
Europeans vow to pursue digital tax plans after US “provocation” - Xoltus
https://arstechnica.com/tech-policy/2020/06/europeans-vow-to-pursue-digital-tax-plans-after-us-provocation/
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laser
From a purely national interest standpoint, it's hardly surprising the US
would be uninterested in negotiations given the fact it's the global digital
products leader. While it's certainly true some such rules are worthwhile at
the minimum tax level to stop global mega-corps avoiding taxes, like the old
Double Irish loophole [1], the negotiations didn't break down over such
provision, as the article mentions.

The negotiations broke down because the Europeans have failed to develop as
successful a digital economy and run a large digital economic deficit with the
United States. They want to levy a tax against an American import to help this
trade imbalance, while claiming it doesn't amount to a trade tariff. Given the
amount of economic value at stake, of course the Americans are going to view
it as an unjust trade tariff and fight against it, while the Europeans will
view it as a fair and justified tax for value captured in their domestic
market. The global minimum tax has mutual agreement, however, so don't use
that to distract or straw-man non-existent disagreement, avoiding the real and
essentially intrinsically zero-sum crux of the disagreement here.

[1]
[https://en.wikipedia.org/wiki/Double_Irish_arrangement](https://en.wikipedia.org/wiki/Double_Irish_arrangement)

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Mirioron
The worst part about taxes like this is that they make it even harder for
Europe to ever catch up. Taxes like this will make Europe a less attractive
location for a business like that. Investors will be less likely to invest,
there's a greater regulatory burden for anyone who does want to start the
business, and you will and up paying more in taxes.

~~~
0xfaded
Europe has VAT, which from a simplified perspective means that businesses
don't directly pay any consumption tax, but have to charge VAT on the value of
the goods and services sold to consumers.

So for purchases within Europe, the end consumer is already paying a 25% tax
on the digital services provided by google.

But for good and services sold outside the EU, and remember that Europe have
export driven philosophies, there is essentially no government revenue from
foreign digital services.

Europe deserves compensation for buying American digital services in the same
way America deserves compensation for buying German cars. It doesn't. Instead
it needs to focus on a more competitive business environment where the money
is cycled more times through the economy before ultimately making it's way to
the government.

~~~
hackeraccount
America gets compensation for buying German cars.

Every time I think to myself "Well, at least I'm not a libertarian," I read a
sentence like that and after first getting confused (What does that even
mean?) I then feel sad because I'm pretty sure if I parsed through the logic
it would turn out that I after all more of libertarian than most of the people
I know.

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LatteLazy
I find the fact talks fell through particularly concerning as right now we
should all be presenting a united front against China.

I also think they should call this a digital tax or apply it only to digital
services. I understand that’s where the biggest impact will be felt but a
minimum corporation tax rate shouldn’t depend on business type and I dislike
the idea people are free to target companies for being “too successful”.

~~~
Youden
> I find the fact talks fell through particularly concerning as right now we
> should all be presenting a united front against China.

Honest question: why? Why should Europe unite with the US against China?

I don't mean this as a challenge, I'm not trying to argue either way¸ I'm just
curious about the reasoning behind your statement.

~~~
noir-york
Because China is threatening the global order on which peace and prosperity
lies, starting with the freedom of the seas.

China is already harassing and sinking fishing vessels and trying to close the
South China Sea. It may soon try to enforce an ADIZ over the SC Sea as well.
Not great.

China is a growing aggressive power with cyber attacks across a multitude of
countries and is running, like Russia, disinformation campaigns to undermine
democracy.

It is in the interest of EU and the US, and indeed many countries, to have a
rules-based international order. It is increasingly in the interests of the US
as its power is in relative decline.

~~~
NicoJuicy
We all know this, but Europe has no trust in the US under Trump.

How can you not see that they are waiting till trust re-appears.

1 example: If Europe would really partner up, Trump would require Russia to be
in the table ( G7). The current situation is nuts and it's not Europe's fault.

Ps. Trump has no interest in peace and prosperity. Haven't you been paying
attention? The US has never been this divided and the current leader thinks
tweeting is more important.

~~~
noir-york
> How can you not see that they are waiting till trust re-appears.

The EU cannot afford to wait that long. China isn't taking a pause on its
aggression. Indeed, its exploiting the US under Trump, Covid, etc to move
aggressively now.

> The current situation is nuts and it's not Europe's fault.

"fault"? It doesn't have to be your fault if the mess still ends on your lap.
And Europe (and I'm a European) being neighbours with Eurasia doesnt have the
luxury of huge oceans separating it from revanchist powers.

~~~
NicoJuicy
I'm European too.

The thing about democracy is, it's a slow process.

Currently the best thing is to wait till November and China knows that.

They are exploiting the situation, but in contrast. I think the "one road, one
belt" will fail if they continue their exploitive behaviour.

Taiwan is not an easy topic right now, because it's a bit too early. Since
Western democracy under Trump is not United :(

As soon as we can, harder measures should be employed.

~~~
noir-york
Trump is a moron - threatening to withdraw US troops out of Germany is a gift
to Russia.

But the EU cannot wait for Trump to go away because if he wins reelection that
could be 5 years away. We don't have that time. The EU needs to work with what
its got - work with India, Australia, PacRim countries.

The problem is that the EU is itself split with different interests. Someone
has to provide leadership. The US president is the natural option but Trump
has not stepped up. Someone else needs to - it cannot be Merkel as she's
stepping down soon, but we urgently need leadership on the issue.

~~~
NicoJuicy
The only sane option currently would be to exclude Trump.

But that would cause additional problems because of his ego and childish
behaviour. So the best thing currently, is still too wait. It will happen if
Trump gets re-elected.

It's not easy for someone new to step-up immediately as the so-called leader
of Western democracy.

We all know that Obama and Merkel were potentials/it and Trump isn't. We'll c.

Ps. I think the current/best move to counter China already started. But it
seems to bit below the radar currently.

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knolax
More economic saber-rattling. We need less of this jingoist bull.

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dantheman
It's insane that they want to propose a global minimum corporate tax.

~~~
pjc50
On the contrary, it's _necessary_ if corporations can operate internationally
and transfer money untaxably between jurisdictions, otherwise the global
effective tax rate _is_ that of the lowest country.

~~~
smabie
What's wrong with that? Countries need to compete just like corporations.
Small countries need someway to compete for global talent, and low taxes are a
good incentive.

~~~
endymi0n
I would be even siding with you slightly if this amounted to actually moving
people, facilities and capital to that country.

However, in the modern world, corporations don't just use low taxes to simply
route massive amounts of capital through low-tax countries without a net
benefit for anyone — they are actually exploiting tax loopholes in different
countries' tax laws against each other.

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

If Google actually used your machine to port scan and automatically exploit
other computers, would you be enraged?

Well, that's exactly what their black hat tax lawyers were doing on the
financial side:

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

~~~
humanrebar
If it doesn't benefit the Dutch, they would (and I understand they have at
least attempted to) close the loopholes. For instance, they could require more
presence in the country in particular ways: physically, employed citizens,
cash in banks, taxes paid, etc.

If the beneficiaries are bribed individuals in various governments, that would
be another thing entirely.

