Europe Plans Special Tax For Google, Apple, Facebook, and Amazon (theregister.co.uk)

An anonymous reader quotes a report from The Register: Bruno Le Maire, France's minister for the economy, has revealed that a plan to levy a special tax on Google, Apple, Facebook, and Amazon will soon be revealed by European authorities. Le Maire told French newspaper Le Journal du Dimanche "A European directive will be unveiled in the coming weeks, the minister reveals, and it will mark a considerable step forward." The minister told the paper that a tax of between two and six per cent has been considered, with the proposal to be "closer to two than six." The proposed tax will be levied on the four companies' turnover, rather than profits. Taxing turnover is hoped to offer a simple way to tax the companies, as all use legal-but-cynical ways to minimize their taxable income. Le Maire added that a turnover tax is seen as being quick to implement and that the four companies know they're going to have to pay more tax in Europe, so may be amenable to such an arrangement.

Comments

Turnover tax?

[SultanCemil]

Seems like a horrible idea - what if the company makes a real loss and can't pay the tax? There's a reason that we tax profits.

Re:Turnover tax?

[oldgraybeard]

Bankruptcy is done according to the law. Throwing out the Trump part. The only thing wrong with having a company Bankruptcy on your financial record is, if you do not pick your self up and try to start a business again!

And no I don't have one on my record, and I have 2 businesses.

Just my 2 cents ;)

Re:Turnover tax?

[jrumney]

Maybe the companies should have thought about that before trying to game the rules against the interests of the people who make the rules.

Re:Turnover tax?

[MtHuurne]

That's just a risk of doing business. A tech company with losses so heavy that it cannot pay a ~2% turnover tax likely wasn't going to survive without paying tax either.

Besides, if I understand the article correctly, this is an offer to the mentioned four tech companies as an alternative to thorough legal probing into their tax avoidance constructs, so they're free to reject it. And as far as I know all four are making a profit.

Re:Turnover tax?

[93 Escort Wagon]

Maybe the companies should have thought about that before trying to game the rules against the interests of the people who make the rules.

There's an old saying - "it takes two to tango".

But it's nice to know that enlightened European companies never try to take advantage of loopholes in the various European countries' tax laws.

Re:Turnover tax?

[serviscope_minor]

There's an old saying - "it takes two to tango".

A large number of old saying are stupid.

But it's nice to know that enlightened European companies never try to take advantage of loopholes in the various European countries' tax laws.

The EU fines and cracks down on Euopean companies all the time. But when they do it to an American company, it's met with a huge outpouring of whining on slashdot.

Re:Turnover tax?

[bluefoxlucid]

Why is it that companies get to subtract their costs and pay tax on the result while individuals are taxed on revenue, not profit?

Because a business purchases productive output from other businesses, pays wages to workers who produce, and keeps the remaining revenue as profit. Thus the worker produces, and his wage represents the productive output; the suppliers also produce, and so the cost to the business to purchase that input is their productive output; and, of course, the business's profits are tied to nothing except the productive output of the business (which is the same productive output as the business's employees).

That means taxing corporate net profits and not their expenses taxes production: if a table is made, taxing the worker's wages and the corporate profits both of the table manfuacturer and all involved suppliers (including the truckers shipping those supplies) at a rate of 10% gets you 10% of the market price of a table. By taxing strictly and effectively in this manner, an average effective tax rate of 10% collects 10% of GDP and represents 10% of all goods and services produced and sold, in the long run.

Taxing corporate revenues ("gross profits"), on the other hand, double-taxes wages at the end of the pipeline; and far more than double-taxes supply everywhere else. This means the more suppliers you have in a chain, the heavier your taxes, and the higher the effective tax rate applied to a product.

Corporate revenue taxation heavily-favors monopolies, notably vertically-integrated monopolies as per Andrew Carnegie.

Re:Turnover tax?

[bluefoxlucid]

Profit is revenue minus the total operating expense involved in producing a product. Businesses are producing products with labor and materials, and providing the operating environment in which people work; what exceeds that is profit.

Individuals aren't producing a product. They're consuming. You're not creating a productive output, and so you don't get to count anything as an "expense" toward the creation of an output. Even if you renovate your house, you use that house--you're the consumer!

Here's the fun part: if you buy a house, live in it for at least 2 years, and then sell it, the difference in purchase versus sale is capital gains. If you do any home improvement, then the cost you expend on that home improvement is actually deductible as part of the cost basis of your home.

That is to say: you paid contractors, you bought material, and you otherwise expended to produce something that you then sold (you improved the house). Those expenses are not part of your income, and so you take the $200,000 you paid for the house and the $50,000 you paid to redo the kitchen out of the equation when you sell it for $350,000--only paying taxes on $100,000 of capital gains.

So here's the thing: if you repair your house, you're bringing it up to its original condition. You're not producing; you bought the house, you lived in the house, and the house needs maintenance--you are consuming the house by using its useful lifespan. Repairs are just consumption, and not tax-deductible. When the house requires $1,000 of repairs over the course of you living in it, you spend $1,000 to cover what you have consumed. Had you sold (and not consumed) the house, there would be no demand from you for those $1,000 of repairs. Yes it's weird to think about, since the house is going to need repairs over time.

If you're a farmer, you grow food, thus producing. When you eat food, you consume it. Your farm, as a business, has expenses for that food production; and if you use your own food, then the sale value of that food (not paid to your farm!) is essentially paid to you as personal income. This means that if you grow your own food using farm resources, you pay personal income taxes on that food as income; if you use your personal money to buy materials and grow a garden, you pay income taxes on the money you spend for all that, but the food you're growing is not income (it's not originally an asset of the farm, grown by an expense made by the farm, which has been transferred to you as a product of the farm for your consumption).

Chew on that for a bit. Yes, the IRS really taxes farmers on food they grow for themselves.

Re:Turnover tax?

[goose-incarnated]

Profit is revenue minus the total operating expense involved in producing a product.

Really, you just added that qualifier at the end to make the argument work. Profit is *always* revenue minus expenses.

But, okay, let's say that I go with your revised definition, in which profit only exists when there is a product. In this case, the "product" is my labour to my employer - I effectively *am* the product for 8 hours a day, and I am selling myself - why can I not deduct the costs involved in selling myself?

Even if we go with your definition of profit, there is no explanation of why my suit, tie, briefcase and lunch is not deductible. The continued sale of my product (me) depends on transport to and from the employer - why is my transport not deductible?

As employees we don't get to deduct the cost of maintaining employment, whlie businesses get to deduct the cost of doing business. There is no rational explanation for this.

Re:Turnover tax?

[bluefoxlucid]

The very first response discussed the activities and incomes in the course of making productive output. This isn't a revision; it's me repeating the same argument to your face again, and again, and again.

In this case, the "product" is my labour to my employer

Actually, you engage in labor and leisure to produce an output. Your employer deducts your labor because that part of the revenue--the part that pays your wages--isn't going into production effort by the employer, but rather into production effort by you. The output of that effort is the product your employer sells.

As a Candidate for office, I am not legally allowed to use campaign funds to purchase my suit, my tie, my briefcase, and so forth. That would be personal use, and personal use is egregiously-illegal. Funding my travel requires that I show the main purpose of travel was campaigning; note that Congressmen routinely abuse leadership PACs by taking leisure trips and identifying a minor, possibly-political activity as "the political expense" when really they're just taking their whole family on holiday to Scotland, because the rules are severely-broken.

As employees we don't get to deduct the cost of maintaining employment

To do so, you would need to deduct only the proportion of costs invested in your employment, and nothing more. That means you'd have to have special not-for-personal-use work clothes, deduct only the miles used for travel to and from work, and so forth. We actually allow this, but we don't consider time not required at work as "work-related": the drive to and from work (and to the gym, the spa, the grocery store, and everything else you did along the way) isn't tax-deductible.

If you're temporarily stationed at another office instead of your main office, that drive from home to work is actually deductible. If you have a second or temporary job and you commute from one place of work to another (instead of home to work and back), that drive is also deductible.

Moving expenses are also deductible if you move more than 50 miles for a new job. Apparently, we just consider normal commuting as basic consumption.

We don't consider driving to be "performing work for your employer" unless it is incurred by a fact of employment or interactions between employment (rather than as a fact of where you decided to live, in as much as one decides precisely where to live): the conditions of your employment must dictate some deviation at an endpoint (your office is somewhere else today, modifying your commute by a temporary measure put forth by your employer; or you must be at employer A and then at employer B and so your employment fully determines the length of your commute). If your endpoint is fixed--you have a permanent office location--then you determine the commute by renting an apartment closer or farther away.

More-correctly, your employer has about zero determination over your commute in those conditions, and is affecting your capacity to determine your commute in the others.

Your initial premise--and the manner in which you frame your function as an employee--seem to aim for a dialogue that suggests everything you do supports your existence, and your existence is wholly impactful on what you produce, and therefor you have zero income and should not pay taxes. It's one that's been tried by tax protesters now and then.

Re:Turnover tax?

[Luckyo]

So what you're saying is "drop the world's biggest economic area and force them to develop your competitors".

If you were a CEO of any of such a big company, you'd be ousted in a day. If said ousting failed, you'd slip in a shower and land on some bullets. When billions are at stake, people are very serious about stupidity such as one you espouse.

Re:Turnover tax?

[goose-incarnated]

I'm not arguing that "$FOO isn't considered deductible" where $FOO is "driving to work", or "buying a suit for work".

I'm arguing that it should be deductible. You are presenting the way the world works - but I already know the way the world works and I'm complaining that it is unfair. You have not addressed the unfairness, you have only reiterated (multiple times) that this is the way things are. I already know the way things are.

My argument is, if a company can deduct every single one of its expenses as a cost of business, it is unfair to prevent individuals from deducting their cost of maintaining employment. Right now, I cannot deduct the cost of maintaining employment, proportionally or otherwise, which gives businesses an unfair advantage - their tax burden is lighter than mine.

I'd be fine with deducting a proportion based on the proportion used to maintain employment. Having to maintain a minimum hygene standard to maintain employment would let me deduct part of the water bill. Having the need for business attire to maintain emplyment would let me deduct the cost fo the suit (who uses a tie unless its for business? Weddings, maybe? Funerals?). Hell, a portion of the car repayment (I don't have one, but still) would be deducted.

Right now none of the costs incurred in maintaining employment are deductible. That is unfair, when businesses have all of their costs deductible.

As far as revising the definition, I did not mean "You revised the definition you previously presented", I meant "You are presenting a new definition for the word PROFIT that differs from what it actually means in both english and economics", which is that which is left over after costs have been subtracted fom revenue.

Profit has never meant anything to do with production, and I don't recall seeing your definition in any of the economics textbooks that I've had the misfortune to read. I also don't recall seeing your definition anywhere else. Regardless, even if we settle on your definition, the systems as I stated it are still unfair, as I stated above.

If you want to tax only the profit, then go ahead and tax only the profit, but do it fairly for everyone. If you want to tax the revenue, then go ahead and tax only the revenue, but do it for everyone.

If (as the TFA says) countries want to tax based on revenue, then their decision is logically sound - they are already taxing their citizens on revenue, why not tax companies on revenue too?

Re:Turnover tax?

[bluefoxlucid]

Right now none of the costs incurred in maintaining employment are deductible.

You know what? This is a stupid argument; partially because you're right: Trump took away the personal exemption, which in 2017 is $4,050, so right now you're not deductible.

You don't get to deduct that $5,000 suit; you could have gotten a $150 suit at Express. Dry cleaning is bad for suits; you should be using a $25 brush, which will last over a century if cared for properly. You could save water by giving yourself a sponge bath, so those 15-minute hot showers are luxury consumption and not necessary to your job. Food should cost under $2,000/year.

I'm repealing the TCJA anyway.

Watch the mergers

[Harlequin80]

There is now a huge incentive to merge your organisation. There will be an active push now to drive down revenue while holding profit levels the same. The best way to do this is to create massive verticals.

Will be interesting if some just drop out.

[Ungrounded Lightning]

It will be interesting if some of these services try just dropping their presence in the countries in question. Close any offices, shut down any data centers, not take adds from or sell services to any operation in the country in question.

Sure it might hurt their bottom line a tad. But it would cause severe pain to the countries' own businesses.

Trade wars usually consist of both sides shooting themselves in the foot. But they can consist of shooting the other guy in the leg while only blowing off a couple of your own toes. It would be interesting to see a trade war like event where one side is a multinational corporation rather than a country's government.

Re:Will be interesting if some just drop out.

[b0s0z0ku]

Europe would be better off without American giant corps siphoning off its residents' data. The world survived for all but the last few decades without those cloud crappers, Europe will be just fine without FB/Google/Apple/Amazon.

Re:Will be interesting if some just drop out.

[b0s0z0ku]

Better that some of those services didn't exist at all, no matter who owns them.

Re:Will be interesting if some just drop out.

[dunkelfalke]

That is really a stupid question.
Most people aren't smart.

Re:Will be interesting if some just drop out.

[b0s0z0ku]

Economic mobility index says that the US is closer to a feudal society than most European countries... (higher is worse in this case)

http://www.epi.org/publication...

A special tax?

[darthsilun]

Why don't they all (U.S. included) just fix their existing tax laws so that these companies can't use loopholes and accounting tricks to launder their profits through countries like Ireland that give them preferential tax treatment?

Oh, we have an office in Ireland. We sold $100M in Ireland and $10B in the rest of Europe, so we'll just use a bookkeeping sleight of hand to claim all that revenue in Ireland and pay Ireland cents on the Euro. Then we'll "park" all those profits, and the money we didn't pay in the EU in a Cayman Islands bank so that we don't have to bring it into the US and pay US taxes on it. We'll just leave it sitting there indefinitely..

But it's an asset on their books, so they're happy and their share holders seem to be happy/

Actually what is good about keeping $100B sitting in a Cayman Island bank? I'm sure it earns interest and all. But it's just sitting there.

If I was a shareholder I'd be screaming bloody murder for a dividend. A fucking big dividend.

Re:A special tax?

[slew]

Actually what is good about keeping $100B sitting in a Cayman Island bank? I'm sure it earns interest and all. But it's just sitting there.

You forgot what these companies did with that money which was sitting in the "bank" (not a literal bank account, but cash equivalent holdings).

The companies used the money to back bonds sold in the USA. The companies effectively virtually move the money to the states (by borrowing the money from the bond investors) at a rate far lower than if they had to pay tax on that money by repatriating the money.
  This was because since the risk on the bonds was perceived to be low, they discount they had to apply was low (bonds had ~2% yield vs a 20% tax rate).

If I was a shareholder I'd be screaming bloody murder for a dividend. A fucking big dividend.

Why would an investor want a large dividend that they would have to pay tax on? It is much more efficient for the company to save 10x the tax rate than for the investor to pay taxes on dividends as long as the stock price is reflecting this savings. The only reason companies issue dividends is that they have no better use for the money, but saving 10x the tax rate on virtually repatriated profit is a good reason to not issue all this profit as a dividend.

Re:A special tax?

[AmiMoJo]

The issue here is that they claim to make very little profit due to having to pay crippling fees to the parent company (that is registered in a tax haven) to use the Amazon or Google branding. Starbucks does it too, they buy all their beans from the parent company and pay them licence fees to use the logo and green styling, and end up making near zero profit in EU countries despite having billions in revenue.

So the EU plan is to simply tax turnover, rather than profit. Easier than deciding what is legitimate profit and what isn't. Then they can carry on with their bullshit tax doge licencing fees but the EU still gets its tax take.

It's a nice solution to this problem, because it avoids trying to determine what is legitimate and what isn't, which is where the loopholes are found.

Re:Justification?

[cheesybagel]

If it were FB et. al, I'd disconnect it all off for a day - see how that goes down. That would be hilarious.

The Russians and Chinese seem to do fine without it.

Evaders will evade

[NuclearCat]

No problems, just Google will not accept payments directly, for example, and create MicroGoogle France, who provide service surprisingly similar to theirs.
Or they think those behemoths will give up on their billions just like that?

Re:Justification?

[b0s0z0ku]

Yep, Britain enjoys being the lackey of US corporate interests while the rest of Europe (justifiably) pushes back.

And Microsoft has a sad...

[bruce_the_moose]

...because they aren't in the same group as the "Big Boys". Samsung too.

Re:The Anti-American Trade War has Begun

[moronoxyd]

I already mentioned years ago on this very site that the EU fines and rulings against American companies were outrageous in comparison to worse and greater offenses made by European companies. This is just the next step, just tax a company simply for being American.

European companies that break the law are fined similar amounts all the time. It's just that people like you don't hear about it, because it doesn't involve American companies/people so it's not "important".
Google "e-on gaz du france fine" for one example.

The EU isn't going after American companies. It's going after companies that break the laws. Which is something America should do, too.

Re:Justification?

[tsa]

That would hurt FB a lot more than it would hurt its users.

Re:No one is going to "drop out"

[angel'o'sphere]

The minute that Apple or Facebook pull out of the EU, the EU revokes all of their patent, trademark and copyright protection.
There is no law that would allow for that.