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
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.
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.
By comparison, most European countries don't tax companies on foreign earnings at all.
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.
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.
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.
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.
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?
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 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.
Unfortunately in these cases, perception is just as important as the nominal reason.
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."
I really don't think it's sour grapes so much as trying to address the Irish/Luxembourgish tax schemes
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...
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.
also, tax-evasion and tax-reduction are two different things, equating them is an argument in bad faith
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.
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.
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.
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.
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.
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 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.
Tax on revenue disincentivizes progress and R&D.
Not sure I follow
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.
They could pick arbitrary ways to bisect the set until they get the desired result.
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 :
• 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.
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.
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.
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".
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.
On the other hand, most revenue is probably B2B and business reclaim their VAT.
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.
yeah, so taxes make sense to pay for the roads, bridges and healthcare that these ads are using.
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.
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.
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).
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.
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.
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.
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.
They absolutely do. They implicitly use courts, police, customs, trademark/contract enforcement, etc.
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 ?
I'm writing this via a glass fiber connection supplied by "Orange" (formerly known as France Telecom)
Google only pays VAT on purchases (for its own use) that it will sell on to customers.
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.
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.
Sogeti merged very soon after it was formed. It's never really been known as its own company.
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...
Could you explain what do you mean by this, and provide specific instances?
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.
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).
… 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).
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.
VAT is a consumption tax. It is - by definition - only paid by consumers.
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?
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.
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.
What are the negative externalities of AWS and the likes?
You cannot compare pears with apples.
What do you mean by unwanted externalities? Unwanted by who?
Edit: companies -> countries
Making people pay to access Facebook etc would be the best possible move for society ever.
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.
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, 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. 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?
 Whether FB or regulators should set that value is up for discussion.
 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...)
Regulators are not quick, give them a year or two to deliver the fines.
E.g. facebook could be forced to give you discounts for your card or sth.
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?
I think it would be closer to checking which French company bought ads from Facebook and for how much and taxing this.
Retroactively they'll have to eat the cost though.
Ordering French ISPs to block the web service of that company thereby breaking the fundamental human right of freedom of speech and no censorship.
If they don't have French customers, the French government blocking them would have no impact.
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.
Is this tax functionally different from tariff?
It will likely act much like a tariff as I doubt any of these megacorps will pull out.
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.
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.
Edit: From the French newspaper Le Monde , it was Ireland, Sweden, Danemark and Finland which opposed the idea. And from this article , Germany didn't help a lot, fearing tariff on their car industry.
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?
No matter what happens to FB, you're safe here.
After a couple minutes on the discussion, they came up with Airbus (not strictly French and made outside of France).
Isn't that largely due to EU laws and the decisions of Ireland and a couple other countries.
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.
Off topic, did the China tariffs had any good side effect so far?