right of freedom of speech and no censorship”, at least not in France.
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.
Well commerce isn't so unrestricted for one which gives tangible reach. They can easily forbid financial transactions and freeze accounts to tax delinquents.
China does that and laughs all the way to the Gulag.
I'd guess it's even more palatable for France if the US threatens. The combativeness from the US helps foreign leaders to look stronger by creating a nationalist confrontation.
Is this tax functionally different from tariff?
Given that French companies are also affected, I fail to see how it could be construed as a tariff. The goal of tariffs is to penalize foreign corporations. That tax is directed at a sector. It will not help the few French actors in that sector become more competitive.
It will create a local market opportunity if FB, etc, pull out. See Austin vs. Uber - the absence of ride-shares launched local alternatives that quickly took that marketshare until the locality changed it's stance.
It will likely act much like a tariff as I doubt any of these megacorps will pull out.
There is only one French company affected as another commenter pointed out.
There may be a complication : As EU is a single market, US retaliation (except maybe on Champagne and Camembert ...) cannot be targeted on France but on the whole EU. For example, Airbus headquarter is located in the Nederland, and has factories all over Europe. As such, EU will have to enter a fight a single country started. I really wonder what will happen next. Maybe Texas could raise the tax on red sole shoes https://www.google.com/search?q=red+sole+shoes ?
As much as I support governments cracking down on companies trying to dodge paying taxes, I can't help but feel like this is just for show.
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.
Taxes are never fair, that's why you'll never agree on them. It's a game of coercion and the only thing that can be done is choose who's the sucker that's gonna pay.
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.
I think the Brexit negotiations have probably shown Europe the power of sticking together, and presumably France feels that the rest of the EU has its back here.
No, EU isn't backing this, because in that case it would have been an EU-wide tax, not in just in one country. The EU tried to establish an equivalent tax, but there was pushback from countries that are taking advantage of it (Ireland, Luxembourg)
Edit: From the French newspaper Le Monde , it was Ireland, Sweden, Danemark and Finland which opposed the idea. And from this article , Germany didn't help a lot, fearing tariff on their car industry.
I think this will play out differently, and doubly so if American sabre rattling continues
Ireland and Luxembourg are a small minority, fortunately or unfortunately.
I just hope the US does not "retaliate" on this. EU entrepreneurs are too dependent on US businesses.
How, they would also tax big companies "hidden" profits ? Some US citizens are asking for this already, the French tax is not target at a country.
They would tax digital companies doing businesses in the US.
Would they exclude US companies doing business in US?
obviously yes. we are in a trade war
This makes no sense, France is not excluding french companies. there is no war , they probably need more money so they found some group to tax, in Romania the government is also in big need of money so they put a tax on telecom companies, should the UK queen get upset now if a UK telecom company that makes business here is taxed more? I mean there are no exceptions or protectionism involved but some politicians can let an opportunity to spread their agenda.
I really wish US companies would take a more forceful approach with these rogue governments. “You get off our back or we pull out of your countries”
I would be happy if those spy organisations like Google and Facebook would leave my country.
Google provides some genuinely useful services, like Maps.
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?
Facebook provides the great service of keeping them all over there. Imagine if all that crowd descended on HN.
Don't be silly. Even if FB disappeared tomorrow, "that crowd" isn't going to come to HN, just like they're not going to suddenly develop an interest in, say, electronics and start hanging out on message forums where people talk about how to design PCBs, or an interest in, say, astrophysics, and start hanging out on message forums where people talk about gravity wave detection.
No matter what happens to FB, you're safe here.
As an American whose taxes are heavily subsidizing these companies, I too hope that they pull out and are taught a lesson in paying taxes.
Sounds like a great recipe to end US tech dominance and tank the market cap of global companies.
"Rogue governments"? The governments do not derive their power from U.S. or from tech companies. Regarding pulling out, that is always a possibility, but very unlikely one, even if the taxation was higher than what France demands.
Looking at the list, and as a citizen of an European country: yes, please, do pull out.
We've asked you before not to post unsubstantive comments here. We ban accounts that keep doing this, so would you please stop?
Very interesting comments that reflects the difference of values between french and north americans!
Absent all this talk about fairness or not, if one were watching CNBC today, Cramer and the other analysts were asking themselves "what exactly is France selling to the U.S" and this is the list they came up with:
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).
Please do this in the US, and use the money to fund the green new deal.
Amazon should and probably will just raise prices for French shoppers.
Btw, on a tax manner, are these companies really American?
> The French government has argued that such firms headquartered outside the country pay little or no tax.
Isn't that largely due to EU laws and the decisions of Ireland and a couple other countries.
Let's say it is. Why would that change anything? France's government isn't trying to target or punish anyone (whether Ireland or Google), it just wants to stop the corporate tax avoidance it sees as unfair.
What you call avoidance is the essence of EU. Undoing that would bring us back to pre-EEC situation
Tax avoidance via jurisdictional arbitrage is certainly not the essence of EU.
Cross border trade is. And digital businesses , finance, shipping , and many more will increasingly become remote. Right now EU artificially inflates local presence with regulations (by e g not having a bank union). Like it or not though, free trade zone means that taxes wont be paid uniformly. I know that tax avoidance is seen as unfair but it was enabled by the Union.
Cross border trade does not require allowing for the tax avoidance. And the E.U. is changing, just because something was enabled long time ago does not mean it will remain the same. Free trade zone can have many forms.
And yet they couldn't find a way to have both without imposing this tax.
I'm saying if the EU states all worked together on taxation rules none of the tech giants could take advantage of them. Also Google could do a little payback by moving the higher pay jobs from France over to neighboring countries like Germany.
The EU can't work together on this, because their motives are incompatible. France, Germany want the corporations to pay taxes in France and Germany for the business they do in those countries. Ireland's business is offering a tax cut to the corporations so the corporations don't pay taxes in France or Germany and Ireland get's a cut in return. Ireland has no interest in changing this, obviously.
European regulations and taxes always come up in these threads and some libertarians complain about how it's an unfair way to treat a digital company that shouldn't pay taxes.
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.
In addition, the United States is exporting its tax system around the world and imposing costs on the rest of the world in the process via FATCA and FBAR.
Aren't they already taxed in Ireland, another EU country? Isn't this double taxation?
Yes, France wants money too. Not unreasonable, considering the companies' activities involve French infrastructure and French citizens.
This entire thread shows how much of a waste of time it is discussing taxes or government or social services (socialism!) or markets with Americans. They have such an incredibly skewed point of view based on an insanely unfair and unjust system of everything in the US.
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Amusing to read political comments on HN ... It is like discussion about programming laguages, just church wars ....
Why aren't services, of any sort, taxed in the USA?
We don't tax legal services or doctor visits. None of them.
But we tax groceries.
Trump is right on this one -- this measure is definitely anti-competitive and specifically aimed at American tech companies. I hope he is swift to retaliate with appropriate tariffs. Failing to do so will bring a wave of random EU taxes on American tech companies, which will eventually lead to lower profits and engineer salaries.
How, did you forgot how big US is? We are reminded here on HN how big US is, so it is natural that some US companies will also fall into that tax laws. What will Trump do? tax smaller companies so non US ones are hit harder ?
Off topic, did the China tariffs had any good side effect so far?
Arguably the China tariffs are resulting in manufacturing being distributed to other countries. This could be considered a good side effect from a fault tolerance perspective.
Agree, also China,India and other countries will invest more into reducing their dependencies on US which is as you said good from a fault tolerance perspective
This trade war might help Chinese capital equipment manufacturers as they can sell to the new factories in other countries.
Which China tariffs? The extreme ones China had been using the last few decades or the recent US ones in response to China's longstanding tarriffs?
The ones we read on HN, were there any good consequences so far?
Oh no, won't someone please think of the U.S. software.engineers.
And oh no, access to a market also means legal and tax responsibilities?
The HN guidelines ask us not to be snarky.
I appreciate the frank comment. Thanks
> Oh no, won't someone please think of the U.S. software.engineers.
Next time you're wondering why you're a Senior Software Engineer with 10 years of experience, but only making 45k EUR in a major European metro area and can never afford to own your own home, please don't forget to remind yourself that you'll get to stay for free in the hospital for the 2 weeks before you die in your late seventies.
Instead of taxing companies because it’s an easy method to steal money, maybe France should focus on enabling their people to create a company like Amazon or Facebook and actually generate wealth instead of taking it?
Why wouldn't they do both? "Stealing" money via taxation is a legal and logical way to get some money to support their other operations, perhaps even "enabling their people".