
Three European Countries Block Tax on Tech Giants - adventured
https://www.bloomberg.com/news/articles/2018-11-06/french-push-for-eu-tech-tax-falters-as-italy-vows-to-go-it-alone
======
bsaul
As a french, seing french government officials trying to impose their knee-
jerk « let’s tax it » reaction to any kind of problem makes me absolutely
sick. They’re just a bunch of jealous incompetent insufferable pompous
politicians than don’t understand a thing about the private sector and so
instead of trying to fix the numerous reason why we don’t have any competitor
to google / facebook etc ( such as our best engineers fleeing to silicon for
the last 30 years) , and how come all those companies HQ in europe are in
ireland, prefer to add tax.

That will solve absolutely NOT A SINGLE ISSUE , but it’s just another income
to feed the bureaucracy.

Thanks to the three countries that stopped this madness.

PS : i also find it outrageous that gafa don’t pay taxes, but let’s fix the
tax heavens in Europe then. Don’t start making special taxes on _revenue_ ffs.

EDIT : changed "income" to revenue.

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

~~~
bsaul
Sorry, the project is actually about taxing "revenue", i fixed it, thanks.

Taxing on revenue means a corporation that actually loose money because its
expenses (salaries, investmenst, etc) are larger than its sales would still
have to pay taxes, making it loose even more money. It doesn't make any kind
of sense unless you're targeting a very particular set of companies that you
_know_ are making money. In which case you're taxing those companies, but
you're also creating a law that makes it almost impossible for new companies
to start competing.

~~~
bluecalm
It does make tons of sense. What doesn't make sense is running a business that
doesn't bring profits. Taxing revenue is one idea end accounting shenanigans
and unfair practices like price gauging to eliminate competition which is now
tax advantages strategy. Iam not a fan of it for other reasons but it does way
more sense taxing profits which is just non workable idea.

EDIT: replying to child (not possible to reply directly): your argument about
high cost industries is bogus. A system without tax on profits would just make
those services more expensive as they should be (they are mostly high cost
because they are very environmently unfriendly). It would also make higher
margin services cheaper (cause they can afford it and there is less spending
power). Once you actually think about it and analyze various scenarios you
will realize that taxin profits from the very beginning was based on
intellectual laziness and lack of ability to predict outcomes of such
policies.

~~~
bsaul
You do realize the whole concept of a startup is about raising money because
you know you can’t both grow fast enough to conquer a new market while at the
same time making profits ?

Also, some companies like industries have huge revenues but make few profits
because of the enormous cost to produce what they sell.

Try thinking about the various cases and you’ll soon realize there’s actually
a very good reason why corporates taxes have always been on profits, since the
very beginning.

~~~
claudius
> You do realize the whole concept of a startup is about raising money because
> you know you can’t both grow fast enough to conquer a new market while at
> the same time making profits ?

But undoubtedly a start-up during that phase also benefits from public
education and roads, from state-subsidized internet and transport, from
security provided by the police force etc and hence should also pay its fair
share towards those costs?

~~~
bsaul
i suppose you're french, because it's the one argument people keep repeating
again and again whenever someone speaks about tax reduction: but what about
the roads then ?

The problem (beside the fact that corporate tax on revenues is just one tax
corporations are paying among others) is :

1/ every single developed country has roads and hospitals and schools. Look at
how much they ask for tax and the service they offer (and no, don't believe
what people in france tell you. We don't have the best hospitals by far, and
we don't have the best schools).

2/ at which point do you think we should stop adding taxes ? Is there a limit,
or will you always be able to say "but then, what about the schools and the
roads" ?

------
dalbasal
Whether this policy is good or bad will depend on the details. But generally,
in Europe, this kind of priposal is a populism magnet and a dancefloor for
cheap politics.

"Standing up to multinational corporations and making them pay their fair
share (ra! ra!)" is exactly the type of rhetoric our most generic politicians
love.

An American equivalent might be some "government out of your hair" initiative
to reduce professional liscencing.. or somesuch.

Once you've got something like that on the table, all the cheapest politicians
come out of the woodwork.

On a serious not though, I think it's a good idea if (and only if) this names
and addresses the problem which this actually intends to fix: company tax.

Companies have always been difficult to tax properly for 2 reasons. (1)
"profit" is whatever your accountant says it is, and this is a manipulatable
figure. (2) companies operate in multiple tax jurisdictions. Between these two
things, these companies don't pay tax. Besides denying the taxman her due,
this gives bigger piles of money and advantage over smaller ones. Not fair.
Sad.

I just don't see how modern democracies can address something like this. It's
at the nexus of all the things we suck at (politically) at the moment. Cheap
idealogy, corporate interest groups, and complicated systems.

~~~
bluecalm
This is because taxing profit is a very bad idea. It leads to situations where
two companies doing exactly the same thing pay different taxes because one
uses less efficient (and often more polluting) technology or just chooses to
buy luxury cars for the employees instead of showing profits. The tax on
profits is a tax on honesty in accounting and even if accountats are honest
it's still impossible to determine fair value of things like offshore
licensing.

Once you accept taxing corporate profit is a very bad idea the solutions
magically appear: tax consumption and things we don't want (pollution, land
usage etc.) It's very easy to make consumption tax progressive if you want
that (higher rates for luxury goods, refunds up to X amount per month, funding
social services with it etc.).

There is no reason to debate what a company based in country at the end of the
world should pay or how your neighbors choose to tax their companies. If they
do business in your country the revenue is collected by consumption tax. If
your country is nice to live in people will move and pay tax there. The
incentives are right for the politicians: make your country businesses
friendly and a nice place to live and for the companies who move to places
which are more business friendly and better to operate in as tax rate isn't an
issue anymore - everyone sets their consumption tax rates and everyone who
sells there must oblige.

The countries setting their corporate tax to near 0% have the right idea. I
hope they won't be bullied of their position.

~~~
amelius
> This is because taxing profit is a very bad idea.

Wouldn't the same argument hold for _income_ tax then?

I mean, I can evade income tax to a certain extent by making my boss buy me a
nice car, computer, bicycle etc.

~~~
rubber_duck
He can't, if he buys it as company expense then it's not your property.

But yeah same is true for income tax, my country has a really high wage income
tax at top bracket (close to 50% with health&benefits) that kicks in really
fast, but profit income tax caps at 20% because people would just take profits
out of the country if it was higher. so a lot of people work around it by
invoicing their salary as self owned company pay min wage and take the rest as
profit.

~~~
bluecalm
It makes some sense because wages come with a lot of benefits guaranteed by
labor law while self employed people take a lot of risks but in general I see
progressive taxes as a bad idea inviting scams. It's better to tax consumption
of luxury goods at higher rate and/or use more tax revenue to fund social
services mainly poorer people use.

------
0xfaded
Apple and Facebook are currently building massive datacentres in Denmark, and
Google has bought two plots for future datacentres.

They have definitely been wooed to denmark, labour and consumer electricity
prices are some of the highest in the world.

[https://facebook.com/OdenseDataCenter/](https://facebook.com/OdenseDataCenter/)

[https://www.reuters.com/article/us-apple-denmark/apple-to-
bu...](https://www.reuters.com/article/us-apple-denmark/apple-to-build-second-
renewables-powered-data-center-in-denmark-idUSKBN19V0MJ)

[https://stateofgreen.com/en/partners/state-of-
green/news/goo...](https://stateofgreen.com/en/partners/state-of-
green/news/google-invests-in-second-data-centre-location-in-denmark/)

~~~
shaki-dora
I doubt that some data centers make much of a difference. Those tend to be
employ maybe two cleaners, one depressed robot and one or two jaded
administrators, plus their pot dealer.

They also don't buy anything locally, except electricity at negotiated prices
close to or below the costs of production. Maybe they lead to some
earnings/profits to be at their location? Considering the issue discussed
here, I doubt that.

~~~
barrystaes
> Those tend to be employ maybe two cleaners, one depressed robot and one or
> two jaded administrators, plus their pot dealer.

You just wrote the plot to The New IT Crowd..

------
7000skeletons
I didn't even need to click the link to know that Ireland was gonna be one of
the three.

It's like they have a vested interest, or something.

~~~
Lio
Yes they're an obvious one. I was surprised though that Luxembourg wasn't
listed whist Sweden and Denmark are.

I'd be interested to here their objects if anyone can point at a fuller
article or discussion of the issues.

~~~
7000skeletons
This is from earlier this year, so the debate may have progressed since then,
but Sweden and Denmarks' concerns seem to stem from the way in which the EU
aims to apply the tax.

>“A digital services tax deviates from fundamental principles of income
taxation by applying the tax on gross income, i.e. without regard to whether
the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena
Andersson, and her counterparts from Denmark and Finland, Kristian Jensen and
Petteri Orpo, said in a joint statement on Friday.

[https://www.reuters.com/article/us-eu-digital-tax/nordic-
cou...](https://www.reuters.com/article/us-eu-digital-tax/nordic-countries-
oppose-eu-plans-for-digital-tax-on-firms-turnover-idUSKCN1IW337)

~~~
mabbo
It's an intriguing concept.

What effect would a tax purely on size (income rather than profit) have on the
world economy, if everyone were to adopt such policies? It would discourage
large companies and encourage small ones.

It seems like employees do better when there is a bigger and more diverse
marketplace for work, ie, many smaller companies. So they would win out,
hopefully.

Customers may or may not do better. It would encourage companies to keep
prices low to reduce gross income, and give an advantage to incumbents in the
same marketplace. But one Amazon with it's fulfillment centers, delivery
networks, etc, is more efficient than two overlapping half-sized Amazons.
Twice the delivery trucks means twice the delivery costs and pollution.

Overall I'd be for such a system, provided it were not too onerous and didn't
target specific companies.

~~~
stickfigure
It would not select against size. It would select against low margins.

Google and Apple would be fine. Amazon would be toast. Your local supermarket
would be toast (avg grocery store margins are 1%). Any startups that are just
scraping by, no matter how small, would be toast.

You would basically crank up the difficulty level of business across the
board. This would generally help successful incumbents by making life
punishingly difficult for challengers, who have to climb up through a period
of unprofitability.

It is a terrible idea.

~~~
yxhuvud
Supermarkets would just raise the prices though. It is not as if people can
choose not to buy food.

------
ckastner
The article doesn't say why Denmark, Ireland and Sweden opposed, but from a
referenced article [1]:

> _Spearheaded by France, the plan has met resistance from countries such as
> Ireland and Sweden, which question the wisdom of the EU going it alone given
> the global nature of digital services._

First, not all services are digital, especially not Amazon packages.

Second, the "global nature" is a technological aspect. The corporations
themselves are local to some jurisdiction, as are their clients.

This argument is similar to computing in the "Cloud": Technologically, the
_service_ is perhaps global, but the physical manifestation of it certainly
isn't. That data center is located somewhere, and when it goes down, one is
reminded of the limitations of the "global" aspect.

[1] [https://www.bloomberg.com/news/articles/2018-11-05/eu-s-
divi...](https://www.bloomberg.com/news/articles/2018-11-05/eu-s-divisive-
plan-to-tax-facebook-amazon-returns-to-spotlight)

~~~
logifail
>> The corporations themselves are local to some jurisdiction, as are their
clients

My latest invoice from AMZN says "Sold by Amazon EU S.à r.l., UK Branch".
Amazon EU S.à.r.l. is based in Luxembourg.

My order was one (single) LTO cleaning cartridge. Does anyone here think that
cartridge even went anywhere _near_ Luxembourg at any point between
manufacture and reaching me?

I doubt it.

------
adamlett
Please correct me if I’m wrong, but isn’t the sole reason multinational
corporations can avoid paying taxes, that they “have to” pay surprisingly
large royalties to some sister company in a tax haven that “owns” all the
rights to the mother company’s trademarks and other IP? Isn’t this the reason
that a company like Google mysteriously isn’t able to turn a profit in most
European countries? And if I’m right, couldn’t we make _that_ illegal?
Couldn’t we for instance require a company to prove that the IP it licenses is
owned by someone who is not controlled by the same entity that it is itself
controlled by?

~~~
tananaev
But they should be able to pay something to sister or parent company because
they actually use the software developed there. The question is how much.
Probably not all of the profits. I guess it's really hard to determine and
define strict and fair rules in this area.

~~~
MagnumOpus
It is rather likely that the intellectual property for the google or Starbucks
brand or the work that led to Pfizer patents etc were not developed in
Bermuda, Bahamas or Panama. It’s hard to exactly apportion where but rather
easy to point out that near-zero IP work was done where it was declared to be
taxable.

------
xps
I feel that if that law was to pass, the affected companies would simply add
that 3% tax to the prices European consumers pay, especially since this is a
tax on the revenue and not on profit.

It's not like US tech giants have much competition to fear from European
companies anyway. A 3% price increase isn't going to get anyone to switch to
another service (except maybe in the case of Amazon's physical sales).

In the end, consumers would pay and this would add to the already large price
difference between the EU and the US, due to the much higher applicable VAT in
the EU, as well as other similar taxes applied in some EU countries (private
copying levy [0], eco-participation [1]...).

[0]
[https://en.wikipedia.org/wiki/Private_copying_levy](https://en.wikipedia.org/wiki/Private_copying_levy)

[1] [https://fr.wikipedia.org/wiki/Éco-
participation](https://fr.wikipedia.org/wiki/Éco-participation)

~~~
Natela
But what is this price we pay for FB and Google services ? 3% increase on 0€
is still 0€.

We don't pay for Google with money but with our privacy. I'm perfectly fine
with making my privacy more expensive to buy for Google.

------
mrleiter
It‘s interesting to note, albeit probably being irrelevant here, that both
Sweden and Denmark are not in the monetary union (Euro) and have certain
priviliges in certain areas of EU law (like the UK has).

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

~~~
jpdus
Its relatively easy. All the big tech crops are paying effectively below 1% of
their profits in Europe and are moving almost all of their profits to tax
havens. As these companies are very creative when measuring their localized
profits, its easier and more fair to impose a tax at the revenue level.

I don't understand all the negative comments here. Look at the big profit
margins of all big tech companies (maybe with the exception of Amazon retail)
and ask yourself whether a moderate, unavoidable tax is really unjustified or
will have negative effects on anyone (except maybe the shareholders). I don't
think so and in my opinion tech workers should be a bit more mindful when
thinking about these taxation topics. I prefer paying high taxes strongly to
further social segregation, which will lead to the development of civil unrest
and lower quality of life for everyone sooner or later...

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

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

------
simonebrunozzi
Can we change the title to "Denmark, Ireland and Sweden block Tax on tech
giants" ?

------
discordianfish
I didn't follow this particular solution to taxing tech companies as much as I
probably should have, but I feel like it's not addressing the root problem.
Wouldn't it make more sense to tax the revenue where it was earned (as oppose
to the physical location of the european HQ)?

------
ThomPete
Denmark is a taxhaven in its own sense for holding companies which might be
surprising to many. The country primarily tax income not companies and have a
high (deductible for companies) sales tax.

~~~
ElBarto
The Danish corporate tax rate is within the EU average.

~~~
ThomPete
Yes but it's not where Denmark make their money. I am talking about holdning
companies.

------
_Codemonkeyism
1\. I knew Ireland was on the list without reading the article

2\. Sweden is lobbied by Spotify

3\. Denmark tries to attract Google.

Cui bono.

~~~
kryptiskt
Sweden has a successful tech economy and doesn't want to be held back by
lumbering continental countries and their fears.

~~~
_Codemonkeyism
Yes, every other country would do the same, but it does explain Sweden on list
which was my intention.

This tone

"lumbering continental countries"

wasn't called for though. Could we be civilized here without insults and hate?

------
lordnacho
I wonder if the placement of data centres has much to do with it?

There's a bunch being built or in the pipeline at least in Denmark.

~~~
8fingerlouie
There are 2 Apple data centers being built in Denmark, and rumors of Google
and Facebook ones as well.

As for the rejection of the tax, i honestly think it has more to do with
avoiding double taxation.

Company taxes are at 22% in Denmark.

Denmark already collects 25% VAT on everything sold. If a 3% tax was to be
imposed on "tech giants", it would ultimately end up being passed on to the
consumer, effectively increasing retail price by 3% or more (depending if it's
calculated as cost+28% or cost+3%+25%)

In the end it fails to accomplish the goal of forcing companies to pay local
taxes instead of transferring them to wherever they can pay the least taxes,
and instead drives up sale price and ultimately inflation.

~~~
C1sc0cat
Its a revenue tax not a sales tax - easier to enforce and less problematic
legally than forcing profits to be booked locally.

and its not clear how paying taxes on local profit would have any more effect
on consumers than taxing revenue

------
snidane
You're never gonna implement an income based tax system which would be fair to
both corporations and employees. Corporations are currently taxed on profit,
while employees on 'revenues'. So to make it fair you would:

1\. tax corporations on revenue too. Which this thread is about 2\. tax
employees on profit. Food, gas, utilities, ... - these are basically cost of
operation of a human being, aren't they?

Income taxes will never work. Monopoly taxes are a solution though. Monopolies
behave as money sinks in economy. Their prices are not competed down, so you
can't talk about monopolized system as capitalistic. The more monopolies and
wealth concentration you get the more you approach something like feudalism.
Which is where we are heading as a civilization right now.

Monopolies are usually created and maintained by heavy regulation, because you
don't allow small projects to challenge them. Also monopolies influence
regulation in such a way to make it so.

So why not embrace monopolies, but tax them for the service of letting them be
monopolies? You can then even not call it tax, but a pay-per-use license
granting certain social privileges. Perfectly progressive tax. The more you
use, the more you pay.

~~~
zhengyi13
If any given org is a monopoly, I'd fully expect that org to pass any new
costs on directly to their captive consumers. Monopolies ought to be actively
broken, not worked around.

~~~
snidane
Good point, but it is wrong. That applies to sales taxes. Not to monopoly
taxes.

In well functioning market with many competitors, the price of good would be
determined as costs + margin. Over time given enough competition the price
should converge to that sustainable minimum basically. If you introduce sales
taxes into the equation, then obviously you hike up the cost, therefore you
shift this minimum.

Monopoly goods prices are not determined by cost, because there is no
competition which would make it go lower over time. Monopoly prices on the
other hand have opposite tendency - ie. to maximize to the point where almost
all disposable income of its customers gets eaten up.

That's why you get the phenomenon of rents being ever so higher. They just
catch up to increases in wages and eat it all away. There is no sufficient
competition to compete the price away, simply because there is not enough land
to house the people, especially in cities.

House rents are the biggest of the monopolies, because everyone has to pay it
and often it is significant portion of a paycheck.

Back to the point. Introducing monopoly taxes has the exact opposite effect -
it lowers the prices for consumers.

Explained further here [http://blog.lvrg.org.au/2011/08/why-land-tax-cant-be-
shifted...](http://blog.lvrg.org.au/2011/08/why-land-tax-cant-be-shifted-
onto.html)

------
qaq
I think people forget this cuts both ways there is trade imbalance between US
and France in France's favor so if both sides apply similar measures it will
be net loss for France. I am sure this is something politicians forget to
mention.

------
residentfoam
This is one of the reasons EU is never gonna fly. Countries like Ireland are
allowed to offer lower corporate taxation but still benefiting of the EU
common market. No wonder why most companies have/move their tax domicile in
these countries (like Nederland). This is unfair competition and EU should
stop this s*t show. Businesses should be taxed based on where the revenue is
generated and not where their tax domicile is placed.

~~~
purple_ducks
> This is one of the reasons EU is never gonna fly.

You mean a single market???

> Businesses should be taxed based on where the revenue is generated and not
> where their tax domicile is placed.

How would that make sense? If a product is built & sold in country X to a
person in country Y, then only sales tax is paid to country Y. Revenue goes
back to country Y to cover the costs and then tax is paid on what remains.
That's like one of the fundamental things tying EU together.

------
divbyzer0
The EU was strongly against any trade tariffs.

What differentiates this 'tax' from a tariff?

~~~
themihai
Everybody pays tax. The issue is that some companies avoid paying it in the
EU, basically stealing from the EU citizens.

The difference between the taxes and tariffs is that the tariffs target a
specific country while the tax is same for everyone (working in a specific
industry).

Tech companies seems to be the most notorious tax evaders so this was just a
push to make them pay a fair share of tax in the EU.

>> Traditional tax systems have so far failed to capture revenue from
companies with global reach but limited physical presence

~~~
divbyzer0
I agree that tech companies do not pay their fair share of tax.

But this is an EU tariff against US companies. Will any EU company be
affected?

~~~
freeflight
If they are making similar use of tax evasion techniques then, yes [0].

Too many people here act like this is something specifically aimed at US
companies, when in reality it's not. US companies just happen to be affected
the most by it due to their dominance in this particular business sector.

But this is something that has been long overdue and was bound to happen
regardless of who was dominating that sector.

[0]
[https://ec.europa.eu/taxation_customs/sites/taxation/files/p...](https://ec.europa.eu/taxation_customs/sites/taxation/files/proposal_significant_digital_presence_21032018_en.pdf)

~~~
cyphar
It's aimed at companies incorporated in the EU. If a US company decided to
incorporate a subsidiary in the EU to get tax breaks and other benefits, then
it makes little sense (to me, at least) to complain about US companies being
targeted. Some US companies specifically decided to structure themselves to be
EU companies in name (and tax status) -- so from a practical perspective they
are EU companies. You can't have it both ways.

(Not to mention this will affect companies like SAP and Spotify, which are
real EU companies.)

------
polskibus
I wonder what are the reasons opposing countries gave.

------
wimgz
A smart move would be a corporate tax at the European Union level

------
gaius
A company that leverages the favourable infrastructure and institutions of a
country without paying its fair share is quite simply siphoning money from the
taxpayers of that country into the pockets of its shareholders, the money that
maintains that infra and those institutions. Politicians need to take a step
back and realize that whatever jobs these companies bring, they are still a
net loss to the country as a whole, the country would literally be better off
if those people were unemployed!

~~~
antidesitter
> whatever jobs these companies bring, they are still a net loss to the
> country as a whole, the country would literally be better off if those
> people were unemployed!

That’s quite the claim. Got _anything_ to back it up?

~~~
gaius
_That’s quite the claim. Got anything to back it up?_

Pretty easy really. Multiply the cost of unemployment benefits * number of
company employees in that country. Then look at the tax evaded by the company.
"You do the math".

JSA in the UK is £73/week, or £3796/year. Let's say a company dodges £1Bn/year
in taxes. How many people would they need to employ before the country breaks
even?

~~~
antidesitter
Uh, what? Stop being vague and describe exactly what you mean.

Response to edit: Please describe the _full_ calculation (with _factual_
numbers) of "national wealth", and then we'll talk.

~~~
gaius
LOL if you wish to disprove me do your own research! But I'll give you a hint,
if tax evasion was good for a country, why would that country have taxes at
all...?

~~~
antidesitter
> LOL if you wish to disprove me do your own research!

That's not how burden of proof works. You made the claim that "the country
would literally be better off if those people were unemployed!", so prove it.

> But I'll give you a hint, if tax evasion was good for a country, why would
> that country have taxes at all...?

A "hint" is not what's required here.

------
swarnie_
When one country can hold up the progress of the entire 27 member bloc because
of their own self-interests the project looks very weak.

~~~
raverbashing
Oh you mean the EU is not an authoritarian nightmare that just imposes their
will on unsuspecting member states as some are lead to believe?

~~~
growlist
Ask the Greeks how it's working out for them

