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France has approved a digital services tax despite threats of retaliation by US (bbc.com)
324 points by adzicg 43 days ago | hide | past | web | favorite | 478 comments



The US administration is presenting the new tax as if it was specifically targeted to US companies because of their origin. Like a tariff.

It is not the case at all. Yes the biggest tech giants that do not pay enough tax are mostly from the US (also other companies from other countries are affected too)

But it is not because they are from the US that this new tax is created. It is simply because they don't pay enough tax


The US is big into tariffs these days, why do they complain when the same treatment is applied in return?


The US loves a cheat.

Home town legal decisions are the norm. Gerrymandered electorates are the majority. The american exceptionalism of we can but you can't is openly embraced by all in politics and the media. Regulatory capture is the norm. Revolving door Washington lobbyists is not even a story anymore.

Cheating is an absolute way of life nowadays. Which is really, really strange because it seems to me that most Americans really don't like cheats and cheating. Brady.


An easy rebuff to the US is simple: if they are American companies, why aren't they paying American taxes on their European business activities?


They are. The US taxes companies on profits made abroad. The issue is that these taxes are only collected when the money enters th US, so companies park this money abroad.


> They are.

The rest of your comment refutes this. They might pay it sometime in the future, but they are not paying it by parking it abroad.


They can't spend it when it's parked abroad either. It's less that they're not paying taxes, just that they aren't paying taxes on it yet.

By comparison, most European countries don't tax companies on foreign earnings at all.


https://en.m.wikipedia.org/wiki/Repatriation_tax_holiday

Or they wait for good deals to come up to bring the funds back home at a fraction of the cost.

Meanwhile it's easy to get domestic loans based on foreign assets which gives them easy access to spend that same money locally.

Put it in safe low yield securities on the other side, take out low interest loans here and profit on the tax money which should have been paid at the expense of small competitors who don't have the scale for tax scams or the lobbyists to legalize them.


They still pay taxes, though, even if politicians did set a lower rate for a period of time. If they bring the money back in to pay back the loans they'll pay taxes on it.

You call this a "scam" when in reality it's the system working as designed, so I don't think you have a particularly good grasp on this subject. Again, in most countries companies don't pay taxes on foreign income at all.


The personal slight isn't necessary.

Things are indeed working as designed, designed by the people who it benefits through regulatory capture, lobbying, and campaign finance, that part shouldn't be hard to understand.

If it were "working as designed" there wouldn't be a trend of global cooperation in closing these tax loopholes and you wouldn't be reading an article about France working to close one.

>If they bring the money back in to pay back the loans they'll pay taxes on it.

While profiting from the capital which should have been paid in taxes for decades, and more importantly out competing their smaller rivals out of the market because they didn't have the resources, scope, or moral infortitude to engage in similar behaviors.

Would that it were we all could avoid our financial obligations and paying our fair share long as we did so eventually while being called heroic.


> Would that it were we all could avoid our financial obligations and paying our fair share long as we did so eventually while being called heroic.

Again, most countries - including most European countries - don't Levy taxes on foreign company earnings at all. If Google were not a US company, they wouldn't be taxed on any foreign earnings even without any kind of money parking abroad.


What's your point?

If I lived in Nevada instead of California I wouldn't have to pay state income tax so by your logic I should just stop paying?

Once companies get big enough they get to arbitrarily choose which sets of laws to follow?

People don't have to pay for groceries at food banks so we can walk around the checkouts at Safeway?


> If I lived in Nevada instead of California I wouldn't have to pay state income tax so by your logic I should just stop paying?

No, my point is that Californians shouldn't point to Nevada and say they're not paying their fair share of taxes.

Google isn't dodging any French taxes, and isn't dodging American taxes either. What people are complaining about is the fact that American companies' foreign earnings aren't taxes until those earnings are brought into the country. This is not against the law, since companies aren't forced to move that money back into the country. And to put the cherry on top, most countries don't tax companies on foreign earnings at all.

So France is trying to say that they are being disadvantaged because these companies are delaying payment of American taxes, on earnings that wouldn't be taxed at all in France or most other European countries. This is blatant hypocrisy. France is complaining that American isn collecting taxes too slowly on earnings that it and it's peers don't tax at all. If European countries think corporations should pay taxes on foreign earnings, maybe they should begin with taxing their own corporations' foreign earnings first.


They don't have to "spend" it. They invest the money. Then the investment vehicle uses the money (now not directly tied to the foreign earning) to fund projects anywhere around the world. (For example in the US too.)


They can't spend it, or they can't spend it in the US?


They can't move it into a US bank without paying taxes on it.

They can do convoluted accounting with loans and subsidiaries and the like to bring it into the country anyway with the unwinding and tax paying left into the far future.


Maybe because of Ireland?


I suppose it's just like how the tax law changes in the US were not designed to hurt high-tax liberal states more than low-tax conservative states, but that the high-tax liberal states were just taking advantage of the standard deduction.

Unfortunately in these cases, perception is just as important as the nominal reason.


How can you tell that they weren't? There are always pretexts and blindly trusting face value explanations for a policy is dangerously naive.


I apologize for not being more clear as I agree with you completely: I cannot tell and neither can I tell about this French tax.


How much tax is enough tax?


more than 4 milion on $11.3bn of revenue

https://www.theguardian.com/technology/2018/aug/02/amazon-ha...


Stock based comp expense. If Amazon paid these employees cash instead of stock, Amazon's cash profits would have been lower. Instead they pay in stock, and employees pay the tax (which they're happy to do because the stock keeps going up). Furthermore if Amazon sold that stock in the public markets to fund those cash payments to employees, it wouldn't be revenue at all, and still not taxable.

From the article: "On average the thousands of staff who handle orders received about £3,000 per person last year. Senior staff will have taken home considerably more.

Amazon’s share price has surged 84% in the last two years. Last year the shares vested at an average stock price of $992, in 2016 it was $704 and in 2015 $467.

The payouts will have reduced Amazon’s tax bill because under UK tax law companies are required to deduct the vest value of the shares provided to employees."


Taxes are not paid on revenue. They pay sales tax on these goods sold in any case.


Part of me originally wanted the US to retaliate since this theoretically threatens my paycheck, but a 3% tax on revenue generated within the country is pretty low and seems reasonable considering how ineffective taxing profits is due to loopholes.

I really don't think it's sour grapes so much as trying to address the Irish/Luxembourgish tax schemes


Correct in theory. But have you looked at french tax policy? The issue with new taxes is that often it starts at 3%, then goes up gradually to 5, then to 7, and before you know it you have a 15% turnover tax.

France is a lovely country, but one of the worst players when it comes to tax policy. The never ending appetite to increase the spending of the state does not stop...


Which is actually a good idea: increase tax on revenues for companies using tax-evasion schemes until it is no longuer profitable for them to continue doing so.

Also, consider the fact that tax evasion is a crime in most countries and that this is a very bland measure when compared to what these companies (and their executives) really reserve.


increasing taxes makes tax-reduction-strategies _more_ profitable, not less

also, tax-evasion and tax-reduction are two different things, equating them is an argument in bad faith


What I was arguing is that raising taxes revenues instead of profits (when companies declare no profits as part of tax-avoidance schemes) will eventually make them declare and pay taxes on real profits.

You have a point here, but what really is at stake here is tax-evasion, not reduction.

The company declares no profits in France (and thus pays no tax) because its profit is fraudulently passed as costs to pay for IP or services for the mother company in another country.


What you call fraudulent is not actually fraudulent. It makes a lot of sense to allow this.

If a US company develops IP in the US, is it not normal that they then get to charge a royalty for use of said IP globally?

If a French company develops IP in France, is it not normal that they then get to charge a royalty for use of said IP globally?

If you have a centralised office somewhere supplying back office services to all entities within Europe, does it not make sense to allow companies to tax deduct these expenses?

It seems like an easy thing to fix, but it's not. Particularly because multinationals _do_ actually operate in many countries and can pick where to base their operations.


Tax reduction strategies can include things like paying employees higher wages. Turnover taxes are inane because profit margins across vary widely across different industries.


>tax-evasion and tax-reduction are two different things, equating them is an argument in bad faith

I beg to differ, the only difference is that one is by definition illegal and the other is by definition legal. Tax reduction can mean chasing tax incentives responsibly, which is fine, but can also mean deliberately engaging in weird financial engineering that violates the spirit of the law but not the letter.

Like if I max my 401k and HSA, get a $600k mortgage to max out the mortgage interest deduction, and count all my professional electronics as business expenses I am reducing my taxes but I am following the spirit of the law because I am reducing my tax burden by making decisions that tax policy is meant to encourage. If I incorporate in the Cayman islands and declare all my income through a Virgin Islands subsidiary operating through Panamanian bank accounts so that I can sell off shares of my business to a trust which I also own, all so I can turn personal income into capital gains earned in a different country even though I do my actual business and live in the US, I would definitely be violating the spirit of the law.


To each their own view, but the more wealth someone builds up, the more complex their tax affairs become. Especially if operating internationally. The 401k example is good for a normal employee.

But what if I have businesses in Poland, the UK and Belgium and I can book my investment gains in either of those countries? Am I evading tax because I book it in the country with the lowest taxes? No. You'd be crazy to book it in the highest tax county if you have the freedom to not do so.

The spirit of the law is an extremely hairy discussion, exactly because different people have different views on this. In my view only the exact letter of the law can be interpreted as a set of rules to determine whether you're breaking the law or not.


"In my view only the exact letter of the law can be interpreted as a set of rules to determine whether you're breaking the law or not."

True, and that's what happens in practice. Which is why it's fine and understandable, to me, when countries take measures to close tax loopholes.

"But what if I have businesses in Poland, the UK and Belgium and I can book my investment gains in either of those countries? Am I evading tax because I book it in the country with the lowest taxes? No. You'd be crazy to book it in the highest tax county if you have the freedom to not do so."

Yeah, that makes sense. But going out of your way to create an optimal corporate structure of subsidiaries, licensing agreements, etc. all based in particular tax advantaged countries based purely on tax law is a lot more involved than that.


And?

The French themselves will protest if they feel the tax is too much (so if they can't get cheap enough iTunes/Spotify/Netflix and their local versions).


A tax on revenue is very different than a tax on profit.


A tax on profit is almost useless in this case because most internet giants would buy “services” or pay “royalties” to countries with zero taxes, to keep profits zero whereever there are nonzero taxes.

A reasonable middle ground would be to tax google on their central profits and take a cut based on the fraction of business done in France. That way no tax would be owed if google makes a loss, regardless of French revenue.


You can't just tax a company. Well, you could, but then you'd be a Libyan dictator or something.

Tax on revenue disincentivizes progress and R&D.


> You can’t tax a company

Not sure I follow


A tax on revenue makes sense in a very high margin business like software


Taxes on revenue disincentivize spend on R&D


Given how much after-salary profits the big tech companies make do you really need to be worried about your paycheck?


to be more clear, perhaps they could demand those taxes from Ireland, or Luxembourg where amazon is. This is like california taxing startups because they are based in Delaware.


Taxing digital companies based on digital presence certainly makes sense to me, as a layperson. A company that's selling ads to a French company that wants to show those ads to French users is doing business in France, end of story.

Taxing only very large corporations - that's a little more questionable, but plenty of countries (including the US) treat small businesses preferentially, so it's not like it's unprecedented.


Taxation/regulations can place an undue burden on smaller companies. So I think it's perfectly acceptable to use size as a component of taxation. It's like progressive taxation applied to business.


Exactly. A company with only 1 person has to spend a large share of its time-resources just complying with taxes and regulations. The more people in the company, the lower the proportion of those time-resources are needed. With a large company, it's easy to employ someone (or a team even) to do that work full-time, but for a tiny company it's impossible; they wouldn't get any actual work done to keep the company running. This would have the effect of killing small business, which would provide a huge inertia advantage to large businesses (which started small, when they didn't have so many regulations).


No matter how the law is written, if the result is that the exceptions only apply to French companies and not to the US, it’s bullshit :).

They could pick arbitrary ways to bisect the set until they get the desired result.


Who said it was only targeting US companies?

26 companies fall under the required threshold. Not all of them are US based and there's even a French one (criteo).

Here is the full list [1]:

• Sales of goods: Alibaba, Amazon, Apple, Ebay, Google, Groupon, Rakuten, Schibsted, Wish, Zalando.

• Services: Amadeus, Axel Springer, Booking, Expedia, Match.com, Randstad, Recruit, Sabre, Travelport Worldwide, Tripadvisor, Uber.

• Advertisement: Amazon, Criteo, Ebay, Facebook, Google, Microsoft, Twitter, Verizon.

[1] http://www.lefigaro.fr/conjoncture/2019/03/20/20002-20190320...


Most of those are still American businesses (twenty of twenty-nine, or over two-thirds). Another interesting way to look at it would be by revenue breakdown - I suspect the total revenue of American companies may be disproportionately high.


Yeah right, who'd even notice Alibaba?

FYI, Alibaba's revenue (~56B) exceeds that of Ebay (~10B), Uber (~11B), Expedia (~11b), Twitter (~3b), Groupon (~3v) and Tripadvisor (~2b) combined.

Yes, Amazon/Apple/Microsoft/Google/Verizon are still huge. But it doesn't mean there aren't other big fish out there.


But what’s Alibaba’s revenue from France? I suspect the proportion is quite low compared to American companies.


What's Verizon's revenue from France? I suspect the proportion is quite low compared to Chinese companies.


Well, let’s compare tax rates the foreign companies pay with the local French companies. Something tells me that the American companies are making out like bandits compared to the French ones that have to pay all local taxes. I see this as as an attempt to equalize the competitive playing field.

This is just another example of Americans (and hey, I’m American) feeling they are permitted to do whatever they want, even outside of their own borders. It’s peak arrogance.


Why? Is only the US allowed to practice protectionism?


Very salient point.

It's funny that the US is allowed to tariff anyone who breathes at them wrong under the guise of protecting US jobs/etc. but they are up in arms when another country decides to implement anything remotely seen as "against the US".


Please don't confuse the US with our government! (or, rather, with the subset of people in our government who happen to be talking at a given time---there are many levelheaded, effective people working in our government who never enter the spotlight)


I try to avoid painting with a broad brush wherever possible, but I was also trying to be sufficiently succinct. There is, of course, good to be found within the US government. Although, to an outsider, it feels like one has to look much harder to find that good now adays.


That's not the case. Per the article:

About 30 companies will pay it - mostly US groups such as Alphabet, Apple, Facebook, Amazon and Microsoft. Chinese, German, Spanish and British firms are also affected, as well as the French online advertising firm Criteo.


Not to refute your point, but they surely already charge VAT. However, this is commonly described as a tax for the buyer, not the seller.

On the other hand, most revenue is probably B2B and business reclaim their VAT.


Customers buying from local businesses that compete with them also pay VAT, so the consumer side of it is fair. But local businesses themselves pay much more in corporate taxes, which is not.

You are free to argue that the playing field can be likewise leveled by lowering corporate taxes to Ireland's levels. That's a debate for the French to have, as citizens of a sovereign country. It is not a decision to be forced on them by global tax loopholes.


I was not argueing anything.


> company that's selling ads to a French company that wants to show those ads to French users is doing business in France, end of story.

yeah, so taxes make sense to pay for the roads, bridges and healthcare that these ads are using.


Where the taxes are coming from and what they are used for do not need to be in the same industry or sector. Maybe it's different where you live?

E.G. An oil company being taxed for the revenue it made during an oil project does not get ear-marked for oil-only usage by the government.


Taxes make sense to pay for the court system that's enforcing contracts, just to name the first thing that comes to mind.


Taxes in France (and in many other more [than the US] socialist countries) are not just about paying for the public infrastructure that you use. It's about contributing to the development of the society by taxing very lucrative businesses and individuals (and also taxing not so lucrative businesses sadly). If you are an individual in France, and you are well off, you will pay much more taxes than what the state pays in infrastructure for you, why do you think it should be different just for internet businesses?

You may not agree with that philosophy, in which case you can decide to stop doing business in France. Considering the amount of cash GAFAs make, I would wager they will continue doing business in France and pay that 3% tax rather than miss 65M wealthy customers.


Given the effect of social networking products on mental health, in this light it absolutely makes sense for countries with nationalized healthcare to tax big tech


[flagged]


Could you please review the guidelines? You've been breaking them quite a bit and eventually we ban accounts that won't stop.

https://news.ycombinator.com/newsguidelines.html


Completely ignoring the cables that carry their data.


Aren't the cables already paid for by the fees that subscribers pay to their ISPs for internet access?


ISPs generally don’t own the land cables run over/under


It's really not that simple. They don't use any of the country infrastructure or workers. If I make a video game and sell it to a person in France does it mean I do business in France? It seems to me it should be treated the same as French person coming to my country, buying my game and going back home. We've just skipped on unnecessary traveling. Those things are subject to debate and power struggle but it's clear that: I sell it to you so I do business where you live isn't story-ending argument. In fact I think it's both not very consistent with general tax law principles nor practical as the burden of complying with regulations in every country you sell to even if you don't have presence there means many companies dummy won't sell at all to smaller countries.


If I make a video game and sell it to a person in France does it mean I do business in France?

Yes, by the commonly and globally accepted definition of "doing business" in a country, selling into a country is doing business in that country.

It seems to me it should be treated the same as French person coming to my country, buying my game and going back home.

No, it would be more like your company going to France, selling the French guy the game, and then coming back to the US. The burden of tax compliance is placed on you, the seller, because you are the one profiting from the activity and therefore morally (and legally) should shoulder the burden.

In fact I think it's both not very consistent with general tax law principles nor practical as the burden of complying with regulations in every country you sell to even if you don't have presence there means many companies dummy won't sell at all to smaller countries.

It's exactly consistent with general tax law in the US and internationally. It's not practical, but that's the price you pay for choosing to make money in another taxing jurisdiction. If you don't want to deal with it, make money somewhere else.

That being said, the US has a good treaty network so that the situation you describe generally wouldn't result in income tax to the US seller unless they had a physical presence in the country of the buyer. Which is exactly why the French tax at issue is an excise tax (not subject to treaty restrictions) and not an income tax (covered by treaty restrictions).


> No, it would be more like your company going to France, selling the French guy the game, and then coming back to the US. The burden of tax compliance is placed on you, the seller, because you are the one profiting from the activity and therefore morally (and legally) should shoulder the burden.

I don't think that's as clear as you try to make it be. Both parties (seller and buyer) are doing something that is in their best interest, one is acquiring a product/service for some money, the other is selling it for the money. In both cases it serves their interests, both have a moral responsibility in regards to the exchange. And you see this reflected in tax laws too where both companies and consumers pay taxes relevant to a transaction.


I'm an international tax lawyer dude...

The seller is making money. That's what matters from a moral and legal perspective. Everywhere. It doesn't matter that the buyer is possibly also getting a benefit.

And you see this reflected in tax laws too where both companies and consumers pay taxes relevant to a transaction.

Please list even one location where both the buyer and the seller pays the transaction tax. Here's a hint: there isn't one. Either the buyer pays, or the seller pays. However, for nearly every transaction tax, the seller collects the tax on behalf of the government and remits that amount to the appropriate tax authority. (In Hawaii and Australia, the seller actually pays the tax--GET or GST, respectively-- but is permitted to pass along the tax to the customer as a separate line item on the invoice. In Hawaii, the seller then owes more tax for the additional charge to the customer.)

Note also: withholding taxes on cross-border payments are not transaction taxes. They're income taxes, which is a very different thing.


>France does it mean I do business in France? It seems to me it should be treated the same as French person coming to my country, buying my game and going back home.

In that case you, the vendor, would need to pay taxes where you sold the game.

The problem with these large companies is that they basically pay little to no taxes _anywhere_, an optimisation that only large companies can really afford.


They pay taxes where they are located. I am opponent of corporate income tax as I think it's the worse possible way to get about taxation. France is already collecting VAT on what Google sells there. They could increase that if they want. Why should it matter to them if Google turns profits or not? The concept of "profit from sells to France" isn't really well defined either, their profit depends on cost of operating and those depends on laws and regulations of the place they actually use to make their product.


>They pay taxes where they are located.

The sale can trivially be said to occur in a different jurisdiction or they can make zero profit because that money is owed to a another company that exists to facilitate them not paying taxes.

The only thing that they can't move is the customer which is why this makes sense.


>It's really not that simple. They don't use any of the country infrastructure or workers.

They absolutely do. They implicitly use courts, police, customs, trademark/contract enforcement, etc.


It's true that when a French person comes to your country to buy your product, then goes back to France, the burden is on them to pay the relevant customs and taxes.

On the other hand, I would argue that the market of people who would come to your country to buy your product is significantly smaller than the market of people who buy it on the internet and have it delivered---and it's fairly typical for companies sending products to France to be asked to collect any duties, customs and taxes from the purchaser. Why would electronic delivery be different ?


>If I make a video game and sell it to a person in France does it mean I do business in France?

Yes.


apart from that they take advantage of there even being people who can be advertised to (i.e. who have the means to buy stuff, to be even worth advertising to) facebook etc certainly make use of the digital infrastructure in place.

I'm writing this via a glass fiber connection supplied by "Orange" (formerly known as France Telecom)


Try bringing much more expensive items across a border and you will see what happens ( you will be taxed at the border ).


Yeah, I will pay VAT and maybe tariffs. Both are perfectly fine taxes. Google is already paying VAT on sells to France. France could increase those on electronic advertising if they want to and Google will pay that.


Google does not pay VAT. The buyer pays VAT, and Google collects and remits it on behalf of the buyer.

Google only pays VAT on purchases (for its own use) that it will sell on to customers.


it is more like, you are putting your product in their shops and not paying any tax on it!


That doesn't make any sense. I am actually delivering it to customers myself, run the accounting, run the store. I don't use their real estate, their roads, electricity, anything. How is it anything like putting my product in their stores?


How are you delivering it to the customer without using their roads, electricity, or "anything"?


Interestingly, the only recent French tech company to be even remotely globally relevant (Criteo), is also affected.

https://en.wikipedia.org/wiki/List_of_companies_of_France is a good list to look at. There is only one other software/internet company founded in France since 2000 in the 'Notable' list - 360Learning. About a third of the list was founded before 1900. A very different list than what you'd see in the US.


France is an ecosystem where smaller (tech) companies get acquired by massive conglomerates (Vivendi, LVMH...). Or more recently like Zenly's acquisition by Snapchat.

https://en.wikipedia.org/wiki/Vivendi https://techcrunch.com/2017/06/21/snapchat-buys-zenly/

While there are some French tech unicorns (BlaBlaCar, Criteo, Veepee, Doctolib) a lot of French founders just create their company in the US (Docker, Lending Club, Wit-AI) because the labor code is simpler and there are more VC funds.

The current administration is trying to change that with Station F and by making it easier to get foreign workers visas but it's a long shot.

https://en.wikipedia.org/wiki/Station_F

https://visa.lafrenchtech.com/


Sogeti is also very large, founded in 2002.


Looks like they were acquired by Capgemini


It's not a tech company. It's a contractor body shop, like Accenture.

Sogeti merged very soon after it was formed. It's never really been known as its own company.


The US has long been using their legal system to skew free market rules and favour their domestic markets and companies.

DoJ is constantly "exporting" US law around the world by methods that border blackmail or even sometimes taking hostages.

Fighting back has been long due. Though of course France should begin with EU free-riders, Luxembourg and Ireland...


> DoJ is constantly "exporting" US law [...]

Could you explain what do you mean by this, and provide specific instances?


For instance the 1977 (79?) law against corruption of foreign officials has been in almost all cases involving large companies, only been used against foreign ones, except in once case, Halliburton. In fact in that very case Valourec (French) was working on a common contract with Halliburton and was attacked first, but they negotiated by implicating their partner (both were punished).

Concerning US embargoes, the DoJ has extorted many billion dollars from foreign companies for breaking these. However there was no embargo between, say, Germany and Iran; as some transactions happened to be in USD, DoJ consider that Deutsche Bank, by providing services priced in US$ to Iran, violated the US embargo. Ditto other European banks. This looks like blackmail: US Treasury grabbed more than USD 14 billions from European banks using this tactic. Also the US blocked various arms sales between various countries because the weapons used some US-made parts (typically some electronic chip deep inside), only to keep the deal to themselves.

Basically that means that any company making transactions in US$ must comply to US law, always and everywhere. If my company sold some product to some Russian company with a price in USD, it could be sued by a US prosecutor. Then when visiting a friend in the US, I could be jailed (even if I hadn't no direct relation with the targeted sale, simply as a company board member or manager).

If my product includes any US-made part, my international sales are depending upon US goodwill. Which, in the case of billion-dollars contracts, will probably enter the scene.

Seems preposterous? It actually happened many times. It happened to the VP Asia of Alstom, jailed nearly 4 years in the US to blackmail his company for the sole benefit of General Electric. One of Deutsche Bank VP was extradited from Croatia to the US while on holidays, and jailed in a high security prison like a murderer. Etc.


This is a stupid move. The tax is not payed by big tech giants. Not by both, either. It's complicated and depends on who needs whom the more.

If there are no alternative to AWS, Google Adsense, or an American SaaS in France; the French people will be paying all of the tax. The big tech giants will just slap them with a 3% surcharge for being in France.

This is different from US-China tariffs. If the US can source from other suppliers, the Chinese will need to lower their prices. Effectively making them pay the tax. It is a complicated and messy situation.

The big tech giants are named that way because they are big and dominant. This makes them able to make the rules and circumvent the current ones. You'll need the whole EU (or maybe the EU/USA) to get them in line.

France has been digging its own graveyard for a while. It seems that they didn't learn their lessons and now going full speed. If you are a French startup, you'll be less competitive. People hate paying more and it's not clear if they can deduct this tax (like VAT).


> If you are a French startup

… you won't get taxed under this law until you get more than 750M€ of revenue. So, all thing being equal, a French startup would be more competitive (of course things aren't equals, but that's another matter).


I mean a French startup using the American services.


> If there are no alternative to AWS, Google Adsense, or an American SaaS in France; the French people will be paying all of the tax. The big tech giants will just slap them with a 3% surcharge for being in France.

Just like VAT is passed on to consumers? I don't think the goal is to make specific companies pay; rather, the goal is to have every type of economic activity to contribute a fair share to the society they benefit from. Digital activity currently contributes relatively little due to being more amenable to tax evasion schemes, so this tax mitigates that. How the exact amount is subsequently distributed among the parties in that activity is not that relevant.


>Just like VAT is passed on to consumers?

VAT is a consumption tax. It is - by definition - only paid by consumers.


Exactly. Yet VAT is a thing, and consumers are doing fine.


This would incentivize competitors in France. That’s a good thing for France.


With that argument, protectionism will incentivise competition. So why don’t we close the economy a bit?


Whether you're /s or not, I wholly agree; I both fully support using public policy, tariffs, and other economic mechanisms to support "at home" companies over those abroad, as well as supporting local labor over that outside the country.

If internet companies are the future of the economy (see: Stripe's opinion), why wouldn't you do everything you could as a country to support your own companies?


Because protectionism isn’t only economically bad but also immoral. You can’t force everybody else to pay higher prices.

Supporting your own companies at the expense of the rest of the society isn’t good. You’ll be forcing consumers to pay higher prices for a completely nationalist reason.

No reasonable economist would favor protectionism.


Strawman, nobody is arguing for supporting companies at the expense of the rest of society. The parent is arguing for supporting companies for the benefit of the society. Both can happen, it depends on how and to what extent it is executed. Economists disagree a lot and they have only partial say in policies, countries are not run solely by economists.


“For the benefit of the society”

How would you measure that? Does paying more for a worse product and raising the price of the better one benefits society?

If the product was better it would already be in the market.


Supporting local businesses and local jobs. This may lead to worse or to a better product, it depends on many things. There is no necessity of a catastrophe where the local product is worse and everybody is worse because having to use it. See China.


How much oil has been burned without paying for its environmental costs? Does that make it a better product? That’s the point. Cheaper does not necessarily mean better.


We are not talking about environmental externalities here. That’s another issue altogether. B

What are the negative externalities of AWS and the likes?

You cannot compare pears with apples.


Morality is subjective and open to interpretation. Sometimes consumers should pay higher prices to avoid unwanted externalities.


No, morality is not subjective.

What do you mean by unwanted externalities? Unwanted by who?


From what I can tell, it will incentivize competitors everywhere, as long as they don't have revenues over €750M.


Which is a good thing, too, as it incentivizes decentralization.


Good. Next step, have EU countries come up with an estimation of the value of their citizens' private data that FB and Google gobbles up and tax them on that too.

Edit: companies -> countries


Isn’t this tax on ad revenue already a good proxy for the value of user data?


Does that mean that EU citizens should also pay for these services? Or do you expect these companies would continue to operate in the EU with no net profit.


> Does that mean that EU citizens should also pay for these services?

Making people pay to access Facebook etc would be the best possible move for society ever.


I would agree. Even something as low as $1 a month or $10 a year would change everything.


they make money out of you, you're already paying.


Yes, they should. FB doesn't want to get taxed? Create a non-tracking version and paywall it, I would actually pay for that myself.


You and maybe a dozen other people. Social media is worthless without widespread adoption.


It could potentially share the backend -- track only those people who are on the free version, but keep everyone on one network.

Also, no. Social media existed before the current big general-purpose networks. See Usenet, email lists, IRC, forums, etc. A single big network with no particular purpose or common interest provides different benefits, better in some ways and worse in others, but niche networks still have their own worth.


I should have expanded more on your original reply in my parent response but rather than editing it I'll continue it here.

You said: Or do you expect these companies would continue to operate in the EU with no net profit.

A tax doesn't have to eat up all the net profit. Googling "how much is a Facebook user worth" comes back with about $158 dollars, whether that's accurate or not is beside the point, some value can be derived[1], France can say "we want a X% tax on that value". If the tax is too high FB leaves the market and France gets nothing so there is little incentive to do that[2]. FB then has to take the cost of servicing a user against their value minus the tax and decide if they want to continue as is, offer a paywall option to avoid the tax, or leave the market altogether... I don't understand why this would be so controversial?

[1] Whether FB or regulators should set that value is up for discussion.

[2] Some would see FB as such an overwhelming societal net negative they would want to tax it out of existence, but that could be true for any industry (fossil fuels, tobacco , meat, etc...)


We already implemented that last year. That's called the GDPR.

Regulators are not quick, give them a year or two to deliver the fines.


Why not google and FB pay the users directly?


Would I get paid per search when I use Google and per post when I use Facebook?


Bing has a rewards program, I have a few friends who use Bing just to collect something like ten bucks of Amazon gift card every month.


Many ways. Even a tax would do, as long as the tax collector gave it back to the users proportionally to the time spent on either site.

E.g. facebook could be forced to give you discounts for your card or sth.



It's interesting to compare the general sentiment of the comments on that post, which was posted 8 hours earlier than this one. Presumably those comments are more from Europeans, and comments in this post are more from people in American time zones.


Who is this going to affect? The business:

1) between Facebook/Google and advertisers based in France?

2) between Facebook/Google and any advertiser as long as the ads are shown to people in France?

3) between Facebook/Google and any advertiser as long as the ads are shown to French people?

If it is the first, then I don't really see a problem. FB and co can either stop doing business directly with French advertisers, or eat the tax, or increase the prices.

If any of the others, then how would one go about determining how much money to pay without infringing on people's privacy? What would stop FB from either declaring a token amount of "business done in France - as per the options 2 and 3" or even say no business happened? How would the French gov check that? Get the list with all ads shown by FB over a month along with who they showed the ad to so the gov can check if those people where in France or not?


> Get the list with all ads shown by FB over a month along with who they showed the ad to so the gov can check if those people where in France or not?

I think it would be closer to checking which French company bought ads from Facebook and for how much and taxing this.


This is the case no 1 in my post. What you quoted refers to points 2 and 3.


Sorry, I misread your post. I think that the tax don't apply for points 2 & 3, since it only concerns revenus made in France.


This tax is on sales and not profits, so won't it just become another line on the bill for French consumers? I imagine they'll just break it separately from VAT.

Retroactively they'll have to eat the cost though.


Yes, but only for larger tech firms, so this will somewhat level the playing field between large and small companies (offsetting the economies of scale that larger firms benefit from). This would hypothetically lead to greater consumer choice, which is probably a good thing.


What happened to a company who has no physical presence in France refuse to pay the tax on the ground that France has no jurisdiction upon them?

Ordering French ISPs to block the web service of that company thereby breaking the fundamental human right of freedom of speech and no censorship.


I'm not sure the assumption that other countries give a damn about what the U.S. Constitution says is correct.


If they have French customers, the French government has jurisdiction.

If they don't have French customers, the French government blocking them would have no impact.


I'm not sure that fundamental right is correct, at least, outside of America. There's no fundamental human rights of freedom of speech and no censorship in New Zealand for example, as enshrined by law.


There are no freedom of speech laws that would apply to a corporation rather than a human, that I know of at least.


Newspapers etc. regularly use Article 10 (freedom of expression) of the European Convention on Human Rights to protect their ability to publish.


That freedom of expression is for the journalists, not the newspaper - that is my point.



Blocking a website is not “breaking the fundamental human right of freedom of speech and no censorship”, at least not in France.


Simple.

France informs their customers that they need to withhold part of or even all of their payments to said company under penalty of criminal sanction. Customers comply, non-French company receives less money.

Non-French company then has 2 choices: accept defeat and pay the French tax, or cut the French customers and accept less revenue.


Well commerce isn't so unrestricted for one which gives tangible reach. They can easily forbid financial transactions and freeze accounts to tax delinquents.


I'd guess it's even more palatable for France if the US threatens. The combativeness from the US helps foreign leaders to look stronger by creating a nationalist confrontation.

Is this tax functionally different from tariff?


Given that French companies are also affected, I fail to see how it could be construed as a tariff. The goal of tariffs is to penalize foreign corporations. That tax is directed at a sector. It will not help the few French actors in that sector become more competitive.


It will create a local market opportunity if FB, etc, pull out. See Austin vs. Uber - the absence of ride-shares launched local alternatives that quickly took that marketshare until the locality changed it's stance.

It will likely act much like a tariff as I doubt any of these megacorps will pull out.


There is only one French company affected as another commenter pointed out.


There may be a complication : As EU is a single market, US retaliation (except maybe on Champagne and Camembert ...) cannot be targeted on France but on the whole EU. For example, Airbus headquarter is located in the Nederland, and has factories all over Europe. As such, EU will have to enter a fight a single country started. I really wonder what will happen next. Maybe Texas could raise the tax on red sole shoes https://www.google.com/search?q=red+sole+shoes ?


As much as I support governments cracking down on companies trying to dodge paying taxes, I can't help but feel like this is just for show.

Since the yellow vests protests started last year(yes, they are still happening, although the number of protesters has been decreasing rapidly), the French government has been under pressure to stop taxing the middle class and go after other entities/individuals to raise money.

It is no secret that France and most of the developed world is technically broke. With a debt to GDP ratio approaching 100%, the French leaders have to find money quickly or the whole welfare state will come to an end sooner than later.

Considering the fact that this tax is supposed to bring in 400m per year, it is basically a drop in the ocean.

But, what will happen is that Macron will spin it as a success and will tell people: "See we are taxing the bad guys."

In the meantime, he will keep on increasing the taxes on the middle class covertly.

The problem is that in a normal functioning democracy, the proceed of the taxes is used to increase the well being of the population.

In France though, all new taxes raised are not used to create or maintain infrastructure or even subsidize basic services for its citizens.

Most of the proceeds are actually used to pay off the debt. See the carbon tax from last year when the government admitted that only 50% would be allocated to actually fight climate change and the rest would be used for some other unrelated things.

France as a whole has never been more taxed than now, and yet public services and public infrastructure(or whatever is left of it, after they nearly sold everything to private corporations) is falling into disarray.

Emergency rooms are closing(They have been on strike for the last 3 months now), social services have been cut back, roads on the countryside are full of potholes, electricity/gas prices keep on increasing.

The middle class is being bled dry by an overzealous state that does not know what to do anymore to fix the problems it created in the first place.

For the last 30 years politicians from all sides of the political spectrum have done one thing and one thing only. Instead of reforming, they just tax, tax and tax more. Until there nothing left.

That's why France is dying. That's why people like me who do not like what France has become have left to create companies/ pay taxes somewhere where I don't feel like I have to share 50% of my money with a state that provides very little to me.


Taxes are never fair, that's why you'll never agree on them. It's a game of coercion and the only thing that can be done is choose who's the sucker that's gonna pay.

Taxing big, multi-national companies is something that I can live with, strangely. I know it's wrong, but still less wrong than having poor/middle-class directly pay the bill. In the end they have the money to pay tax consultants and the money to deal with it.


I think the Brexit negotiations have probably shown Europe the power of sticking together, and presumably France feels that the rest of the EU has its back here.


No, EU isn't backing this, because in that case it would have been an EU-wide tax, not in just in one country. The EU tried to establish an equivalent tax, but there was pushback from countries that are taking advantage of it (Ireland, Luxembourg)

Edit: From the French newspaper Le Monde [1], it was Ireland, Sweden, Danemark and Finland which opposed the idea. And from this article [2], Germany didn't help a lot, fearing tariff on their car industry.

[1]https://www.lemonde.fr/economie/article/2019/07/11/le-parlem...

[2]https://www.lemonde.fr/idees/article/2018/12/06/taxe-gafa-un...


I think this will play out differently, and doubly so if American sabre rattling continues


Ireland and Luxembourg are a small minority, fortunately or unfortunately.


I just hope the US does not "retaliate" on this. EU entrepreneurs are too dependent on US businesses.


How, they would also tax big companies "hidden" profits ? Some US citizens are asking for this already, the French tax is not target at a country.


They would tax digital companies doing businesses in the US.


Would they exclude US companies doing business in US?


obviously yes. we are in a trade war


This makes no sense, France is not excluding french companies. there is no war , they probably need more money so they found some group to tax, in Romania the government is also in big need of money so they put a tax on telecom companies, should the UK queen get upset now if a UK telecom company that makes business here is taxed more? I mean there are no exceptions or protectionism involved but some politicians can let an opportunity to spread their agenda.


I really wish US companies would take a more forceful approach with these rogue governments. “You get off our back or we pull out of your countries”


I would be happy if those spy organisations like Google and Facebook would leave my country.


Google provides some genuinely useful services, like Maps.

Facebook, on the other hand, isn't something that anyone really needs. What value does Facebook actually provide anyway, besides giving people a forum to post boring family photos for grandma to look at? I guess Facebook Marketplace can be sorta useful for selling your old junk, but that's the only thing that comes to mind.

Remember also that there's only two players in the smartphone market: Apple and Google (which makes the software and app store behind Android). If you loose Google and Android, that means everyone's going to be sorta forced into buying an iPhone unless they want to go back to flip-phones. Do you really want an Apple monopoly in your country?


Facebook provides the great service of keeping them all over there. Imagine if all that crowd descended on HN.


Don't be silly. Even if FB disappeared tomorrow, "that crowd" isn't going to come to HN, just like they're not going to suddenly develop an interest in, say, electronics and start hanging out on message forums where people talk about how to design PCBs, or an interest in, say, astrophysics, and start hanging out on message forums where people talk about gravity wave detection.

No matter what happens to FB, you're safe here.


As an American whose taxes are heavily subsidizing these companies, I too hope that they pull out and are taught a lesson in paying taxes.


Sounds like a great recipe to end US tech dominance and tank the market cap of global companies.


"Rogue governments"? The governments do not derive their power from U.S. or from tech companies. Regarding pulling out, that is always a possibility, but very unlikely one, even if the taxation was higher than what France demands.


Looking at the list, and as a citizen of an European country: yes, please, do pull out.


Bye.


We've asked you before not to post unsubstantive comments here. We ban accounts that keep doing this, so would you please stop?

https://news.ycombinator.com/newsguidelines.html


Very interesting comments that reflects the difference of values between french and north americans!


Absent all this talk about fairness or not, if one were watching CNBC today, Cramer and the other analysts were asking themselves "what exactly is France selling to the U.S" and this is the list they came up with:

1. cheese 2. wine 3. ....

After a couple minutes on the discussion, they came up with Airbus (not strictly French and made outside of France).


Please do this in the US, and use the money to fund the green new deal.


Amazon should and probably will just raise prices for French shoppers.


Btw, on a tax manner, are these companies really American?


> The French government has argued that such firms headquartered outside the country pay little or no tax.

Isn't that largely due to EU laws and the decisions of Ireland and a couple other countries.


Let's say it is. Why would that change anything? France's government isn't trying to target or punish anyone (whether Ireland or Google), it just wants to stop the corporate tax avoidance it sees as unfair.


What you call avoidance is the essence of EU. Undoing that would bring us back to pre-EEC situation


Tax avoidance via jurisdictional arbitrage is certainly not the essence of EU.


Cross border trade is. And digital businesses , finance, shipping , and many more will increasingly become remote. Right now EU artificially inflates local presence with regulations (by e g not having a bank union). Like it or not though, free trade zone means that taxes wont be paid uniformly. I know that tax avoidance is seen as unfair but it was enabled by the Union.


Cross border trade does not require allowing for the tax avoidance. And the E.U. is changing, just because something was enabled long time ago does not mean it will remain the same. Free trade zone can have many forms.


And yet they couldn't find a way to have both without imposing this tax.


I'm saying if the EU states all worked together on taxation rules none of the tech giants could take advantage of them. Also Google could do a little payback by moving the higher pay jobs from France over to neighboring countries like Germany.


The EU can't work together on this, because their motives are incompatible. France, Germany want the corporations to pay taxes in France and Germany for the business they do in those countries. Ireland's business is offering a tax cut to the corporations so the corporations don't pay taxes in France or Germany and Ireland get's a cut in return. Ireland has no interest in changing this, obviously.


European regulations and taxes always come up in these threads and some libertarians complain about how it's an unfair way to treat a digital company that shouldn't pay taxes.

Just remember that the United States are subsidizing tech companies (tax amnesties) and all the upside (high salaries, innovation, stock market growth etc...) is going back to the US while the downside of tech companies (electoral manipulation, teen depression, tax avoidance, privacy breaches) is only felt in Europe with no upside.


In addition, the United States is exporting its tax system around the world and imposing costs on the rest of the world in the process via FATCA and FBAR.


Aren't they already taxed in Ireland, another EU country? Isn't this double taxation?


Yes, France wants money too. Not unreasonable, considering the companies' activities involve French infrastructure and French citizens.


This entire thread shows how much of a waste of time it is discussing taxes or government or social services (socialism!) or markets with Americans. They have such an incredibly skewed point of view based on an insanely unfair and unjust system of everything in the US.


Amusing to read political comments on HN ... It is like discussion about programming laguages, just church wars ....


Trump is right on this one -- this measure is definitely anti-competitive and specifically aimed at American tech companies. I hope he is swift to retaliate with appropriate tariffs. Failing to do so will bring a wave of random EU taxes on American tech companies, which will eventually lead to lower profits and engineer salaries.


How, did you forgot how big US is? We are reminded here on HN how big US is, so it is natural that some US companies will also fall into that tax laws. What will Trump do? tax smaller companies so non US ones are hit harder ?

Off topic, did the China tariffs had any good side effect so far?


Arguably the China tariffs are resulting in manufacturing being distributed to other countries. This could be considered a good side effect from a fault tolerance perspective.


Agree, also China,India and other countries will invest more into reducing their dependencies on US which is as you said good from a fault tolerance perspective


This trade war might help Chinese capital equipment manufacturers as they can sell to the new factories in other countries.


Which China tariffs? The extreme ones China had been using the last few decades or the recent US ones in response to China's longstanding tarriffs?


The ones we read on HN, were there any good consequences so far?


[flagged]


The HN guidelines ask us not to be snarky.


I appreciate the frank comment. Thanks


Instead of taxing companies because it’s an easy method to steal money, maybe France should focus on enabling their people to create a company like Amazon or Facebook and actually generate wealth instead of taking it?


Why wouldn't they do both? "Stealing" money via taxation is a legal and logical way to get some money to support their other operations, perhaps even "enabling their people".


too hard




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