
Czech Republic proposes the highest digital tax rate in Europe - mlinksva
https://www.bloomberg.com/opinion/articles/2019-05-03/the-czech-republic-s-new-digital-tax-is-the-right-approach
======
bartimus
We can do this in Europe because we are great at killing innovation through
our taxes and regulations. This way we can safely tax innovative tech giants
without hurting our own tech giants. Because they don't exist here.

We don't like that thing that you do. So we'll just apply taxes and let you
continue doing the thing we don't like you to do.

~~~
point78
As opposed to the billions tech giants dodge taxes

~~~
evanriley
Surely there is a balance between overly taxing and letting them get away
without paying them?

~~~
sasasassy
I'm guessing a 2-7% tax is on the low side of such balance.

~~~
JumpCrisscross
> _2-7% tax is on the low side of such balance_

A 7% tax on revenues is a 50% tax on a business with a 14% margin. It's even
more damaging when one considers start-ups, who run negative profits in their
early years. (Seven percent is thus eleven months of runway in the Czech
Republic for every 12 months a German competitor gets.)

Seven percent is generally prohibitive to low-gross margin business, _e.g._
any tech company producing physical devices or doing anything next to retail.
It thus compresses an economy's accessible tech sector to enterprise
businesses.

If these taxes remain confined to ad-driven businesses, that's a fair
tradeoff. But given Europe's penchant for over-encroachment, it could very
easily be over-applied.

TL; DR Top-line taxes transfer wealth to high-margin businesses over low-
margin businesses and from start-ups to incumbents.

------
protomyth
_Intermediary platforms such as Airbnb and Uber exacerbate cities’ housing
problems and weaken worker protections._

Its interesting that this line has no support and just treated as fact for
this article. Is there a source to explain the reasoning?

~~~
sokoloff
Full time AirBnB rentals almost certainly exacerbate any housing shortages
that might exist. A tourist in general is willing to pay _far_ more (maybe
5-10x) per night of temporary lodging than a resident is willing/able to pay
for 365 days per year. This is especially true in beautiful but inexpensive,
tourist magnet cities like Prague, Vienna, Budapest, and the like.

Taking otherwise available rentals off the full-time rental market and moving
the "up" the economic return ladder to AirBnB rentals makes the housing
situation tighter for residents and would-be residents.

(I'm a happy user of AirBnB platform and am "OK" with the conversion of real
estate to its highest and best use, but I understand the opposition argument
and think it has some merit.)

~~~
ShorsHammer
Airbnb is highlighting a zoning problem that governments are unwilling to
admit to themselves. Sublets and short term rentals existed long before before
and most cities on Earth didn't care, but once a frictionless platform came
along it suddenly was a problem.

My landlord kicked us out to run an airbnb fulltime after seeing how much a
neighbour was earning. (Around New Years /Christmas you could easily bring in
2 months rent). Despite all this I hold no illwill towards Airbnb.

If any other basic need was chronically undersupplied due to government
inaction people tend to riot, yet somehow housing gets a free pass.

~~~
hapless
It's not a "zoning problem." It's much simpler than that.

* Airbnb flophouses are not obliged to conform to fire, health, or safety codes, and they don't pay taxes. Right off the bat, they're scads cheaper than hotels because they don't bear those costs.

* Visitors and residents have very different incentives. Tourists may wish to stay in cute residential areas, but they are not necessarily interested in being neighborly -- they're not particularly invested in the comfort and safety of the people around them, because they'll be leaving soon.

* People do a lot of gross stuff in a hotel that you probably don't want to encounter in your apartment building. Drugs, prostitution, loud parties.

No amount of "zoning" is going to make the commingling of apartments and
hotels attractive to full-time residents, nor will any change in "zoning" make
flophouses less profitable.

~~~
manfredo
> Airbnb flophouses are not obliged to conform to fire, health, or safety
> codes, and they don't pay taxes. Right off the bat, they're scads cheaper
> than hotels because they don't bear those costs.

Because Airbnbs aren't flophouses. They're holding usually just a couple or
family, maybe a dozen people tops unless the place being rented is a really
big detached house. Expecting them to be held to the same standards as hotels
is not necessary. If this lack of compliance is so dangerous, then why are
letting people live in these places full time?

> Visitors and residents have very different incentives. Tourists may wish to
> stay in cute residential areas, but they are not necessarily interested in
> being neighborly -- they're not particularly invested in the comfort and
> safety of the people around them, because they'll be leaving soon.

Tourists also spend more money while on vacation, especially on small
businesses like restaurants and bars. More importantly, they bring this money
in externally. More tourism attracts the ire of residents that now have to
deal with out-of-town people walking around their neighborhood, but I have
rarely seen someone complain about negative economic impact of tourism let
alone make a coherent argument about why it's bad.

> People do a lot of gross stuff in a hotel that you probably don't want to
> encounter in your apartment building. Drugs, prostitution, loud parties.

Plenty of people do these things in their apartments, condos, and houses, too.

> No amount of "zoning" is going to make the commingling of apartments and
> hotels attractive to full-time residents, nor will any change in "zoning"
> make flophouses less profitable.

Tourists generally don't want to visit residential areas. Airbnb-ing instead
of renting a hotel is usually less convenient because the former are further
from the city center. When I used an Airbnb in Iceland it was more of a hassle
because I effectively needed to rent a car (and then subsequently park a car)
to get to the center of the city. It was worth it because of cost. If there
were hotel rooms available at the same cost of Airbnb then I would have used
that.

However, the number of hotels is usually kept artificially limited. This
drives up the cost of renting hotel rooms, which benefits hoteliers. This is
the main reason why Airbnb is so much cheaper than hotels. Hoteliers don't
want to build more hotels because that would drive their costs down and their
expenses up.

~~~
UnFleshedOne
> More tourism attracts the ire of residents that now have to deal with out-
> of-town people walking around their neighborhood, but I have rarely seen
> someone complain about negative economic impact of tourism let alone make a
> coherent argument about why it's bad.

Tourism is an economic curse similar to the curse of resources. It makes most
unrelated economic activity less viable.

~~~
manfredo
> Tourism is an economic curse similar to the curse of resources. It makes
> most unrelated economic activity less viable.

Got any source to back up this claim? Plenty of regions with strong tourism
industries have other viable industries. San Francisco, LA, and New York are
all heavy tourist destinations but no reasonable person would say that this
tourism has made unrelated economic activity less viable. Same with London and
Paris. Large tourism industry, but plenty of other industries.

It may be true that as other economic opportunities are exhausted, communities
try to use tourism to bring in money to the community (e.g. Leavenwoth, WA
[https://en.wikipedia.org/wiki/Leavenworth,_Washington](https://en.wikipedia.org/wiki/Leavenworth,_Washington)).
Underdeveloped countries that don't have the ability to participate in many
industries lean on tourism more heavily (especially eco-tourism since the lack
of development is actually an asset for that industry) which makes tourism
take up a larger proportion of their GDP.

But I am highly skeptical of your claim of a causal link between growth of
tourism and inability to sustain other industries.

~~~
sokoloff
I don't know that it's a negative overall, but in general the most
economically lucrative sector of commerce in an area does tend to out-compete
the others. Much of Silicon Valley used to be farmland. Tech surely disrupted
and ejected many farming uses of that land. Gambling disrupted the previously
sleepy area of Las Vegas. Disney disrupted parts of Orlando. The auto industry
disrupted much of Detroit.

I think it's generally a good thing overall, but if I were a buggy whip
manufacturer around Detroit in 1920, I wasn't as happy with my lot in life 20
years later...

------
hevi_jos
"It has helped malicious actors during the 2016 U.S. presidential election and
the Brexit referendum, arguably helping to subvert democratic institutions."

Wow, it seems clear to me that some people only respect democracy when they
win. I don't like Brexit but if people in UK vote for it, let them be.

The malicious actors and those that try to subvert democracy are the
billionaires that buy Media in order to propagate lies that at the current
time remain unproven.

A tax on absolute income is a very dangerous thing in any gobertment. But we
already have it, with inflation.

------
halukakin
I think they should raise it to 30%. Any given country provides a much better
platform to these companies compared to what google play provides to app
publishers.

------
tracer4201
Why single out Google and FB or tech in general? Is the belief that these
companies pay less taxes than non tech companies? I don’t have the breadth nor
depth on this topic, just wanting to learn.

~~~
tootahe45
Because politicians attack things perceived as bad by the public. If there's a
time to implement such a tax it's after a year of sensationalist (and largely
fake) news about FB and Google, from exaggerated data breaches to helping
terrorists.

~~~
Fnoord
I don't know about (any) Google data breaches but the Facebook data breaches
are neither fake nor sensationalist.

~~~
tracer4201
I agree but taxation and data breaches are orthogonal. To be clear, I’m not
defending their practices (or lack of security).

------
scrape_it
This reminds me of the Estonian business startup thing that BBC covered, has
anyone actually used this to a success?

What would be the point of starting a business in countries like Czech and
Estonia vs the US?

~~~
atlasunshrugged
Do you mean e-residency
([https://e-resident.gov.ee/](https://e-resident.gov.ee/))? I work there,
happy to answer questions if you have them. The value of starting a business
in Estonia vs. elsewhere depends on a number of factors - we mainly focus on
folks from outside the EU (or citizens of the EU but living outside it) who
want an EU based company they can run remotely in English which is tough in
some jurisdictions

~~~
scrape_it
Ah yes! Pleasantly surprised you'd follow up on here.

Does Estonia offer any anonymity through its e-residency program?

A lot of us have stereotypes towards EU regulations as being restrictive,
wonder if you could address this one glaring fear in the back of our minds
(ex. GPDR).

What should folks on HN know a thing or two about Estonia? I've literally only
heard of the country 4 years ago when I played Arma: Cold War with an Estonian
gamer, which ironically is a military simulation of gorilla warfare against a
USSR invasion of the Baltics..... (see OF: Resistance)

~~~
atlasunshrugged
Haha I'm a big HN reader so I was happy to jump in :) Sorry for the delay, I'm
actually on vacation back home (I'm an American from SF)

It depends what you mean by anonymity - if you're just an e-Resident (eg.
you've applied for the status and gotten the card) then it's not public to
anyone except you and the Estonian government. If you open a business however,
then there is a large amount of transparency. Estonia is very very
transparent, I can even see things like the age of the owner of a company if
I'm so inclined to look it up.

To be honest, I haven't seen much in terms of restrictive policy in Estonia
specifically with the exception of banking - Estonia is a small country of
just 1.3m and most of the banks are foreign owned. That means there's not much
sway we have domestically over policy and it's dictated from outside (mainly
from the parent banks in the Nordics) and it can be tough to open a bank
account as a foreigner if you don't have strong ties to Estonia. That said,
this is getting tighter just about everywhere as banks try to comply with Know
Your Customer regulations (however, my impression is that this is mainly
brought on by the US rather than the EU and banks are so stringent because
they don't want to lose their US dollar payment capabilities from
correspondent banks)

There are a lot of interesting things about Estonia - I'll skip the Googleable
things and say that from living there the most interesting thing is on one
side how closed and yet how open the people are. To give an example, in my
apartment complex I don't believe I ever spoke one word to any of my neighbors
in a year, but for the people I met via some group activity or was introed by
Estonians I knew from work, they are incredibly open and friendly (basically
if you don't have a reason to speak with an Estonian they think you're
incredibly strange if you try to initiate a conversation, but if there's a
reason, they're very friendly people). The other really interesting thing I've
found is the Russian/Estonian dynamic. There's still a large Russian minority
of people in Estonia from the Soviet days and some communities are not
integrated at all, there are constant political debates about forcing schools
to only teach in Estonian (there are currently ones that have all Russian
courses). So you have a situation where there are people born and raised in
Estonia but who don't speak the language and live pretty much only in Russian
communities and have a different worldview of many Estonians.

------
cle
> The potential disparity between the value of personal data and what users
> receive in return creates space for governments to seek reimbursement on
> society’s behalf.

Is there a way to leverage competition to reduce this disparity instead of
taxation? If there were proper competition, would there be a disparity?

~~~
save_ferris
The problem here isn't a lack of competition.

This happens because tech companies are well-equipped to siphon user data at
massive scale and have been given the luxury of embedding these services into
our daily lives without sufficiently educating the public around their
business models. Ultimately, the public has very little control over what
these companies do with this data, so there's a perverse mismatch of
incentives here.

Tech companies are incentivized to collect user data and not explain how it's
used. Tech companies are incentivized to pay lobbyists to discourage the
government from placing a market value on data. The public doesn't have that
kind of lobbying influence.

~~~
cle
> Ultimately, the public has very little control over what these companies do
> with this data, so there's a perverse mismatch of incentives here.

That's what I'm getting at.

See for example: [https://stratechery.com/2016/antitrust-and-
aggregation/](https://stratechery.com/2016/antitrust-and-aggregation/)

------
muckrakerz
Once again the former eastern block is implementing smart reforms that are
pro-market and anti-globalist.

~~~
bduerst
How is increased taxation pro-market?

~~~
rvp-x
At least for my own country, if you buy advertising from Google, you pay 0%
VAT because it's not a local purchase. With a local company there's 18% VAT.
The local companies are starting the competition at a huge disadvantage.

An even playing field is a healthier market, without megacorps that can run at
a loss for decades to crush out any chance competition in a field.

~~~
bduerst
In accordance to Article 44 of EU Council Directive 2006/112/EC, you're
supposed to be reporting your spend with Google and paying VAT taxes on it.

You don't have to pay it right away at the time of purchase, but you _do_ have
to pay it. You might want to talk to your company's accountant...

~~~
miskin
If you do business with VAT registered company from different country, you do
not pay VAT upfront with purchase, but you report it at the end of quarter
(monthly if you are big enough). You will actually never pay this VAT if you
are VAT registered company as you will report it and ask for refund at the
same time. On the the other hand, if you are doing business with local company
you pay VAT with payment for service or goods and ask for refund at the end of
quarter. Long term cost is same, but it blocks your resources (paid VAT) and
it may be difference for some companies.

------
mlinksva
Relatedly [https://www.nytimes.com/2019/05/06/opinion/tax-facebook-
goog...](https://www.nytimes.com/2019/05/06/opinion/tax-facebook-google.html)
[https://paulromer.net/faqs-on-targeted-ads/](https://paulromer.net/faqs-on-
targeted-ads/)

------
mc32
Could SF and other cities like Vanc, BC, Miami, London, etc., levy a
significant tax and use that tax to build affordable or subsidized housing to
counteract pricing out of the affected people.

~~~
gok
The reason construction of affordable housing isn't happening has nothing to
do with those city's lack of revenue.

~~~
mc32
Wouldn’t this be a fairer tax rather than diverting general funds?

~~~
gok
The pricing out of existing residents isn't caused (much) by local taxes
either.

~~~
mc32
So if AB&B are reducing the supply of housing to locals who don’t own, then
this tax could be used to build or subsidize housing costs for those who
because of the reduced inventory and commensurate price increase can’t afford
the housing they were once able to.

~~~
microcolonel
AirBnB is not "reducing the supply", they're increasing the demand. The supply
is limited, both artificially and naturally, and the demand is growing mostly
normally (AirBnB or no).

The local governments get more revenue from high demand (since it increases
assessments), and limited supply, so they generally do not have the right
incentives to make housing affordable. The public is pretty ignorant in these
places, as they should perhaps be allowed to be, so they do not put any
pressure on politicians to stop this gambit.

~~~
mc32
I think that’s two sides of the same coin. If someone’s rent budget meant they
had in theory access to say 10% of the units for rent, but AB&B’s additional
demand means now their budget only puts 5% of the units available within their
range, that effectively reduces their supply (or in other words access).

~~~
microcolonel
> _that effectively reduces their supply_

No, importantly, it does not reduce the supply. If you want to apply terms
like this, pay attention to how they are defined.

Access is not supply, and supply is not access.

There is an immense _supply_ of housing in Vancouver, and as much as is
possible, AirBnB-facilitated demand (although it's really a tiny fraction of
the total demand) puts pressure on the market to _increase_ supply (even if
the circumstances make that unlikely to succeed greatly). Whether people
living in Vancouver are buying their housing through rental agreements,
purchases, or short term rentals like AirBnB, the supply will only tend to
increase (just not enough that some of it is "cheap").

For an example of high supply with poor access, just look at the tremendous
number of low-quality developments across China with few or no legitimate
residents.

------
Shivetya
The way to tax the corporations is to have a minimum base rate they cannot
escape and rules tightened on what qualifies to reduce their rate to that
point.

the value of personal data can only be quantified if you can follow the path
to its eventual sale. If they are not selling it but using to expand their own
presence I have no issue. However buyers should be easy to identify along with
the transaction value.

i just find it odd government and some who don't like what these companies put
so much value into this data when the vast majority really assign it no value.
people willfully give up so much and its not going to change because people
want to be noticed more than they want to notice others

~~~
akvadrako
Base rate of what? The problem is that their profit is artificially low.

~~~
AlexTWithBeard
Why humans have AMT, but corporations don't?

~~~
gok
What? Corporations absolutely have an AMT.

~~~
AlexTWithBeard
Hmm... Looks like you're right.

How do they manage to pay zero taxes then? I thought AMT assumes that once
you're beyond a certain level of income, your lose most deductions and
essentially pay a certain percent of the income.

~~~
knz42
The tax code taxes wins, not revenue.

An org that invests all their margin into growth doesn't pay (as much) tax.

The best way though is to create an offshore subsidiary, and then have the
subsidiary invoice the main office for "services" or "IP licensing". The
invoice becomes a cost and is deducted from revenue. "Everyone" (all the big
players) do things like that. It's 100% legal.

------
topicseed
Targeted advertising is not the only or even main space in which global giants
avoid taxes. So not sure why such a focus on FB and Google.

~~~
rafiki6
Selection bias. HN community tends towards disliking Google/FB, and will tend
to show articles that target those kinds of tech giants.

In all honesty, they do have monopolies and it seems that the same type of
anti-trust enforcement that was used to help Apple/Google in the browser war
against Microsoft just isn't there anymore. Now Google/FB really do have a
monopoly on user data.

I think properly regulating instead of just taxing is more useful.

~~~
llukas
> HN community tends towards disliking Google/FB

HN community also understands better Google/FB business model and what
actually happens with their data when fed into Google/FB.

------
_mikz
It is important to know, that our ruling party is a populist left wing all the
time promising one. So whatever might be proposed might not have enough push
to be implemented.

------
ed_balls
I have a feeling that this won't work. The only robust way to implement fair
tax is to tax corporation 1%, but everyone in EEA has to do it. I know that
taxing revenue is not optimal, but how much money corporations spend on gov
audits, accounting what is profit and what is cost etc.

~~~
ed_balls
I'd appreciate a reason why I was downvoted.

