
Spain planning on going ahead with ‘Google tax’ despite US tariff threats - melenaboija
https://elpais.com/elpais/2019/12/04/inenglish/1575463947_590283.html
======
tim333
I'm not sure of the details of Spain's proposal but something needs to be done
really to make taxation more fair. At the moment you get headlines like
"Facebook paid just £28m tax after record £1.6bn revenues in UK" because they
fiddle it with offshore tax havens while normal UK businesses have to pay more
like 30% of their income in tax, not 1.7%.

~~~
thu2111
_normal UK businesses have to pay more like 30% of their income in tax_

UK corporation tax rate is 19%.

USA corporation tax rate is 21%. Pushed down partly due to low tax competition
from the rest of the world, i.e. places like the UK.

Facebook pay little corporation tax in the UK because it isn't a British
company. It's an American company. It was created in America. Most of its
employees are there. Its headquarters are there.

The EU works the same way. Corporate taxes are levied where the company is
headquartered. It's arbitrary but all other ways to try and divvy up something
inherently multi-national are even more arbitrary.

I am British myself and I really don't understand why my fellow Brits have
such a hard time understanding this - foreign companies pay little UK tax on
profits _because they are foreign_. They were _not made in Britain_. If
Facebook had been formed in the UK then for sure, most of its corporation tax
would be paid to the Exchequer. But unfortunately it wasn't.

~~~
bb123
I'm sorry if this is a misunderstanding but I thought you pay tax where you do
business. So Facebook should be tax on profits generated in the UK - but they
play with their corporate structures to make it look like they aren't actually
doing any trade here.

~~~
ericmay
A couple of points:

1) If you pay tax where you do business do you pay tax on global profits
there? For example, France’s new law taxes 3% of global revenue if you do more
than €28m in business in the country. Should it be taxed on 3% of global
revenue or on the exact amount of business it does in France?

2) If BMW sells a car in the US, do we tax BMW global for doing business in
the US at the 21% tax rate?

“ The levy designed by Spain included a tax rate of 3%, which would be applied
to certain digital services from tech giants whose global revenues exceed €750
million and whose earnings in Spain are greater than €3 million.”

So let’s say the US goes back to Europe and says ok Europe, all of your best
industries/companies face a 3% tax if you do more than a million dollars worth
of business. How would those companies react? Think they might press their
governments to do something about it?

I’m not a fan of tax-avoidance or anything, but I hardly think this proposed
solution is fair, or won’t elicit a significant response from the US. It’s
protectionism - so call it that and make sure you are railing against the
internet about it like you do when Trump does random tariffs.

Spain doesn’t export a lot to the US maybe? Ok then the US can just pick and
choose Eurozone members to arbitrarily tax. That’s what I’d do. 15% tax on
global revenue for European cars sold in the US. Why not?

~~~
antaviana
Regarding 1), it is a 3% on France revenue, not global revenue.

------
nabla9
These are patchwork solutions.

It would make more sense if EU countries would make laws that extend normal
VAT to all internet business in EU and close all Irish loopholes. Google and
others use Irish tax arrangement schemes like "The Double Irish" (base erosion
and profit shifting), the Single Malt, and CAIA to avoid paying taxes.

12 EU states reject move to expose companies' tax avoidance
[https://www.theguardian.com/business/2019/nov/28/12-eu-
state...](https://www.theguardian.com/business/2019/nov/28/12-eu-states-
reject-move-to-expose-companies-tax-avoidance)

~~~
HorstG
The EU will never close tax loopholes since there will always be a veto from
the likes of Ireland, Netherlands, Luxembourgh or UK.

~~~
virmundi
Wow. The EU requires unanimous approval. The Europeans looks at the US’
Articles of Confederation and said, “we can make that work.” They need a rogue
group of reformers that create a new system of government, illegally, like the
US’ Federalists. Only then will the EU get its shit together.

~~~
Mirioron
The reason the EU's system is so similar is that the circumstances are
similar. If you don't require unanimous approval on critical issues then why
would smaller countries ever join with Germany, France, Italy, and the UK
around?

~~~
virmundi
If you require unanimous agreement how can you ever prevent a bad actor from
taking advantage of the system?

~~~
Mirioron
By persuading them. It's also much less of a problem that a small country as a
bad actor takes advantage of the system compared to big countries abusing
smaller ones.

~~~
virmundi
Will Ireland vote against their current income?

------
prepend
I wish the article had more info on the mechanics of the tax. How do they
measure “value” and what percent of the value do they want to collect as tax?

The ad sales might make sense, but why not just add a tax on all advertising.

The marketplace tax is confusing because do they tax the value of the
transaction? The full customer value that results of the acquisition? Why not
just use existing sales tax for retail transaction (which e-commerce is).

The last one is the hardest to understand. Do they mean sale of data from
Spanish citizens? Or only people created data while in Spain?

It seems simpler to just create a “data sales tax” that happens specifically
for transactions where data is sold to or from Spanish orgs.

I think this will just result in a tarrif on Spanish goods.

~~~
Mirioron
> _Why not just use existing sales tax for retail transaction (which
> e-commerce is)._

My guess is that they already do. The government just wants more tax revenue
as usual. Tech companies are just a good punching bag right now.

Edit: I cannot imagine that they are _not_ collecting VAT on these
transactions. Digital VAT is a very explored topic in the EU.

------
seibelj
IMO the corporate tax rate should be zero, and then everyone would be on the
same playing field. Right now the only companies that pay taxes are small ones
without the resources and staff to get around it. With 0% corporate tax, all
of these games and shenanigans would end.

Also, corporate profits are double-taxed anyway, as taxes are paid once on
profits then again as dividends / capital gains by the shareholders. This is
one reason stock buybacks are so popular - way to benefit shareholders without
the ridiculous double taxes.

~~~
tim333
Zero corporate tax would lead to a lot of avoidance and drops in government
revenue. Say you are a consultant earning 100k a year who owns a house. You
could just pay the 100k to your company and borrow against the house for
living costs and pay zero tax for the time being.

~~~
rb808
Right but eventually they money has to get from the company to the consultant
- either dividends or wages. Either way it'll be taxed.

~~~
beefield
Yep. Eventually. Meanwhile Buffett's tax rate on his (and his companies)
income is within the distance of epsilon from zero. Can you estimate when
Buffett is going to need the bulk of the money from his compankes to buy a new
house? How long heis going to have approximately zero tax rate, that is? My
personal estimate is with a very good approximation 'never'.

~~~
mrep
Buffet pays capital gains taxes and most economists who argue for dropping the
corporate income tax only recommend so with an increase in income/cap gains
taxes or even merging them.

------
sbacic
I have been seeing these headlines more and more lately and I have a nagging
suspicion that somebody is pushing an agenda. What exactly that agenda is
remains to be seen.

As for the news article you mentioned, it should be noted that the £28m is
corporate tax, not _all_ the taxes. I'm reasonably sure that FAANG is not
shirking the government on VAT or payroll taxes. As for why they pay so little
corporate tax, I'd guess it's because they're not an EU company.

All of FAANG's cost centers are in the US so it makes sense that they are
allowed to offset those costs with revenue from the rest of the world. Whether
they are doing so fairly is another matter, but even then, I suspect the
victim here is the US (since the money should be going there instead of some
tax haven) and not individual EU member states.

~~~
tim333
There are currently a lot of ways for multinational companies to reduce their
tax burden to near zero by for example Microsoft allocating most of their
European profits to a DVD stamping plant in Ireland which had a near zero rate
at the time. Also they are kind of expected to maximise shareholder value by
taking advantage of such legal avoidance schemes.

The proper way to stop this is for counties to make anti avoidance laws.

I recall a fuss in the press over Google along the lines of

"Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich',
Google apparently was able to pay only 3.2 per cent in tax on its overseas
profits in 2011 even though most of its sales were in countries with tax rates
from 26 to 34 per cent,"

and Google's CEO said

"We pay lots of taxes; we pay them in the legally prescribed ways,” he told
Bloomberg. “I am very proud of the structure that we set up. We did it based
on the incentives that the governments offered us to operate."

And basically if the governments want more tax they have to pass appropriate
tax laws:

"If the British system changes the tax laws, then we will comply. If the taxes
go up, we will pay more, if they go down, we will pay less. That is a
political decision for the democracy that is the United Kingdom."

Which is kind of what Spain is trying to do.

~~~
sbacic
> The proper way to stop this is for counties to make anti avoidance laws.

You mean tax evasion, not tax avoidance, right? Last time I checked, avoidance
was legal, evasion was not.

If you actually did mean tax avoidance, then I must point out how dangerous
the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't
okay on a case by case basis.

I'd much rather have some things reclassified as tax evasion rather than
having a "just trust us" system in place that decides when something is legal
or not.

~~~
pjc50
No, we really do mean a "general anti-avoidance rule" (GAAR e.g.
[https://www.gov.uk/government/collections/tax-avoidance-
gene...](https://www.gov.uk/government/collections/tax-avoidance-general-anti-
abuse-rule-gaar)), because otherwise you end up in an endless loop of
adjusting the rules against moving targets.

GAARs ultimately boil down to the question of "did you do this rather than a
more obvious transaction structure simply to pay less tax", a sort of Occam's
razor.

> dangerous the idea of somebody arbitrarily deciding what _legal_ option is
> okay or isn't okay on a case by case basis.

This happens all the time in precedent-based systems whenever something
unclear is litigated. In some sense it's what the legal system is for, and
it's the very opposite of arbitrary.

~~~
sbacic
> GAARs ultimately boil down to the question of "did you do this rather than a
> more obvious transaction structure simply to pay less tax", a sort of
> Occam's razor.

Okay, so it is a "just trust us" system of deciding who is breaking the law
and who isn't. In that case, I'll gladly take multinationals not paying taxes
over some government official arbitrarily deciding that I am avoiding taxes
and should be punished. Even more so because I live in a country where that
same official might be untrained, apathetic or downright corrupt.

> This happens all the time in precedent-based systems whenever something
> unclear is litigated.

Which, AFAIK, the European system is not.

~~~
pjc50
It is not arbitrary. If you're in a corrupt system, you're vulnerable even if
you have followed the rules. GAAR systems generally have a set of best
practices, and if you disagree with the result you have access to the court
system ( _not_ "a government official") to work it out.

~~~
sbacic
> ...if you disagree with the result you have access to the court system (not
> "a government official") to work it out.

You also have access to the court in case of actual tax evasion, though I
assume the odds would not exactly be in your favor.

My whole point is that you're better off avoiding the whole ordeal in the
first place and that having large multinationals and governments playing
whack-a-mole over the tax system is an acceptable price to pay.

------
vector_rotcev
As a non-economist (amateur or professional), I get the impression that
countries are losing their concern of the repercussions of displeasing the USA
economically.

Is this an accurate interpretation? If so, is it that they're less fearful of
reprisals (tariffs?) or that they're less confident in the benefits of
cooperation with the USA? Or a mix? Or something else?

~~~
dangerface
Europeans like me like America because they are very vocal about freedom and
liberty but we are waking up to the reality that it's all talk.

The USA behaves like Russia and China, they spy on foreigners, influence their
elections, start unjustified wars for oil and generally have a very low regard
for freedom and liberty outside of their soil.

USA are not the good guys and Russia and China are not the bad guys they are
just powerful, and USA are clearly loosing that power to Russia and China.

> If so, is it that they're less fearful of reprisals (tariffs?)

These sorts of threats only work on small poorly established countries and
Europeans know it. We wrote the game Americans are playing and I hope they
learn from our mistakes, or they will end up like us.

~~~
ixtis7
China, perhaps. Russia is in the doldrums.

The 'problem' with China is that it's an ethnostate, or wants to be. So in a
practical sense most Westerners are better off fixing their allegiances to the
US, for better or worse.

At least then you can be part of the apparatus and not pre-emptively
sidelined. I like some aspects of China vs. the US too, but _China is for the
Chinese_ , as they say.

~~~
solarhoma
Americans (and Europeans) are very used to the idea that no matter your race
or creed you can be just as American as anyone else. We many times forget that
not every country in the world acts this way. China being one of them.

~~~
dangerface
Thats nonsense, even if you ignore the past problems we had with race and
creed like the genocide of native Americans, enslavement of Africans.

Today Americas police and prison system has institutionalised racism. USA has
camps they keep Mexicans in and separate their families.

China and Russia do these things too I know but that doesn't white wash what
we do.

> Americans (and Europeans) are very used to the idea that no matter your race
> or creed you can be just as American as anyone else

As long as your race is white and your creed is western. I would say the same
thing about china as long as you are Chinese.

------
Roark66
This is just a government looking for another tax to levy on its people.
Google and Amazon will not pay it. The consumers of services offered by those
companies will pay it. If there is 3% tax on every google ad sold in Spain.
All will Google do is add 3% to its prices for Spanish users.

~~~
ptah
they can then just buy ads via another EU country

------
qxnqd
They expect to make €850 million in exchange for tariffs from the US which
will hurt the already battered primary and secondary sectors. A flawless plan.

~~~
romanovcode
It's not about the money - it's about sending the message. No pun intended.

------
gorgoiler
This feels like a battle between governments, and I’m glad to hear OECD are
involved.

Corporation tax feels like it should be agreed between nations, not between
individual nations and corporations. The Google multinationals of this world
expect to pay a certain amount in corporation tax but right now too much of
that is concentrated in the US and Ireland. Of course the US government is
tied — it doesn’t want to give up the giant share of the pie it currently has,
and would lose out on if some of that went to Spain instead.

It’s right that it should be a shared source of revenue between all countries
in which the multinational operates, but I think a new kind of tax is the
wrong way of going about it when corporation tax reform could solve the same
issue and be more generally useful.

Payroll tax — a significant source of government tax revenue spread around the
world, when a corporation has expanded worldwide — is distributed fairly in
this way already.

------
AshwinDurairaj
An honest question - What outcomes would there be if countries like Spain
decide one day to impose exorbant taxes, like those totalling $1b annually for
Google?

Would it just be cheaper for these companies to pull out? And what
international recourse would happen?

~~~
mcv
Only when the taxes reduce their profits to zero. As long as a country only
taxes domestic revenue, that's unlikely to happen.

And in my opinion, countries should be taxing (domestic revenue - domestic
costs), rather than allowing companies to move their undeclared profits around
to the nearest tax haven to dodge all taxes.

~~~
ensignavenger
So if I setup a company to do research and development in Spain, and spend
$100 billion dollars creating a breakthrough technology, then I license my
breakthrough technology to Americans for $1 billion dollars per year, America
should be taxing my $1 billion per year in revenue as if it were 100% profit
because I don't have any expenses in America?

~~~
mcv
Yeah. You already deduct your costs in Spain from your profits there. If you
don't do any business in Spain, why are you there? The idea here is to
discourage corporations from putting basing in tax havens where they don't do
any business. Taxes are paid where the profit is made.

~~~
ensignavenger
Maybe I am in Spain because I am a Spanish citizen? Maybe I want to do R&D
there because that is where the expertise is that I need? Maybe I thought my
tech was going to be much more successful in Spain when I set it all up, but
found out that the market wasn't there but was in the US?

~~~
mcv
I don't deny that my idea will result in some degree of protectionism. I think
that's worth it in this case in order to prevent the flight of profit to tax
havens, but there are absolutely edge cases where it forms some barrier to
free trade.

On the other hand, having pure profit in a foreign market without any costs
there, doesn't sound like a terribile position to be in. And maybe local
businesses could use a bit of an edge compared to multinationals.

------
asdfasgasdgasdg
850M euro, the proposed amount to be raised, would be on the order of 1% of
Google's worldwide revenues. Google doesn't break down its revenues by country
but it's hard to imagine it derives more than about 1/20 of the revenues from
Spain. If we assume 1/20, which seems very generous to Spain, the amount to be
raised amounts to about 20% of revenues in Spain.

So, this seems very high to me? Is this amount annual, or decennial like how
US spending and tax amounts are reported?

~~~
mrep
The tax will effect more than Google like Facebook and Amazon. The 850M number
accounts for the tax revenues from all companies.

~~~
asdfasgasdgasdg
Ah, great point. I was misled by the title, although now I recall that it did
discuss Amazon as well.

------
sebsito
According to CEIC Spain had $232B of tax revenue in 2018. The article suggests
it's going to bring 850M EUR = $943M to state's coffers so would represent
around 0.4% of yearly tax revenue.

How come it's easier to impose a tax on particular area (which sounds unfair)
and risk international relations with US instead of doing something else to
gain just 0.4%. Either it's ideologic or they really can't find the money.

------
AzzieElbab
None of it is going to end good. Will we have to pay to EU countries for every
click from a EU country? The Great Chinese Firewall aint got sh on this

------
jbduler
For me it makes total sense to tax Google, Facebook and all others. Why not?
What do you to lose? Parking your IP in some remote country, be it Ireland or
Turks and Caicos, is fine until you realize that the IP protection is not as
bullet proof as you thought. And please don't come to California to sue to
protect your IP. I still can't believe that none of those companies are paying
Federal nor state taxes. For now. Well, they do pay some insanely low taxes.

~~~
jacquesm
This has absolutely nothing to do with IP but everything to do with the
delivery of services which are free, supplemented by advertising income
accounted for abroad where it can not be taxed by the country where the
service was delivered.

Looked at in a different way: if Google was a paid for service you could levy
sales tax on that service.

~~~
balfirevic
But Google earns it's money from selling ads. If they are selling those ads to
business in EU, the mechanics (and taxation) seem to be the same as (for
example) a US graphic design company selling logo design services to
businesses in EU.

What exactly is new here? Is it just the size (and wealth) of Google and
similar companies that has encouraged the governments to try to take a larger
slice of pie?

~~~
kazagistar
Companies are always going to find ways to avoid taxes and privatize more
profits to fewer and fewer individuals. It's the responsibility of the
government to find those loopholes and get them to pay a fair share to
maintain the society they exploit for that profit.

~~~
balfirevic
Thanks, but that is barely related to the specifics of my comment and seems
ideologically charged to boot.

------
throwGuardian
Let's take a moment to savor the irony here -

Donald Trump is leading a charge to stop unfair taxation of American tech
companies abroad, while they openly work to get him out of office by any means
necessary.

~~~
oblio
Why is this taxation unfair?

~~~
throwGuardian
Someone else explained it well here:
[https://news.ycombinator.com/item?id=21713883](https://news.ycombinator.com/item?id=21713883)

The proposed new tax is on top of everything in place, just to placate
political rhetoric about big American tech "getting away".

This is entirely a nationalist, protectionist tax Spain is levying, and it's
not rooted in reason

------
bassman9000
Just a note on the more than likely ruling coalition: Unidas Podemos is not
left-wing. It's extreme left (communists). Which helps explain the push.

------
ptah
I don't understand why the US constantly interferes in the internal affairs of
other countries like this

~~~
ryeights
Spain has very few large technology companies relative to the US. This tax is
effectively a tariff on US technology companies operating in Spain, making it
no longer an internal affair.

~~~
megous
Last time I checked, comapnies are subject to the laws of countries they
operate in.

~~~
_Understated_
Not trolling, but is there anything that says they're breaking the current
laws in Spain? (I'm from the UK, so no dog in this fight althought I can see
our gov implementing it at some point I reckon)

Sure, they're taking advantage of tax loopholes I'd bet but in themselves,
they're not necessarily against the law.

They're probably paying all the tax in Spain they're currently, legally
obliged to pay at the moment.

Just my £0.02

Edit: Just thought of something? Is there a google.es? If this is what they
are talking about, would it not be easier for Google just to bin that one and
for Spaniards to be automatically redirected to another Spanish-speaking
version, like one of the South American ones?

~~~
pc86
There's no such thing as a tax loophole. It's the law, and is written
specifically the way it is for a reason. "Loophole" by definition implies that
it's a mistake, and with the amount of money at stake that's incredibly
unlikely.

~~~
_Understated_
I upvoted your comment but I respectfully disagree: If a country has a law
that says "you pay X tax using this law/method but Y tax using this other
law/method" Google are perfectly within their rights to say, "Let's use Y".

Who in their right mind would say "you know what, I'm going to pay more tax"?

Have you seen the size of modern tax laws?[1] They're utterly gargantuan!

[1][https://www.theguardian.com/commentisfree/2015/feb/13/britai...](https://www.theguardian.com/commentisfree/2015/feb/13/britain-
tax-code-17000-pages-long-dog-whistle-very-rich)

~~~
pc86
It sounds like you agree with me. That's not a loophole. That's a conscious
decision on the part of whomever wrote that section of law to basically say
"pay the lesser of these two methods."

~~~
_Understated_
Not really. The way I explained it wasn't clear.

Usually a loophole is more complicated like the Double Irish with the Dutch
Sandwich which requires some complex maneouvering on the part of the company
to pay minimal tax.

I run a small business and that kind of thing is beyond my capabilities and
would also cost too much but not for Google.

That's what I assumed you meant by loopholes... my explanation of the process
was a bit too simplistic.

To me, a loophole is looking through all the laws and saying, "ooh, if we put
our money here, then declare this thing, we can show a loss that allows us a
rebate on a particular tax" or something... it's a symptom of excessive
complexity in our tax systems.

I don't blame organisations for doing it.

------
nwellnhof
Historically, it has always been understood that companies only pay income tax
in their country of residence. BMW isn't taxed on its US income by the US,
just like Google isn't taxed on its German income by Germany. I think it's
more accurate to say that the so-called "Google tax" is actually a tariff on
Internet services. Traditionally, tariffs were only levied on imported goods
but the concept works for services as well. That said, if a country
unilaterally imposes tariffs, it shouldn't be surprised to see retaliatory
tariffs in return.

~~~
krzyk
It depends what you mean by "understood".

For me it is obvious that BMW should pay taxes in US for cars sold in US. Are
they taxfree there?

And Google should pay tax in country where they sell given good - assuming a
tax can be goods based.

~~~
tzs
> For me it is obvious that BMW should pay taxes in US for cars sold in US.
> Are they taxfree there?

He was talking specifically about income tax, not other taxes such as sales
taxes or import taxes.

