From a purely national interest standpoint, it's hardly surprising the US would be uninterested in negotiations given the fact it's the global digital products leader. While it's certainly true some such rules are worthwhile at the minimum tax level to stop global mega-corps avoiding taxes, like the old Double Irish loophole [1], the negotiations didn't break down over such provision, as the article mentions.
The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here.
The worst part about taxes like this is that they make it even harder for Europe to ever catch up. Taxes like this will make Europe a less attractive location for a business like that. Investors will be less likely to invest, there's a greater regulatory burden for anyone who does want to start the business, and you will and up paying more in taxes.
Europe has VAT, which from a simplified perspective means that businesses don't directly pay any consumption tax, but have to charge VAT on the value of the goods and services sold to consumers.
So for purchases within Europe, the end consumer is already paying a 25% tax on the digital services provided by google.
But for good and services sold outside the EU, and remember that Europe have export driven philosophies, there is essentially no government revenue from foreign digital services.
Europe deserves compensation for buying American digital services in the same way America deserves compensation for buying German cars. It doesn't. Instead it needs to focus on a more competitive business environment where the money is cycled more times through the economy before ultimately making it's way to the government.
Every time I think to myself "Well, at least I'm not a libertarian," I read a sentence like that and after first getting confused (What does that even mean?) I then feel sad because I'm pretty sure if I parsed through the logic it would turn out that I after all more of libertarian than most of the people I know.
> they make it even harder for Europe to ever catch up
You've stated this as a fact, but it's not self-evident. There are obviously cases where some degree of "protectionism" makes sense. For example, you probably wouldn't want to let yourself get into a situation where another country supplies 100% of your food, if you could help it. As an extreme case, if you can produce all your food locally and it only makes your food 1% more expensive (than the tariff-less case), that's very likely a great trade-off.
Some degree of protectionism can make sense in certain circumstances. I'm not claiming it necessarily makes sense in this case (could very well be a terrible idea), but I think you'd need some evidence or reasoning behind the claim that it's definitely a bad thing for Europe.
From a purely national interest standpoint, it's hardly surprising the US would be uninterested in negotiations given the fact it's the global digital products leader.
A time will come when the US is not the global digital products leader. I surmise that the US will then be very much in favor of digital taxes.
>The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States.
That is undeniably one aspect of it. However, I think the other one is that digital services have become a larger part of the world economy and they are structurally unlike anything that existed when the current rules of taxation were devised.
Traditionally, services required people on the ground and local subsidiaries that were subject to taxation and regulation. For instance, you can't run banking and insurance services for European customers entirely from the US. Trade in goods always benefitted from geographic proximity as well, even without tariffs.
A situation where you can provide services to a huge number of customers on the other end of the world without any local representation or taxation of corporate profits (or other income) is historically relatively new and does in my view justify calls for reform of global taxation.
>They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff.
Claiming that trade imbalances as such are somehow unfair and need to be remedied is in my view nonsense, but it is an idea popularised by Mr. Trump himself.
You can't have it both ways unless you accept that mercantilist power politics is all there is and neither enlightened self interest nor principles play any role whatsoever. I think we can do better than that.
The logic of the tax is "a product consumed on a territory is subject to tax in said territory". Saying this is akin to an import tax is like saying the VAT is an import tax.
I find the fact talks fell through particularly concerning as right now we should all be presenting a united front against China.
I also think they should call this a digital tax or apply it only to digital services. I understand that’s where the biggest impact will be felt but a minimum corporation tax rate shouldn’t depend on business type and I dislike the idea people are free to target companies for being “too successful”.
I don't think the US (or the EU) can change Chinese policies on a list of issues alone. At least not without a tonne of backlash at home over the economic results. So the EU (/US) (plus a list of othets) either need to unite on those issues or accept them happening.
The issues I'm thinking about are: Hong Kong, freedoms in wider China, treatment of minorities, coronavirus and the recent clashes in India (I don't want to take sides, I just want two nuclear powers to stop shooting at each other). You may disagree with one or more of these issues. But I'd be surprised if you think nothing on this list warrents at least some international pressure?
I'm more than happy to admit that none of the places I've listed are perfect. And we all have bones to pick with each other. But right now we're squabbling over very little while China sets up camps and deployed troops...
Because China is threatening the global order on which peace and prosperity lies, starting with the freedom of the seas.
China is already harassing and sinking fishing vessels and trying to close the South China Sea. It may soon try to enforce an ADIZ over the SC Sea as well. Not great.
China is a growing aggressive power with cyber attacks across a multitude of countries and is running, like Russia, disinformation campaigns to undermine democracy.
It is in the interest of EU and the US, and indeed many countries, to have a rules-based international order. It is increasingly in the interests of the US as its power is in relative decline.
> The US isn't the only potential ally against Chinese influence, why should Europe align itself with America instead of other countries?
Of course! All countries that value a rules-based order should ally, and that would include the EU, the US, India, Australia, and the many other smaller countries.
> Also, do you think there's no argument to be made for changing China's behaviour through a partnership?
Been tried. India was trying that by letting China have a stake in the economy. It hasn't ummmm worked out so well.
China uses the economy as a tool for its own political aims.
We all know this, but Europe has no trust in the US under Trump.
How can you not see that they are waiting till trust re-appears.
1 example: If Europe would really partner up, Trump would require Russia to be in the table ( G7). The current situation is nuts and it's not Europe's fault.
Ps. Trump has no interest in peace and prosperity. Haven't you been paying attention? The US has never been this divided and the current leader thinks tweeting is more important.
> Ps. Trump has no interest in peace and prosperity. Haven't you been paying attention? The US has never been this divided and the current leader thinks tweeting is more important.
Trump's only interest is re-election.
The US govt is a huge entity with may players of which the president is one, albeit an important one. The US military, State, academia and other institutions are all actors and they do have an interest in peace and prosperity.
Presidents come and go, but institutions remain and it is important that the relevant institutions adopt a common posture towards China.
> How can you not see that they are waiting till trust re-appears.
The EU cannot afford to wait that long. China isn't taking a pause on its aggression. Indeed, its exploiting the US under Trump, Covid, etc to move aggressively now.
> The current situation is nuts and it's not Europe's fault.
"fault"? It doesn't have to be your fault if the mess still ends on your lap. And Europe (and I'm a European) being neighbours with Eurasia doesnt have the luxury of huge oceans separating it from revanchist powers.
Trump is a moron - threatening to withdraw US troops out of Germany is a gift to Russia.
But the EU cannot wait for Trump to go away because if he wins reelection that could be 5 years away. We don't have that time. The EU needs to work with what its got - work with India, Australia, PacRim countries.
The problem is that the EU is itself split with different interests. Someone has to provide leadership. The US president is the natural option but Trump has not stepped up. Someone else needs to - it cannot be Merkel as she's stepping down soon, but we urgently need leadership on the issue.
The only sane option currently would be to exclude Trump.
But that would cause additional problems because of his ego and childish behaviour. So the best thing currently, is still too wait. It will happen if Trump gets re-elected.
It's not easy for someone new to step-up immediately as the so-called leader of Western democracy.
We all know that Obama and Merkel were potentials/it and Trump isn't. We'll c.
Ps. I think the current/best move to counter China already started. But it seems to bit below the radar currently.
How is it not Europe's fault? When it comes to digital businesses it's almost entirely Europe's fault. It's European countries that have been trying left and right to somehow squeeze more money out of largely American digital businesses. From the new digital taxes in France and Italy to the Google News row in Germany and Spain. This stuff started by Europe way before Trump ever entered the picture.
No, it's not European money at that point. It's the corporation's money, but that's beside the point. The point is that those companies tend to not have the same representation as the local companies do and that some of those governments are willing to use their rules to benefit those local companies, especially when it gets then extra revenue.
It's not like those European countries have a gun to their head. They can always just create their own Google, Apple, Microsoft, Samsung, Sony etc and stop using the products of foreign corporations. As a European, I personally very much like the services provided by these foreign corporations. I have many issues with them, but they are way better than (most of) the things I've seen made here.
There is already different tax regimes based on business type, it's not something new.
I personally think it's a good idea.
Our current tax regime has not been thought for this kind of business. Businesses like Google are something totally new, trying to apply the current tax system on it just doesn't work.
I find it perfectly logical to create a new tax system that is a better fit, will stop this cat and mouse game of optimisation and finally have those companies contributing to the country they operate into the same way other conpanies does.
After, i'm not an expert so I can't say that the system pushed by EU is the best idea or not.
But they already do contribute to those countries. This is simply protectionism plus at work. Squeeze more money out of foreign companies operating locally, because you can. It'll just lead to the world becoming clustered again like before. We're already seeing it happening with the internet - China is already apart from the rest of the world. Russia has been testing the same thing. Europe is essentially trying to isolate itself from the rest of the world by making rules nobody else has. The trend is moving towards separation, which also means that everyone will have to figure out their own technology.
This is just not true. Google for example routes the profit it makes in France to other countries to avoid paying taxes. That's where the current tax systen doesn't work and a new one is needed.
Yes, they avoid paying some French corporate taxes. The French have been fully aware of this for decades. Even if they somehow missed everything else, the Lisbon Treaty was rejected by the Irish until they got assurances from the EU that it won't affect taxation. Part of the reason the EU exists in the form it does is due to this taxation.
To follow on from your mention of China, it seems like TikTok could provide instructive discussion questions here.
Does the U.S. and silicon valley want to continue to manoeuvre and lobby to exempt tech companies from tax dues on revenues generated from digital attention and data gathered from users overseas?
And if so, does TikTok have to pay tax dues in return for similar revenues generated from U.S. user data?
The short-term balance sheet benefit to tech companies from avoiding overseas taxes seems understandable, but the longer-term implications of setting a precedent like that on an international stage seem less clear to me.
Because of Trump, US allies have to guard more corners than before. It's a serious problem and I think Trump is actually giving Russia/China an unfair advantage.
He has already destroyed the Asian partnerships against China that Obama started, he also got out of numerous Western partnerships because it wasn't his signature on it.
I would say that the problem is not Europe, it's 100% Trump. Allies won't back him since they can't trust him. Everyone knows he's trying to have as much as personal gain as possible. Even meddling in European affairs,. Eg. Ukraine for the clear sake of money).
Every time Trump suggests to help countries handle their affairs, you know he's going for the "pay Trump, get US military assistance" card, it's nuts.
The Western alliance since WO II can't survive in it's current form if Trump would get another term, they are all waiting till someone sane comes back. If it doesn't happen, it will become a serious problem :(
TLDR; If you wouldn't trust Trump as a business partner, how can other countries trust him. You can't unite/partner with a person like that.
Edit: if down vote. Please share something that Trump seems trustworthy without personal gain. I haven't seen any situation during his entire term, trying to redirect US-money to his pockets.
Russian economy is weak, agreed, but militarily they are still the only significant threat to US global dominance. China's military is much weaker in comparison.
China is a vastly bigger consideration. If China decides to invade Taiwan the US could lose access to most semiconductors. China’s military is developing rapidly.
If Russia were so inclined (I don't think they are and don't see why they would be) they could turn the Island of Taiwan into a pile of gravel on the floor of the China Sea. They have several thousand nuclear warheads with the means to deliver them; more than enough to overwhelm any extant ABM system.
For that reason if for no other, I think an American conflict with China is more likely than a conflict with Russia. China still has hundreds of nukes too, which is hundreds too many, but that's many times less than what Russia has.
To be clear, a direct war between any three of these countries would be a stupid, horrible idea.
This is not well-understood by the general public, but Trump's power as a statesman is his unpredictability.
If you don't know what or where he will be next, how do you counter him?
Reagan kept the Soviet Union off balance to the point of dissolving it. He's considered one of America's greatest statesman today, but called a clown by the elites at the time.
The CCP should be concerned about the same fate if they trifle with Trump. They have given every reason for him to isolate that country.
Merkel did an excellent job at countering him. Or at least, she earned a lot of respect with voters and other European politicians for it.
Basically, she was just presenting it as if she's babysitting a naughty kid.
So the way to counter Trump is to make obvious the irrelevance of what he's saying or tweeting at any given moment, because he might change his opinion an hour later.
> Trump's power as a statesman is his unpredictability.
Please don't mistake unpredictability to untrustworthy, ego-centrism and self gain driven behaviour. The guy clearly lacks any social decency that toddlers even know.
Reagan did this only as a strategy to USSR, but Trump is clearly influenced by self-gain and ego-centric. He is very predictable, if you use that as a variable.
Reagan also supported anti-communism countries and saw the strength in allies. Trump stands alone, every where he goes and doesn't have the brain capacity to lead a country.
I think you haven't been paying attention the last months. The US has never been this divided, Trump resembles a con-man/lunatic a lot more.
> My book doesn't come out until later in the summer, but I'm going to tell you now one thing that you'll find in it: all of the reporting indicates that Barr is involved in the dubious funding of the Trump 2020 campaign by foreign sources. This is all a lot worse than you realize.
Didn't surprise me
> Trump's power as a statesman is his unpredictability
As said earlier
> Please don't mistake unpredictability to untrustworthy, ego-centrism and self gain driven behaviour.
Trump's power as a statesman is that he doesn't feel the need to ride a horse.
Starace rode a horse.
Reagan rode a horse.
Putin rode a horse.
Le Pen rode a horse.
Kim rode a horse.
Kadyrov rode a horse.
Johnson sat on a horse.
Bolsonaro rode a horse.
Do you ever see Trump on a horse? No, that's unpredictability for you. He doesn't need to do what the cool kids do. He's a leader, not a follower.
Trump is the most failed businessman ever, he burned through all of daddy's money.
No sane person ever gave him any credibility after following him. Eg. When he tried to influence the stock market consistently in 1987, they just started ignoring him.
He's just a one-trick pony, trying to do the same thing over and over again on a bigger scale ( he has some experience with it by now).
But the only consistency in his life is his failure.
Trump has been exceptionally predictable. He's unreliable as an ally, he has no plan on any subject, but he'll do anything for a dollar or a flattering headline. That's it. You think Putin is predictable because he did a horse photoshoot? Jesus.
You will indeed see it in November, not long anymore :)
Edit:
> My book doesn't come out until later in the summer, but I'm going to tell you now one thing that you'll find in it: all of the reporting indicates that Barr is involved in the dubious funding of the Trump 2020 campaign by foreign sources. This is all a lot worse than you realize.
On the contrary, it's necessary if corporations can operate internationally and transfer money untaxably between jurisdictions, otherwise the global effective tax rate is that of the lowest country.
What's wrong with that? Countries need to compete just like corporations. Small countries need someway to compete for global talent, and low taxes are a good incentive.
I would be even siding with you slightly if this amounted to actually moving people, facilities and capital to that country.
However, in the modern world, corporations don't just use low taxes to simply route massive amounts of capital through low-tax countries without a net benefit for anyone — they are actually exploiting tax loopholes in different countries' tax laws against each other.
If it doesn't benefit the Dutch, they would (and I understand they have at least attempted to) close the loopholes. For instance, they could require more presence in the country in particular ways: physically, employed citizens, cash in banks, taxes paid, etc.
If the beneficiaries are bribed individuals in various governments, that would be another thing entirely.
But these both clearly benefit Ireland and the Netherlands. Many of the major international corporations in the EU are set up in Ireland. Do you think that would be the case if Ireland couldn't attract them with the better tax offers? Ireland even had a referendum that initially rejected the Lisbon Treaty until Ireland got guarantees from the EU that it wouldn't affect their taxation.
Apple has 137,000 employees of which 80,000 are in the United States and 22,000 are in Europe, and of those 6,000 in Ireland. However, 64% of Apple's sales are (or at least were in 2017) outside the US, which then get funneled to Ireland, despite only housing like 4.3% of Apple's global employees.
They're just shifting money, not talent. Money which is then taxed at a very low rate (Apple International had an effective corporate tax rate of 1% in 2003, which was shrunk down to 0.005% by 2014) and in return doesn't really benefit the people of that country.
In practice, what is done is that big corporations have their headquarters in a few well-developed jurisdictions that have very strong laws to protect their shit (London, New York, etc.) but use shell companies in offshore locations that just offer a mailbox.
I don't have an issue with a bank being based in the Bermudas or anywhere, for example; but in that case the HQ should really be based there. There is the same issue with ships registered using flags of convenience. Again, I don't have a problem with that per se. But if there is dispute involving your ship, you go ask Liberia to sort it out. You get your insurance from Liberia too; you get the picture.
Now, being French I'm also well-aware that French politicians are completely unrealistic and want to tax French companies doing business abroad in France, and American companies doing business in France, in France (notice the pattern?) There is a middle ground.
Oh wait the only international orgs with any teeth are the IMF and the World Bank who support each other in a non-competitive, mutually-supportive, DC-based relationship. Too bad these countries were fucked centuries ago I guess.... it was foolish to hope to begin with.
If you care about fair trade at all, a minimum tax rate is necessary, else you might as well put it at 0, because that's what it will fall towards eventually.
The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here.
[1] https://en.wikipedia.org/wiki/Double_Irish_arrangement