I'm not sure of the details of Spain's proposal but something needs to be done really to make taxation more fair. At the moment you get headlines like "Facebook paid just £28m tax after record £1.6bn revenues in UK" because they fiddle it with offshore tax havens while normal UK businesses have to pay more like 30% of their income in tax, not 1.7%.
> "Facebook paid just £28m tax after record £1.6bn revenues in UK" because they fiddle it with offshore tax havens while normal UK businesses have to pay more like 30% of their income in tax, not 1.7%.
This conflates a few things. As I'm an American, I'm going to speak about US tax law, but concept should be applicable. No normal US business is paying taxes on their _revenues_, they're paying taxes on their earnings (profit, roughly speaking). So if you made $1B in revenue selling $1 bills for $0.50, you'd have lost $500M and not have to pay taxes on top of that.
The point about fiddling with where revenue is accrued to impact tax rates is true, but the more accurate way to phrase it would be "FB paid only $X in taxes after record $XXX earnings in the UK". This isn't always as simple to derive, but you could back into an estimation of it by taking revenue from UK businesses and subtracting UK headcount and purchases made in the UK or from UK businesses. The tax number they'd owe is definitely higher (and there's a very strong argument that they should pay this rate), but it's not anywhere near "corporate tax rate * revenue in country" (or worse, global revenue).
normal UK businesses have to pay more like 30% of their income in tax
UK corporation tax rate is 19%.
USA corporation tax rate is 21%. Pushed down partly due to low tax competition from the rest of the world, i.e. places like the UK.
Facebook pay little corporation tax in the UK because it isn't a British company. It's an American company. It was created in America. Most of its employees are there. Its headquarters are there.
The EU works the same way. Corporate taxes are levied where the company is headquartered. It's arbitrary but all other ways to try and divvy up something inherently multi-national are even more arbitrary.
I am British myself and I really don't understand why my fellow Brits have such a hard time understanding this - foreign companies pay little UK tax on profits because they are foreign. They were not made in Britain. If Facebook had been formed in the UK then for sure, most of its corporation tax would be paid to the Exchequer. But unfortunately it wasn't.
I'm sorry if this is a misunderstanding but I thought you pay tax where you do business. So Facebook should be tax on profits generated in the UK - but they play with their corporate structures to make it look like they aren't actually doing any trade here.
1) If you pay tax where you do business do you pay tax on global profits there? For example, France’s new law taxes 3% of global revenue if you do more than €28m in business in the country. Should it be taxed on 3% of global revenue or on the exact amount of business it does in France?
2) If BMW sells a car in the US, do we tax BMW global for doing business in the US at the 21% tax rate?
“ The levy designed by Spain included a tax rate of 3%, which would be applied to certain digital services from tech giants whose global revenues exceed €750 million and whose earnings in Spain are greater than €3 million.”
So let’s say the US goes back to Europe and says ok Europe, all of your best industries/companies face a 3% tax if you do more than a million dollars worth of business. How would those companies react? Think they might press their governments to do something about it?
I’m not a fan of tax-avoidance or anything, but I hardly think this proposed solution is fair, or won’t elicit a significant response from the US. It’s protectionism - so call it that and make sure you are railing against the internet about it like you do when Trump does random tariffs.
Spain doesn’t export a lot to the US maybe? Ok then the US can just pick and choose Eurozone members to arbitrarily tax. That’s what I’d do. 15% tax on global revenue for European cars sold in the US. Why not?
Governments generally tax everything they can think of. So there are many different taxes and Facebook pays them all.
There's VAT, which is essentially passed through to their customers but the seller collects it.
There's employment, local government taxes. Facebook pays those because it has workers in the country.
There's corporation taxes, which are taxes on corporate profits. Facebook pays some of these because technically speaking there is no one company called just "Facebook", there's Facebook Inc (USA), Facebook Ltd (UK) etc and they buy/sell services from one another. Specifically, Facebook USA buys software development and sales services from Facebook UK, and Facebook UK buys the rights to the name and the ability to insert ads into the ads system from Facebook USA. We think of them as a single firm but legally they aren't, and this follows from the lack of one global government so it's not a small quirk or weird legal hack Facebook are engaged in: there is literally no such thing as a company of the world.
To what extent corporate profits are allocated to specific countries determines what amount of corporation tax is paid, however, all such allocations are entirely arbitrary. None can be said to be more rigorous or accurate than any others, although tax lawyers make a lot of money out of trying :)
For instance, all of these positions could be reasonably argued:
1. Facebook makes zero profit in the UK and thus should pay no corporation taxes at all. That's because Facebook makes money due to the actions and software written by the employees in the USA; without the UK office Facebook would still exist but without the USA office it wouldn't. Therefore all money is "made" in the USA and none is "made" in the UK.
2. Facebook makes lots of profit in the UK because if every British person stopped using Facebook tomorrow, it'd punch a big hole in their revenue stream. The incremental costs of serving a British customer over an American customer is tiny because they even speak the same language, so once the US version of the site was developed, the costs were already sunk. Thus all revenue from British users is pure profit and so 19% of all revenue originating from British firms should accrue to the UK government.
3. Facebook doesn't make any money in the UK, it actually makes its money in the Ireland because that's where its EU registered headquarters is, and EU corporate tax law was designed to allocate profits to the nameplate location.
4. Facebook makes its money in Ireland because that's where the datacenters are. This is the critical aspect because it's ads are sold in real time auctions and thus the location where the click is processed is where the "sale" is being made.
Of course this is circular: in argument 2 we talked about "British firms" but what is a British firm? Is ARM? It's owned by the Japanese now. Maybe it's a Japanese firm. Or maybe it's still British because that's where most of the work is done.
Because the concept of "making money" for an international firm is so vague, and impossible to refine in a principled way, in practice what happens is a bunch of well paid corporate tax lawyers sit down with the government tax agencies and thrash out some sort of ad hoc deal or arrangement. The company agrees to pay some tax to the UK even though they may feel entirely American and in return the government agrees not to go to court and fight a very complex and expensive tax case that they might well lose, depending on the whims of the judge and/or how vague the various tax treaties are written.
> All countries tax income earned by multinational corporations within their borders. The United States also imposes a minimum tax on the income US-based multinationals earn in low-tax foreign countries, with a credit for 80 percent of foreign income taxes they’ve paid. Most other countries exempt most foreign-source income of their multinationals.
Facebook may be listed and headquartered in the US, but it's actually lots of companies, like most multinationals.
Facebook customers in Europe pay Facebook Ireland, who are subject to 12.5% corporation tax. Facebook Ireland in turn pays "licensing" fees to Facebook Cayman Islands, where there is no corporation tax and high bank secrecy.
Remember the Vodafone tax scandal? You might think that as a predominantly British company (spinoff of Racal in the 80s) listed in the uk, they ought to pay tax on the UK profits. Instead most of the profits appear in Luxembourg.
Maybe the UK and the rest of Europe wouldn't be so bad at building businesses if they stopped taxing revenue and focused on profits instead. I'm not complaining as an American since it keeps them dependant on our services but it seems silly. It's like they hate the idea of succeeding.
It would make more sense if EU countries would make laws that extend normal VAT to all internet business in EU and close all Irish loopholes. Google and others use Irish tax arrangement schemes like "The Double Irish" (base erosion and profit shifting), the Single Malt, and CAIA to avoid paying taxes.
Couldn't any member state just choose to tax daughter companies in their own country, whether or not those daughter companies were buying IP from the mother company in Ireland? Basically choose not to accept transfer pricing as actually reducing the profits in their country, so just tax them anyway. Is this actually against any EU charter? Because my impression was that EU basically does not have jurisdiction over how each country taxes companies within its borders, only that they have to do so uniformly (cf. the fine on Ireland and Apple where they were taxing Apple less than other companies in Ireland). As far as I can tell, what is needed to fix transfer pricing isn't a change of the tax law in tax havens, it's a change of the tax law in all the other countries that want to stop being exploited by them.
Uh really? Check any list of the world's tax havens, and you will see the British Virgin Islands, the Cayman Islands, the Isle of Man, and Bermuda. The City of London has been a conduit through which wealth has been pilfered to these territories for a long time. They may shout from the rooftops about others' improprieties, but I seriously doubt their commitment to meaningfully overhaul their own house.
In fact rumor has it that a major reason for the Brexit campaign was that there was a threat of very costly corporate tax loopholes being closed in new EU wide legislation.
That rumour isn't accurate. The origins of the Brexit campaign are well documented and understood, tax doesn't feature in it. It came out of the rise of UKIP who campaigned primarily on immigration and sovereignty, with the two being intertwined because, immigration was said to be high due to the EU forbidding any controls on intra-EU migration. That rise combined with long term Tory euroscepticism pushed Cameron to promise a referendum to win over UKIP voters, a promise he made good on, and then the Remain campaign lost.
Wow. The EU requires unanimous approval. The Europeans looks at the US’ Articles of Confederation and said, “we can make that work.” They need a rogue group of reformers that create a new system of government, illegally, like the US’ Federalists. Only then will the EU get its shit together.
Only for matters considered critical and sensitive for member states - finance, EU membership, harmonisation of legislation etc. it's mostly a hold over from the days of an EEC with 6 or 9 members (ie, right back when UK and Ireland joined in 73), when unanimity worked much better than it can now. Obviously to step back from unanimity requires unanimous vote without use of veto. :)
Most matters are done under qualified majority - which is a small super-majority based on population.
A post-Brexit UK going full on offshore tax haven might encourage the EU to get their act together on finance, and come up with some ways to crack down. Well, one can hope...
The reason the EU's system is so similar is that the circumstances are similar. If you don't require unanimous approval on critical issues then why would smaller countries ever join with Germany, France, Italy, and the UK around?
By persuading them. It's also much less of a problem that a small country as a bad actor takes advantage of the system compared to big countries abusing smaller ones.
While I agree about it making more sense that way, you only need one state to veto such a measure, and further integration is on hold right now. Plus the EU has it's hands full with Syria, Russia\Ukraine and Brexit.
So Spain can act now, or wait a few more decades...
That has already happened to some degree, we just need to expand it and simplify it. Within the EU you have to pay the VAT of the country of the buyer for "digital services". But shouldn't Google and Amazon already be subject to that since they have EU subsidiaries?
You have to pay the VAT when you sell to EU even if you don't have presence in EU. Google pays that. The fuss is about some countries wanting more than that.
It's a moot point who "pays". The tax is added to the transaction which means less profit for the company. I pay VAT. I can sell my product for X. Just because I need to add VAT doesn't mean I can magically sell for X +23% because people wouldn't buy it. The price is set by demand/supply. Paying VAT means the company makes less profit.
I send the VAT money to my government every month. If I didn't have to do that it would be my profit. "The customer pays" rhetoric doesn't hold water. Customers don't care how much of the price is the tax. They make their buying decision based on sticker value.
Yes, the same way if suddenly raw materials got more expensive. The prices would increase and the companies would make less money as fewer people would be buying. That is assuming the price before the cost increase or VAT was set at a point to maximize profits.
For ads at least, I'm pretty sure Google and Facebook are effectively paying 100% of that. As far as I know, their ad systems work on a bidding process and common wisdom is to bid the average profitability of a new customer * the conversion rate from those that click on your ad. Thus, as long as your bid wins out (you pay the second highest price) you will make money on each ad click.
This represents a case of perfectly elastic demand. No matter how taxes change, the price the advertiser is going to bid never changes and thus all taxes will be off burdened onto google and facebooks margin until obviously the point where the would lose money and then shut it off but that's unlikely to happen.
Their local EU subsidiaries are just for expenses and business.
These companies show their profits in places like Bermuda (British Overseas Territory) Ireland, or Luxembourg and use all kinds of schemes and special arrangements to reduce them.
I wish the article had more info on the mechanics of the tax. How do they measure “value” and what percent of the value do they want to collect as tax?
The ad sales might make sense, but why not just add a tax on all advertising.
The marketplace tax is confusing because do they tax the value of the transaction? The full customer value that results of the acquisition? Why not just use existing sales tax for retail transaction (which e-commerce is).
The last one is the hardest to understand. Do they mean sale of data from Spanish citizens? Or only people created data while in Spain?
It seems simpler to just create a “data sales tax” that happens specifically for transactions where data is sold to or from Spanish orgs.
I think this will just result in a tarrif on Spanish goods.
IMO the corporate tax rate should be zero, and then everyone would be on the same playing field. Right now the only companies that pay taxes are small ones without the resources and staff to get around it. With 0% corporate tax, all of these games and shenanigans would end.
Also, corporate profits are double-taxed anyway, as taxes are paid once on profits then again as dividends / capital gains by the shareholders. This is one reason stock buybacks are so popular - way to benefit shareholders without the ridiculous double taxes.
Who does corporate income benefit if not shareholders and employees?
The corporation can deduct the wages it pays employees, which is why they’re fully taxed at the individual earned-income level—this is the personal income tax. In theory, the corporate tax takes a cut of profits (i.e. what is due to the shareholders), so the capital gains tax is lower to make up for it. The problem is that the corporate tax is too easy to legally avoid for large sophisticated corporations, an almost impossible problem to solve within the international system. The solution is to just abolish it and tax capital gains at the same rate as earned-income.
Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.
> Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.
The issue is that you can already do this by using a corporation incorporated in a jurisdiction with no (or lower) corporate income tax -- which is what international companies and billionaires do and it gives them an unfair advantage, so we should level the playing field.
Meanwhile notice what you're really doing -- you pay no income tax only because you have no income. But that only works as long as you never want to spend the money. Which works great for Apple, because they don't have anything to spend the money on anyway, but they're already doing that.
The consultant making $100K is going to have to choose between spending the money (and so paying the tax on it) or taking a vow of poverty, because you have no equity to borrow against if it wasn't already at some point taxable income, and once you've spent that you still want to eat.
Yeah maybe eventually. Though people try to find loopholes eg. move abroad, transfer the money offshore, lend the money to the consultant from the company rather than paying him or her, send the money to a company owned by an opaque offshore trust and so on. Big industries spring up to facilitate the avoidance that lobby politicians to allow the loopholes and so on. It can get kind of messy.
Literally everything you mentioned isn't a loophole, it's tax fraud. Tax loopholes are what they do within a single jurisdiction to avoid taxes. What you're suggesting is transferring money from one jurisdiction to another, which can't be done tax-free.
On example under UK law is if you work abroad for a year and deemed non UK tax resident then you could receive income tax free during that period. The K2 scheme that Jimmy Carr took part in got a lot of coverage https://en.wikipedia.org/wiki/K2_(tax_scheme)
Yep. Eventually. Meanwhile Buffett's tax rate on his (and his companies) income is within the distance of epsilon from zero. Can you estimate when Buffett is going to need the bulk of the money from his compankes to buy a new house? How long heis going to have approximately zero tax rate, that is? My personal estimate is with a very good approximation 'never'.
Buffet pays capital gains taxes and most economists who argue for dropping the corporate income tax only recommend so with an increase in income/cap gains taxes or even merging them.
You could do this now, leave your profits in the corporation and borrow against the balance. I don't think it would work though, compound interest accumulating on the loan would soon eat the gains.
So don't let the interest accumulate. Taxes on the income needed to cover the interest wouldn't be all that high compared to taxes on the full amount of the loan. Or the loan can just be interest-free, but then you pay tax on the foregone interest as if it were income.
This seems like the obvious solution, make up the difference by taxing dividends and capital gains as if they were income. I'm pretty sure this is where we will end up anyway, there seems to be a race to the bottom.
It's much harder to move your family offshore to avoid tax than it is to move your profits offshore.
Capital gains is weird because there are several different ways to justify the lower rate, but then how it's calculated should differ.
For example, if you bought a lump of silver thirty years ago and sell it today, the nominal price is higher, but that's basically just a result of inflation. Shouldn't we be taxing the real gain and not the inflation? But in that case maybe instead of a lower capital gains rate we should only adjust the gains for inflation and then apply the normal rate.
Then you have the double taxation argument, but in that case you should either just get rid of the double taxation or dividends should be treated the same way.
And there are several others, but what they all amount to is that the lower rate is a bad hack and we would be better off in each case to account for the thing that needs adjusting directly instead.
I agree that corporate taxes aren't strictly required. They are useful though, if you think about international capital markets. Without corporate taxes, foreign investors could extract all profits from a company, without paying any income tax in its country of residence. You are right about double taxation, but you can think of corporate tax as a part of income tax that is guaranteed to benefit the country where the company is registered.
A man after my own heart. I've long been saying that corporate tax rates should be zero, but all dividend and capital gains rates should be taxed at regular earned income rates. What we have now is this weird system where income earned through investments is taxed twice (first corporate, then dividend or cap gain) but each at a lower rate. Just normalize everything.
Giant concentrations of not reinvested money are destabilising. Especially if companies are also allowed to run political campaigns. Arguably retained profits taxation should be higher than shareholder payout taxation to encourage either reinvestment or return to shareholders.
(Note that large categories of shareholders are in pensions or other tax-sheltered vehicles that don't pay capital gains!)
The problem with “it needs to be uniform and higher than 0” is that another sovereign country would have great incentive to set their tax rate at a fraction of yours. Income would then flow towards being recognized in that country.
You might call them a “defector”. Others might say “well, they’re sovereign and what does that mean if not determining how to set their national tax policies?”
Is a company that doesn't pay taxes actually useful?
I would have thought it would out-compete companies that actually do pay taxes, so it would reduce revenue (presumably) without increasing job numbers.
It seems extremely strange to me to think that the primary purpose of a company would be to pay income taxes to a country (as seems to be implied by the question of whether they’re useful if they don’t).
A company that doesn’t pay income taxes can still provide useful services to consumers, provide employment and purpose for workers, and those workers will pay income tax and employer will pay payroll taxes.
I guess I'm thinking that the primary purpose of a company is to make money - and the primary way in which this leads to social utility is through taxes.
Obviously, some companies provide useful and socially beneficial services, but many (most?) do not, or even provide socially destructive services (e.g. tobacco industry). Even in the case where they do provide social utility through their products, it strikes me that a company that doesn't pay income taxes is essentially taking away customers from one that does, and so, all of the usefulness is kind of amortized.
I guess the limitation here is that companies are not all fungible - if TSMC didn't want to pay taxes, you couldn't just replace them with another semiconductor company - they do sometimes bring unique utility to the table. But on balance, I think TSMC is a unusual case, and even there, the expertise and utility is almost entirely in the skilled workers and machinery, which would survive the company's dissolution (be picked up by competitors, etc).
> I guess I'm thinking that the primary purpose of a company is to make money - and the primary way in which this leads to social utility is through taxes.
The social utility of making money lies in the fact that in order to persuade people to give you money you have to satisfy their wants and needs. Taxation has nothing to do with it.
The social utility of taxation lies entirely in the proposition that the government can better decide how that money should be spent than the people that earned it. It is unclear that this "utility" is actually positive when considering the system as a whole. (The proceeds of theft obviously benefit the thief, but when you consider the cost to the victim as well it turns out to be a net loss.)
I don't think this is true at all, even if we accept that all wants and needs are good ones (opiods, for instance). I pay a substantial portion of my income in rent. That's not because my landlord is satisfying my wants or needs. Far from it. Actually, he's the most miserable, difficult person I regularly have to deal with. However, because land is a natural monopoly, I have to suck it up. There are many, many companies that work like this.
The social utility of taxation is simply that in a democracy, the people can decide what they need. Notable achievements of this system include stuff like courts, roads, and (in some countries) efficient, affordable healthcare.
> I pay a substantial portion of my income in rent. That's not because my landlord is satisfying my wants or needs.
If you don't need or want shelter then why are you paying the rent? Clearly the landlord is providing something of value to you.
> The social utility of taxation is simply that in a democracy, the people can decide what they need.
Nonsense. People can decide what they need perfectly well in the absence of taxation. It isn't a prerequisite for fair arbitration, travel, or health care either—all of these things have at one point or another been provided without any government involvement whatsoever.
I guess we're in ideology territory here. You know as well as I do that the word 'rent' does not refer to an exchange of services, but rather comes from money you extract through ownership of a thing - no matter the provenance.
People wouldn't mind free market radicalism so much if they were restricted to just those things in which a free market is possible. Otherwise, you can enjoy deciding which broadband provider you're going to choose, when there's only one set of cables serving your region - or any of the other great 'decisions' you can make when confronted with monopoly.
Or, you can nationalize, and give monopolies to an organization precisely designed to manage monopolies (primarily the monopoly on violence) in a way that's more or less livable.
We're straying away from the point here, though. I think it's obviously possible for companies to exist that serve no good whatsoever. Companies exist to make money. Unless there's an apriori link between some people making money and universal good that I'm unaware of, there's no way you can step around that. Therefore, making taxes zero will always be an unfair deal for some people - since there will be some companies that contribute nothing, and yet use resources and services provided by the government.
Obviously, you could have a mad-max style anarcho-capitalist system, or something, then all my concerns would be void, but probably soon, all your concerns would be too - and all of your neighbors, except that guy Benno, with the gun collection.
> Unless there's an apriori link between some people making money and universal good that I'm unaware of, there's no way you can step around that.
The issue here is that there is no such thing as an objective "universal good"; that's just code for "things of which I happen to approve". The closest analogue which actually does objectively exist is "actions agreed to by all participants which do not actively harm anyone else". Granting the participants the barest courtesy that they are in the best position to know their own concerns, such actions can be considered at worst neutral and in general a net-positive on the basis that the action would not occur if anyone affected by it did not see it a priori as being in their own best interest. Others may not perceive the action as "good", but as these others are by definition not impacted and thus have no standing in the matter, their opinion is irrelevant. Participants may be wrong about whether the action will benefit them, of course, and you are welcome to attempt to persuade them to your view if you feel their judgement is in error, but right or wrong this is ultimately their decision to make, not yours.
Obviously actions which harm non-participants should be out of bounds—that's something the anarcho-capitalists (a.k.a. libertarians), minarchists, and most others can agree on in principle, though for some reason only the anarcho-capitalists are consistent in applying the same rules to governments. With that caveat, however: companies exist to make money, and they do so by engaging in voluntary trades that each participant expects to benefit from. These trade are thus both individually and collectively a net benefit to the participants and either neutral or beneficial to everyone else, according to the only objective measure available.
If your happiness depends on others doing only those things which you consider "good", and not what they collectively see as their own self-interest, then I'm sorry but I really don't know how to help you. This is harm you cause to yourself and not any result of others' actions.
>there is no such thing as an objective "universal good"
I guess here is where we part ways. I can understand it in the sense of objective morality not existing, but I don't think it makes sense to say there isn't a common good. I don't know what the word good means if it doesn't refer to something that happens between people.
I think it's a basic function of groups that they establish what is and isn't good - that forms customs, then law. Obviously, this is a flawed process, but I don't think it makes sense to go total nihilist about it, and just say because you can't prove positive and negative outcomes about given actions, you shouldn't try.
We're fully capable as a society of discussing outcomes of various actions and laws - and that's what we've been doing since the beginning of time. You're doing it yourself when you say 'actions that harm non-participants should be out of bounds'. You're just drawing arbitrary boundaries around the few rules anarcho-capitalists consider sacrosanct[1] and saying that these are obvious, while others are matters of personal opinion that are indeterminate.
I think the idea of 'voluntary trades' is also a bit strange. All trades have side-effects, and most trades are with an element of coercion, natural or otherwise - people need food and shelter, they can't simply not trade for them. So even if you freely trade to build a dogfood factory next to my house, I'm implicitly part of that trade, because I live next door (or if you push the argument along, we're all implicitly involved in basically every trade, because we live on the same planet - e.g. global warming).
[1] - by the by, but I'm pretty sure these rules wouldn't be enough. If you look at early modern history, you can see that a lot of state formation was driven by the needs of capitalism - as states respond to one crisis after another.
Competition tends to lower costs for consumers and profits for companies. Lowered profits results in lower corporate income tax.
Shall we restrict competition, in order to maximize corporate income taxes paid?
I’m not opposed to corporate income taxes or making an “is theft” argument, but I don’t see maximizing corporate income tax paid to be a first-principles good outcome to seek.
That's a good point. I was more thinking in response to the conventional idea that there is a 'race to the bottom' when it comes to corporate taxes - which rests on the idea that a corporation operating in a given country is inherently good, no matter whether they pay taxes or not.
In general, though, I would argue simply that regardless of the specific tax revenue figures, if a company doesn't pay taxes, they get free access to a lot of services other people have to pay for. That is in essence a subsidy. There's no compelling reason why the public should subsidize a private concern.
This goes double for a competitive marketplace, where companies that aren't subsidized in this way will suffer (and have suffered - try competing with amazon on price while paying taxes!)
corporations benifit from state funded systems, so they should give back to the state. The state funds the streets they drive on, the internet they use computers first created by the government, they use are defended by copyright LAW that the government made to protect companies from copycats, they use money regulated by the government, they use employees that were educated (mostly) by the governemnt, smaller companies benifit from antitrust laws set by the government, corporations benifit from a standardized mail system run by the government, they use a regulated traffic system run by the government, they benifit from a police department run by the government, and so so much more. all these things are run by the government and funded by taxes. it's only fair that they pay their taxes and we need to crack down on tax evasion.
Corporations, small businesses, private citizens all benefit from state funded systems. That's part of the point of having a state in the first place.
It could be seen as hyperbolic to conflate paying the minimum legal amounts with tax evasion. Corporations pay payroll taxes, VAT in relevant countries, capital gains, etc. as required by law.
Whether our laws have large wiggle-room is another matter, but they are not evading taxes. People go to jail for tax evasion.
Until they lobby/'donate' for laws (and enforcement) to be relaxed. Which continues to very very effective. So effective that campaign-finance-reform is still outside of all public discussion.
corporations can always find loopholes to siphon money to shareholders , that's the core issue. Corporations shouldn't exist - ultimately profits and liabilities should be shared personally by each individual investor.
The 'double-taxed' argument is so lame. Money circulates in a system and gets taxed basically infinitely. Worker gets paid and pays income taxes and retirement taxes. Worker spends their pay, and has to pay sales taxes. Business gets revenue from that purchase, and has to pays taxes. Business gives it to employee as salary. Taxes. Employee spends it. Taxes. Taxes. Taxes. There is no such thing as 'double-taxation'.
It boggles my mind that people try to defend tax evasion by insisting that a dollar can only be taxed once... and then never again as it is used?
People always look at it differently once it's their money being taken away. Anyone who thinks running a business is easy or more profitable than it should be should try to run one.
> People always look at it differently once it's their money being taken away.
Yeah, they tend to take on a more selfish attitude. People will also believe all kinds of dumb or awful things if they think it justifies their self-interest (hence the cliched quote I won't repeat).
That's why I think moderation rather than ideological purity is probably the way to go.
> Anyone who thinks running a business is easy or more profitable than it should be should try to run one.
Making ends meet isn't easy for a lot of people, either. For them, their hard work doesn't have as much of an upside at your hard working business owner.
If running a business wasn't profitable no one would do it. Simple as that. Running a for-profit is not altruistic. It's not a service. You're not serving your community. It doesn't make you inherently good. People run businesses to make money. Full stop.
Some nonsense comparison like "harder than it should be" doesn't mean anything, it's an opinion-based weasel phrase with no definition.
Considering how dramatically wealth and income inequality has exploded over the past 2 generations in America, the only priciplied, data-based perspective is that corporations and the astronomically tiny number of people who control them have gotten fabulously more wealthy at the direct expense of workers who are working longer hours, more productively, doing more jobs, for less real money and wealth.
You can spin it however you want, but corporations and the capitalist class are more wealthy now that at any time in our history except the Gilded Era, and the working class is poorer now that they have been in many generations, and tax policy is really the only tool the people have to try and right this listing ship before another Wealth Destruction Event, another Great Reset.
I cannot disagree with this analysis any harder. It is so fully incorrect my eyes are bleeding. Although the entire paragraph was riddled with falsehoods and misconceptions, I will just say that the biggest investors and gainers from corporate success are pension funds and sovereign wealth that benefit average people through their retirements.
After reading Thomas Piketty's Capital in the 21st Century and his literal hundreds of pages of hard sourcing of the claims I made regarding wealth and income inequality and how corporations have served to massively concentrate income and wealth into the hands of a tiny class of managers, I have become used to folks like you who react extremely emotionally and inappropriately to the cold hard reality of how capitalist economies work.
P.S. in America, the retirement system is failing, from social security to public and private pensions. All of them are either being redone to ensure folks won't get their money when they retire they way they were promised, or they're just monetizing debt to keep up. Perhaps European style systems are better funded (which would likely correlate with dramatically higher taxes) but massive pension protests in France starting today would seem to suggest otherwise).
You're right, the current taxation systems are already very complex. Governments have done a very good job at obfuscating the tax burden. Sales taxes (VAT), income taxes, and payroll taxes are all largely the same thing - they are all essentially dependent on your income to some degree. If we added all of them together into one income tax (or sales tax) then people would probably find high taxation a bigger issue, but because people encounter these taxes one by one the problem doesn't seem as big. Although, I will say that this issue is much less of a problem in the US, where the tax burden is lower than in Europe.
Double tax can be an issue but there are ways around it. In UK you used to get a tax credit on money paid out as dividends for the corporate tax already paid so if the company paid 20% tax on a profit, paid it as a dividend and your personal rate was 30% you'd just pay the extra 10%. Of course they've now complicated the whole thing up with extra rules and loopholes as politicians tend to do.
I have been seeing these headlines more and more lately and I have a nagging suspicion that somebody is pushing an agenda. What exactly that agenda is remains to be seen.
As for the news article you mentioned, it should be noted that the £28m is corporate tax, not _all_ the taxes. I'm reasonably sure that FAANG is not shirking the government on VAT or payroll taxes. As for why they pay so little corporate tax, I'd guess it's because they're not an EU company.
All of FAANG's cost centers are in the US so it makes sense that they are allowed to offset those costs with revenue from the rest of the world. Whether they are doing so fairly is another matter, but even then, I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states.
There are currently a lot of ways for multinational companies to reduce their tax burden to near zero by for example Microsoft allocating most of their European profits to a DVD stamping plant in Ireland which had a near zero rate at the time. Also they are kind of expected to maximise shareholder value by taking advantage of such legal avoidance schemes.
The proper way to stop this is for counties to make anti avoidance laws.
I recall a fuss in the press over Google along the lines of
"Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich', Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent,"
and Google's CEO said
"We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate."
And basically if the governments want more tax they have to pass appropriate tax laws:
"If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom."
> The proper way to stop this is for counties to make anti avoidance laws.
You mean tax evasion, not tax avoidance, right? Last time I checked, avoidance was legal, evasion was not.
If you actually did mean tax avoidance, then I must point out how dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis.
I'd much rather have some things reclassified as tax evasion rather than having a "just trust us" system in place that decides when something is legal or not.
GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor.
> dangerous the idea of somebody arbitrarily deciding what _legal_ option is okay or isn't okay on a case by case basis.
This happens all the time in precedent-based systems whenever something unclear is litigated. In some sense it's what the legal system is for, and it's the very opposite of arbitrary.
> GAARs ultimately boil down to the question of "did you do this rather than a more obvious transaction structure simply to pay less tax", a sort of Occam's razor.
Okay, so it is a "just trust us" system of deciding who is breaking the law and who isn't. In that case, I'll gladly take multinationals not paying taxes over some government official arbitrarily deciding that I am avoiding taxes and should be punished. Even more so because I live in a country where that same official might be untrained, apathetic or downright corrupt.
> This happens all the time in precedent-based systems whenever something unclear is litigated.
It is not arbitrary. If you're in a corrupt system, you're vulnerable even if you have followed the rules. GAAR systems generally have a set of best practices, and if you disagree with the result you have access to the court system (not "a government official") to work it out.
> ...if you disagree with the result you have access to the court system (not "a government official") to work it out.
You also have access to the court in case of actual tax evasion, though I assume the odds would not exactly be in your favor.
My whole point is that you're better off avoiding the whole ordeal in the first place and that having large multinationals and governments playing whack-a-mole over the tax system is an acceptable price to pay.
By anti avoidance laws I mean laws to prevent the legal avoidance by some means. For example to prevent Microsoft allocating its profits to a DVD stamping plant in a tax haven you could make a law requiring the taxes to be paid where most value was created or some such.
> I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states.
"An unexpected conclusion from Hines-Rice was that: low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections; by paying little/no foreign taxes, U.S. multinationals had avoided building up foreign tax credits; the 15.5% Tax Cuts and Jobs Act of 2017 levy would prove this finding again in 2017"
Scott Dyreng; Bradley P. Lindsey (12 October 2009). "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on US Multinational Firms' Tax Rates". Journal of Accounting Research. 47 (5): 1283–1316. doi:10.1111/j.1475-679X.2009.00346.x.
How many of those employees work as customer support and do stuff like localization as opposed to developing Google's core products that are then sold worldwide (I'm really hoping somebody could answer that)?
The first is basically an extension of local sales while the second is a genuine cost center that should be offset by worldwide revenue.
Amazon's EU headquarter is in Luxemburg, Amazon EU S.a.r.l. Then you have Apple in Dublin. At that is without all the other legal entities FAANG has in the EU. And within the EU, optimizing tax is an art. For some time there was a thing called the double Irish (with some Dutch included if I remember well). Every large enough company is doing this. But saying all of of FAANGs cost centers are in the US is factually wrong.
EDIT: Comment below explained the double Irish way better!
As a non-economist (amateur or professional), I get the impression that countries are losing their concern of the repercussions of displeasing the USA economically.
Is this an accurate interpretation? If so, is it that they're less fearful of reprisals (tariffs?) or that they're less confident in the benefits of cooperation with the USA? Or a mix? Or something else?
Europeans like me like America because they are very vocal about freedom and liberty but we are waking up to the reality that it's all talk.
The USA behaves like Russia and China, they spy on foreigners, influence their elections, start unjustified wars for oil and generally have a very low regard for freedom and liberty outside of their soil.
USA are not the good guys and Russia and China are not the bad guys they are just powerful, and USA are clearly loosing that power to Russia and China.
> If so, is it that they're less fearful of reprisals (tariffs?)
These sorts of threats only work on small poorly established countries and Europeans know it. We wrote the game Americans are playing and I hope they learn from our mistakes, or they will end up like us.
> The USA behaves like Russia and China, they spy on foreigners, influence their elections, start unjustified wars for oil and generally have a very low regard for freedom and liberty outside of their soil.
That perfectly summarises the sentiment I get as a European in Europe, the UK and elsewhere in the world. The US is not different to any other bad actor. In fact the US looks increasingly worse to the rest of the world, which not only means that lots of other countries (and their leaders) lose respect for the US, but it also fuels a bigger sentiment that the Western values represented by the US are doomed to fail, because the US is visibly more plagued by social and criminal issues which you don't find elsewhere.
I'm curious what you think of European support for/collaboration with the USA vs a more self-interested Europe (not isolationist, just not directly aligned with any of USA/Russia/China)?
I haven't heard any clear views on that one way or the other, although I'm not sure the question itself makes perfect sense in terms of actual real world politics.
At least Americans are vocal about it. Here in Europe we seem to have just given up on freedom and liberty. Just look at how many limitations freedom of expression seems to have in various European countries. Imagine being fined for insulting the president (happened in France). Furthermore, European countries fight wars just like the Americans do (Libya), we bully poor countries into trade deals as well (EPA and Kenya). At least the Americans pretend...
I dunno if it's better to pretend. Europe used to rape and pillage Africa and America and pretended it was all to bring them freedom and liberty, eventually you'r reputation will proceed you.
The 'problem' with China is that it's an ethnostate, or wants to be. So in a practical sense most Westerners are better off fixing their allegiances to the US, for better or worse.
At least then you can be part of the apparatus and not pre-emptively sidelined. I like some aspects of China vs. the US too, but China is for the Chinese, as they say.
Americans (and Europeans) are very used to the idea that no matter your race or creed you can be just as American as anyone else. We many times forget that not every country in the world acts this way. China being one of them.
Are you speaking of foreign citizens illegally gaining access to the United States? Which are placed in camps (call them concentration camps if you will but they in no way resemble what China is doing to the Uyghurs, i.e. a true concentration camp). And once in these camps they are processed for asylum, refugee status, etc? Yes, they may be stuck in these ‘horrifying’ camps which is not where they want to be. But they need to be vetted before entry into the US. And consider they are not being brainwashed against their ideals and religion as is happening in China.
Just because they're not as bad as China doesn't mean they're not horrendous. I mean, families are separated! How can you defend such a system? The USA is very rich, and has the means to provide a dignified process. I mean, you're a country of mostly immigrant-descendants, right?
Where are you from, that your hands are lily white? Trying to say that the US is equivalent to China because they both have concentration camps is completely ridiculous.
Even the children of illegal immigrants with unpopular religions in the US will have the legal and right to contribute to future US policies. China's treatment of the Uyghur and US treatment of illegal immigrants are both immoral, but they aren't by any means the same.
I almost did a spit take there. America's short history includes genocide, enslavement, de facto disenfranchisement, economic discrimination, and/or dramatically unequal jurisprudence levied against basically all non-Europeans.
You could say that this is somehow improved since the civil rights movement, and you'd be right, but its legacy as a de-facto patriarchal ethnostate looms large to this day and if this is the beacon of inclusion and harmony that the rest of the world aspires to that's a sorry situation indeed. The US line of "all men are created equal" should have come with a footnote explaining that "some are more equal than others."
I'm not sure I see this. They certainly are awful authoritarians and imperialists, but I haven't actually seen the ethnostate facism, or not in excess of what is in the Americas for example.
I would say most westerners would be better off not fixing their alliances to any imperialist machine, Russian, Chineese, or American. Even the EU is suspect, but its moderating influence against the worst possible facism still seems to be worth the costs and is worth reforming.
Having spent a decent amount of time in China, I think there are definitely a lot of falsehoods that are spread about it, but ethnostate-ish seems a pretty fair conclusion.
If you look at the way they're trying to integrate the outer provinces, and even just the way they view day-to-day and business interactions between Chinese and Westerners.
A Chinese billionaire in the US is no big deal, a US billionaire in China is unimaginable--they'd consider it out of order and I'd be surprised if it could even happen without them being cut down mid-journey. A contrived example maybe but success is reserved for the Han, not for outsiders.
I admit that some of what you say regarding wars and consideration of rights outside of US Soil are in decay of late, but please also inspect the extent to which the United States continues to protect the freedom and liberty of which you speak, generally, and some of the history involved in the current state of things.
Our current president is not the United States, despite his tendency to speak as if he is. I would argue he does not represent the main stream of American foreign policy and has continually fought against the majority opinion to protect institutions that preserve these freedoms and liberty (NATO / OTAN) and oppose actions that threaten said freedoms (annexation of crimea, etc).
September 11th had a huge impact on the country's view of civil liberties (rightly or wrongly is another discussion entirely) especially looking outward. While that might undermine the argument about America being a protector of liberties, I think it would be a mistake to believe that there is no belief held at all, or that America does not continue to fight for these beliefs. History is not something to rest on, but it does leave an indication of a country's intentions, I think.
>While that might undermine the argument about America being a protector of liberties, I think it would be a mistake to believe that there is no belief held at all, or that America does not continue to fight for these beliefs.
What are these "liberties" and "beliefs" of which you speak? I'm an American and think the place is run by lunatics and mafiosos and has been for my entire life. It's more obvious now, and the lunatics are vastly less competent and more ham handed and corrupt.
NATO was there to keep the Russians out and the Germans down. I don't support this organization at all in current year; it is simply a tool of US imperialism, and is spectacularly dangerous as US power fades and they add more shitty non-countries to it so some ding dong from Georgetown can win an award.
It's hard to engage in alternate history, but NATO as an organization was formed to ensure that European democratic governments remained that way immediately following World War II, and until the fall of the Berlin wall. Keeping the Russians out, as you say - that was critical to preserving liberal government in Europe. Article V is not just talk, despite the fallout from the war in Afghanistan. Only using recent history as a reference is not a good guide here.
Can you tell me more about keeping the Germans down? I'm not sure I follow, but I'm probably misinterpreting what you mean by "down".
"Lord Hastings Lionel Ismay was NATO’s first Secretary General, a position he was initially reluctant to accept. By the end of his tenure however, Ismay had become the biggest advocate of the organisation he had famously said earlier on in his political career, was created to “keep the Soviet Union out, the Americans in, and the Germans down.”"
>NATO was there to keep the Russians out and the Germans down. I don't support this organization at all in current year; it is simply a tool of US imperialism
Without NATO, the Baltics would probably already be a part of Russia again.
> I would argue he does not represent the main stream of American foreign policy and has continually fought against the majority opinion to protect institutions that preserve these freedoms and liberty (NATO / OTAN) and oppose actions that threaten said freedoms (annexation of crimea, etc).
The mainstream of American foreign policy is completely divorced from mainstream voters, which is one of the reasons for Trump's election: the foreign policy establishment has remained utterly impervious to American political sentiment for decades.
Most Americans are non-interventionist and veering on isolationist. They don't want to send foreign countries billions of dollars of foreign aid and they don't want endless US military expeditions. The US foreign policy establishment has ignored this at their own peril. They were able to neutralize Obama's foreign policy electoral platform; they haven't been so fortunate with Trump.
It's not very clear that American foreign policy has done anything to serve the interests of the average American in the past fifty years. It might have done great things for Europeans - I'm not a European, so I don't feel qualified to judge - but decades of American empire building have, if anything, hurt Americans, who have died in terrorist attacks caused by US foreign policy, been maimed in endless wars, and who have suffered from the economic globalization promoted by the foreign policy class. And frankly, I don't care about European interests or Crimean interests if they come at the expense of my interest.
It's truly insane how people are so poorly educated on current events, and their magnitudes, outside of polarizing media, that they sincerely believe this is true.
Probably worth keeping in mind that Russian, Chinese, and American people are not their governments. I can't speak for Russia and China, but at least in the USA plenty of people detest their government for all the reasons you've mentioned. Even the "good" years with Obama, people are looking back on that era more cynically than they did at the time.
I think this is largely a Western idea. IMO there is no dichotomy of 'evil Chinese government' and 'liberal silent majority of Chinese people'.
Yes there are restrictions on what people there can say about the party, but it's not North Korea--people say what they really think in private conversations, and from what I've seen they are mostly happy with their government.
Will that change if government performance changes? Possibly, but I don't think there's any noble suffering aspect to it.
> The USA behaves like Russia and China, they spy on foreigners, influence their elections, start unjustified wars for oil and generally have a very low regard for freedom and liberty outside of their soil.
I'm sorry, but which of those do European nations not engage in as well?
Belgium politicking in Rwanda basically caused a genocide. Germany has an active intelligence effort which reportedly compromised or intercepted Obama's mobile phone (intentionally). Europe has a very active intelligence and counter intelligence. They didn't all decide to magically get along and trust each other because WW2 ended.
I'm not trying to play the "what about" game, but I find it laughable for a European to get uppity about anyone else interfering in international politics or spying while in the same rant implying they don't partake.
> The USA behaves like Russia and China, they spy on foreigners, influence their elections, start unjustified wars for oil and generally have a very low regard for freedom and liberty outside of their soil.
This is a very naive and unrealistic take. In a world where nations like Russia and China are willing to play dirty to encroach on western democracies, you cannot simply counter by playing fair. Where do you think the world would be if Allied forces did not resort to spying and influence operations (which were crucial by the way)?
If you play dirty with your friends you will lose them, this isn't naive its the cold reality of relationships, co-operation requires trust and thats a hard requirement.
I'm not sure if the US freedoms are just talk because all those successful companies which Spain wants to tax were started in US not in EU.
So Spain with it's $12B of export can risk imposing tariffs (it's essentially a tax at mostly US companies) compared to e.g. Germany which exports much more.
> Europeans like me like America because they are very vocal about freedom and liberty but we are waking up to the reality that it's all talk.
> The USA behaves like Russia and China, they spy on foreigners, influence their elections, start unjustified wars for oil and generally have a very low regard for freedom and liberty outside of their soil.
As a natural-born US citizen...Yeah I feel the same way. I feel like my government uses "freedom" the same way they use "think of the children" or "terrorism." To a lot of folks it seems like it's just a nebulous concept they can use to push a -- in my opinion unrelated -- political agenda. It's very sad to me.
It's crazy that "Nazi" China is engaging in an ethnic genocide right now, with massive concentration camps, death camps, mass graves, mass rape, mass sterilizations, mass re-education camps, and you would say "China is not the bad guys"
Really goes to show that Europe aren't "good guys" either. A European who could look at despotic China and their Uighur Holocaust and say "not bad guys" is not a good person themselves.
Lest we also forget that Russia is openly engaging in non-stop assassinations on European soil, caring so little for their soverignity that they announce to the world their power by murdering folks in the streets.
The false equivalence here is very sad. "Sure, Russia murders citizens in the streets and China literally has a Holocaust going, but America spies on people (just like us and with our help but shhh)!"
Do you think that individual countries (or the EU itself) counts as a comparable fourth entity in the USA-Russia-China trinity of 'global superpowers' (if that's the right term)?
Not an economist either, but my impression is that the USA is no longer seen as a serious, reliable ally.
If you displease the USA economically you may get tariffs, but then, if you don't you may get tariffs too, because the President is tweeting in bad mood, or because America first, or whatever random reason. So why even bother?
Also note that Brexit has increased the cohesion of the rest of the EU. The UK government with their ludicrous attitude has managed to make all other EU countries agree, euroskeptic movements have been largely discredited by the utter chaos that is Brexit, and there's also the fact that the UK itself always acted as a roadblock vetoing integration policies, and a pro-USA influence in the EU. So lately I'm seeing more teamplay and mutual support between EU countries than ever, which makes them stronger.
Not sure things have really changed. The US and EU countries have historically had disagreements and went their own ways.
At least in terms of major repercussions, threats do happen, but it seems like compromises are the end result, usually done quietly with little press (e.g. the recent Canadian free trade agreement).
I agree with you but, what about the USA not being aware of building a strong western economy?
Economic politics from USA the last years has been quite protectionist and it seems in the coming future it will have to fight against countries with literally billions of people, so my feeling is western countries better stay together.
Is not about fear but working class being tired, among other things, of big corporations avoiding taxes and they having to maintain the social structure.
> Is not about fear but working class being tired, among other things, of big corporations avoiding taxes and they having to maintain the social structure.
I should point out that this isn't a universal problem in Europe. For many countries in Europe, a bloated, inefficient and sometimes corrupt government is the reason why tax rates have to be so high and not multinationals avoiding taxes.
Sure, taxing those multinationals _might_ make it easier on the working class, but it's just as likely that the government would find other ways to spend that money.
Agree, that is the why I said among other reasons, and corruption is another one. Is more a general feeling of working class paying the bills.
I am not positioning myself about how European social system works but it seems something has to change, specially after the crisis. Also this is obviously happening in the weakest economies in Europe.
Long term I don't think western countries have much of a chance :(. Due to how political systems work in China vs the West China can easily invest in large scale long term projects and it costs them a tiny fraction to develop new or upgrade old infrastructure. Given a large enough time span this will give China a huge advantage.
But historically, authoritarian systems aren't very stable. China might very well collapse if they make some bad decisions. I think an authoritarian system is more likely to make bad decisions, because people that decide things are further from the ground, they have less information.
I think it’s more like they’re trying to catch up with the internet. Kind of like in the US states are finally able to get Amazon to tax sales on their behalf —previously people had to self report; and the reporting rate was very very low...
Right now I am again in Turkey after a while. Back then(like 5 years ago?), the USA was seen righteous but demanding country and if you go off-limits bad things can happen to you.
Now Turkey acquired Russian made defence system s400 that was supposed to devastate the economy through embargoes. A few years ago a wealthy Iranian businessman living in Turkey was caught laundering billions of dollars through a Turkish state bank, He was well known for his connections in the Erdogan government. This was supposed to devastate the Turkish banking sector, bringing huge huge fines like those that French or British banks paid back in the day. These and many other actions were supposed to make Uncle Sam very angry and punish Erdogan.
Nothing of significance happened.
Actually, a year ago Trump plummeted the Turkish lira with few tweets but it was about a prisoner that was kept hostage that created political trouble to Trump.
These days it's not a credible position to say "Erdogan, don't do that it may bring trouble", everyone who advocated this position is now a laughing stock.
Europe seems to be behind the curve on this, they are still afraid to trade with Iran but I think that it will happen. They just need to find a way to do it while helping with the presidents career, it worked marvellously with Erdogan. Sometimes I think Erdogan has Jedi superpowers over Trump, it was amazing how He and Trump entered Syria despite of Pentagon and the US allies.
Anyway, times are changing. I hope after the change we plateau in a nice position, I would not be thrilled to see Chinese or Russian style governments be the new de facto way of how the world works. The liberal waster world order was nice(though not perfect) when we had it, I dislike the current trends.
> These and many other actions were supposed to make Uncle Sam very angry and punish Erdogan. Nothing of significance happened.
Turkey was removed from the F35 program, for which they are a manufacturer. They are barred from purchasing the 100 F35s they wanted. They will lose that manufacturing position and the jobs that go with it. They have been demanding to still have the right to purchase the F35 jets - they will not be able to so long as they have the S400s.
Turkey was manufacturing about 1,000 parts for the F35. That has now been reduced to 12 as of November. It will drop to zero during 2020.
Losing access to the next generation of planes to upgrade their air force and losing their manufacturing role is significant, according to Turkey's own behavior and words on the matter (Erdogan states it very plainly that they are upset about it). The Turkish economy is a mess right now, having just finally climbed out of a recession. The unemployment rate had climbed from under 10% to 14% as of August. Clearly Turkey could use those manufacturing jobs and they know it.
See, the F-35 program is not seen as a big deal. The US said that Turkey can be allowed back in if they don't activate the S-400, Turkey went ahead and publicly began testing it.
Also, as it Turns out Turkey does have its own flourishing defence industry and the Brits are helping Turkey to actually build it's own gen 5 warplane and Russia is offering to sell some.
That's the catch with nationalism and authoritarian governments: The citizens are willing to endure economic pain in the name of patriotism and the US doesn't seem to bring much of that anyway.
The US-led world order seems to be vanishing and it's scary when you know some of the alternatives.
The USA are entering an isolationist phase (it started with Obama, acccelerated by Trump) so it's natural that the rest of world is a little bit less concerned about their threats.
Unfortunately the new possible friends look less friendly than the USA of the second half of '900.
Please use the right words so that no one misunderstands the truth or thinks that you are lying.
What the USA is doing is in no way isolationist. That is something completely different with no parallels or relations in any way. Using the word isolationist is misleading to the point of mistruth.
It would be more accurate and representative of reality to say the USA appears to be acting more independently on the international stage. Isolation would imply the USA is not acting on the international stage at all.
"America First refers to a foreign policy in the United States that generally emphasizes American nationalism, unilateralism, protectionism, and isolationism."
The US has 180 military bases around the world and isn't moving to close them by and large.
The US is the center of NATO and, despite Trump's occasional rhetoric, is not moving to leave the alliance.
The US is persistently using its naval projection capabilities to challenge China's territorial ambitions around Asia (including constantly sailing its navy through the illegally annexed South China Sea territory). Nobody else in the world can or will do that, including none of the fellow NATO members.
The US has a very large military presence in South Korea and Japan, positions both countries are openly thankful for and willing to pay more money to the US to keep (as North Korea continues threatening both countries and both are weary of China's military ambitions in the region). Currently the US has around 75,000 to 80,000 (!) military personnel stationed in South Korea and Japan combined.
The US is persistently deploying its military in the Middle East, including in Syria, Saudi Arabia and the waters near Iran.
The US is the extreme exact opposite of isolationist. Go by what the US does, not what Trump campaigns on to win an election (he also has built zero miles of a new wall on the Mexico border thus far and is deporting fewer illegal immigrants than Obama did, again despite his rhetoric to the contrary).
This is just a government looking for another tax to levy on its people. Google and Amazon will not pay it. The consumers of services offered by those companies will pay it. If there is 3% tax on every google ad sold in Spain. All will Google do is add 3% to its prices for Spanish users.
They expect to make €850 million in exchange for tariffs from the US which will hurt the already battered primary and secondary sectors. A flawless plan.
> They are socialists so they don't care if blue collar workers suffer
Elmundo newspaper is a liberal oriented newspaper and they have their audience. Trying to milk the maximum level of outrage about anything done by evil socialists is expected for they.
Thus, take in mind that the real situation could be (and probably will be) a little less melodramatic. Some of their journalists and their director have been fined for spreading difamatory, partial or even faked news in the past.
So what do you propose? This is an honest question. Those companies act in strictly amoral fashion (even within the law of a given country, breaking laws of others).
They basically steal public money by not contributing taxes, so that general population (=we) has to pay up the rest via increased taxation, or public welfare, education, medicine, research, social system etc. suffers because of lack of funds.
Increasing net worth at all costs of types like Bezos, Zuckenberg or Brin at the cost of everybody else is not in interest of humankind in any imaginable way.
Is "tax a company who is making vast amounts of money by operating in our country the same rates that we other businesses doing the same" really a controversial policy position?
This feels like a battle between governments, and I’m glad to hear OECD are involved.
Corporation tax feels like it should be agreed between nations, not between individual nations and corporations. The Google multinationals of this world expect to pay a certain amount in corporation tax but right now too much of that is concentrated in the US and Ireland. Of course the US government is tied — it doesn’t want to give up the giant share of the pie it currently has, and would lose out on if some of that went to Spain instead.
It’s right that it should be a shared source of revenue between all countries in which the multinational operates, but I think a new kind of tax is the wrong way of going about it when corporation tax reform could solve the same issue and be more generally useful.
Payroll tax — a significant source of government tax revenue spread around the world, when a corporation has expanded worldwide — is distributed fairly in this way already.
An honest question - What outcomes would there be if countries like Spain decide one day to impose exorbant taxes, like those totalling $1b annually for Google?
Would it just be cheaper for these companies to pull out? And what international recourse would happen?
Only when the taxes reduce their profits to zero. As long as a country only taxes domestic revenue, that's unlikely to happen.
And in my opinion, countries should be taxing (domestic revenue - domestic costs), rather than allowing companies to move their undeclared profits around to the nearest tax haven to dodge all taxes.
So if I setup a company to do research and development in Spain, and spend $100 billion dollars creating a breakthrough technology, then I license my breakthrough technology to Americans for $1 billion dollars per year, America should be taxing my $1 billion per year in revenue as if it were 100% profit because I don't have any expenses in America?
Yeah. You already deduct your costs in Spain from your profits there. If you don't do any business in Spain, why are you there? The idea here is to discourage corporations from putting basing in tax havens where they don't do any business. Taxes are paid where the profit is made.
Maybe I am in Spain because I am a Spanish citizen? Maybe I want to do R&D there because that is where the expertise is that I need? Maybe I thought my tech was going to be much more successful in Spain when I set it all up, but found out that the market wasn't there but was in the US?
I don't deny that my idea will result in some degree of protectionism. I think that's worth it in this case in order to prevent the flight of profit to tax havens, but there are absolutely edge cases where it forms some barrier to free trade.
On the other hand, having pure profit in a foreign market without any costs there, doesn't sound like a terribile position to be in. And maybe local businesses could use a bit of an edge compared to multinationals.
850M euro, the proposed amount to be raised, would be on the order of 1% of Google's worldwide revenues. Google doesn't break down its revenues by country but it's hard to imagine it derives more than about 1/20 of the revenues from Spain. If we assume 1/20, which seems very generous to Spain, the amount to be raised amounts to about 20% of revenues in Spain.
So, this seems very high to me? Is this amount annual, or decennial like how US spending and tax amounts are reported?
According to CEIC Spain had $232B of tax revenue in 2018. The article suggests it's going to bring 850M EUR = $943M to state's coffers so would represent around 0.4% of yearly tax revenue.
How come it's easier to impose a tax on particular area (which sounds unfair) and risk international relations with US instead of doing something else to gain just 0.4%. Either it's ideologic or they really can't find the money.
For me it makes total sense to tax Google, Facebook and all others. Why not? What do you to lose? Parking your IP in some remote country, be it Ireland or Turks and Caicos, is fine until you realize that the IP protection is not as bullet proof as you thought. And please don't come to California to sue to protect your IP. I still can't believe that none of those companies are paying Federal nor state taxes. For now. Well, they do pay some insanely low taxes.
This has absolutely nothing to do with IP but everything to do with the delivery of services which are free, supplemented by advertising income accounted for abroad where it can not be taxed by the country where the service was delivered.
Looked at in a different way: if Google was a paid for service you could levy sales tax on that service.
But Google earns it's money from selling ads. If they are selling those ads to business in EU, the mechanics (and taxation) seem to be the same as (for example) a US graphic design company selling logo design services to businesses in EU.
What exactly is new here? Is it just the size (and wealth) of Google and similar companies that has encouraged the governments to try to take a larger slice of pie?
Companies are always going to find ways to avoid taxes and privatize more profits to fewer and fewer individuals. It's the responsibility of the government to find those loopholes and get them to pay a fair share to maintain the society they exploit for that profit.
Yes, taxes are related to IP of course. Parking your IP in a country where you have a super low tax rate guarantees paying no or very little taxes using transfer pricing shenanigans back to your home office.
Donald Trump is leading a charge to stop unfair taxation of American tech companies abroad, while they openly work to get him out of office by any means necessary.
Taxes redistribute wealth from areas of surplus to areas of need. If one lives alone forever in a log cabin one might indeed never need anything from the government.
However, if you need the police to help you, you are already getting something back. If someone else needs the police and the police catch the criminal who would have made you their next target, you are getting a benefit.
Now scale that up to the whole country. If you take part in a society where there is generally law and order — and moreover a society where everyone can read and write and some of them can manage air traffic control, and roads exist and people have the skills to build cars and sell them to you — well now you are taking part in the benefits of a society which would not exist without public spending, paid for with taxes.
I agree that it's silly to say that you don't benefit from government spending at all. On the other hand there is often a real sense of not getting what you put in. I imagine especially so on a forum like this where many are professionals of certain industries with relatively high pay.
For example: public spending per person in the UK is < £10,000 per year, which is much less than I pay in taxes. And I would estimate that I'm well below average in terms of spending received: I don't have children, don't have any large medical expenses, etc.
Of course, my cost to society will rise as I get older, but on average I would estimate that I'm paying at least twice (and probably many times more than) what I'm taking. And yet the current trend is for half of society to say that I'm not paying my 'fair share'. I'm not sure what definition of fairness they're using, but it's not mine.
You might not have children but you do benefit from other people having children, just because you don't "take" as much as you're paying doesn't mean you don't indirectly benefit from the effects it has on society.
Sure, I agree, but it's hard to imagine the multiplier for the 'externalities' is 2x or greater. Singapore is not some horrific hellscape where I couldn't live as I do here. Nor is Hong Kong (present situation there not being due to lack of tax revenue). They're educated (perhaps even better than in the UK), healthcare would be accessible to me, infrastructure is good. Heck, Singapore even has a massive public housing umbrella that goes beyond anything in the UK. So where is all the money here going?
There is a belief among many that the current situation in Hong Kong is caused by the housing situation in Hong Kong. Part of why taxes are so low in Hong Kong is that the government profits from the housing situation(by owning most of the land and/or having arrangements with those who own all the land).
Additionally your two examples are both high density countries, and may not generalize to a country like the UK. Also worth noting that these countries give up a fair bit in civil liberties.
Singapore has rougly 5.5m inhabitants and 780km^2 compared to the UK 67.5m and 242000km^2, slightly different situation, interstingly both your example are ultra high density, basically city states. Not everyone can be financal hubs for other countries...
The government is like a PSU though. Except it achieves nowhere near efficiency of even 80 Bronze. A large percentage of taxes just evaporate as "waste heat".
Politicians always just want to raise taxes instead of raising their tax efficiency rating.
> Why do we pay taxes? I know many people that have close to 0 benefits from government.
I guess they never use roads, the electric grid, the police, garbage collection,
don't call the fire brigade when their house is on fire, just assume the country
is protected from foreign invaders, don't need a hospital when they're ill, clean
up their own roads, plant their own parks, etc, etc.
Sorry for being offtopic but I did not see an email in your profile. Would you by any chance happen to have this pdf? http://www.liacs.nl/~opeters/orlein.pdf
You posted the link in https://news.ycombinator.com/item?id=9890599 a few years back but sadly it is dead now. I am a hobbyist interested in cryptography (and a fan of chacha) and so when I saw the "AEAD design similar to ChaCha, that was doing 1.5 cpb authenticated encryption" I got excited.
Wow, that was a long time ago. I do still have the PDF, but I don't really wish to proliferate it, looking back now. In particular the 'paper' doesn't contain any cryptanalysis, and just 'assumes' it is secure. I was 19 when I wrote it.
That said, the design of the mode of operation was quite elegant and efficient. Assuming you are familiar with the field, it consisted of taking the core of BLAKE2 as a tweakable secure PRP, with an important modification.
The core's 10 rounds was split in two sequences of 5 rounds, that transform plaintext to midstate to ciphertext and similarly from ciphertext to midstate to plaintext. We called those alpha and beta, so E(x) = beta(alpha(x)).
Roughly, each block of plaintext or authenticated data was processed using an always uniquely tweaked blockcipher. We took the the midstates of processing those blocks, XOR'd them together and encrypted the resulting block to get our MAC t. The tweaks also contained the AD and message length (through lambda_A and lambda_M respectively), so length extension/contraction attacks were defeated.
The advantage of this scheme was that the authentication portion didn't require any additional primitives or crypto code, and was blazing fast. Furthermore, you only needed to do half of the computational load (for long messages) to verify that a message is genuine compared to fully decrypting the message. Finally the whole scheme is embarrassingly parallel - each block is independent from all others.
That said, only the reduced computational load for verifying isn't enough to offset choosing it over OCB3, which is very similar, and is proven secure.
The us is protecting its own interests. It doesn't care about right or wrong, nor does any other country. Wether the current action is morally right, and wether countries should behave outside the boundaries of ethics is an exercise left to the reader.
If that is true, why do countries spend money on development aid? Isn't that caring about what's right?
Or to take a more extreme example, why do we give a lifelong salary for nothing in return to people who are unable to work for the rest of their lives? Surely killing them would be more efficient.
I do think states should, can, and do care about right and wrong to a certain extent. That's the difference between us and governments like the Chinese.
> If that is true, why do countries spend money on development aid?
1) so people from benefiting countries don't want to immigrate to the paying country (or to put it differently - aren't as motivated to leave because the differences are smaller)
2) so the paying country has somebody to sell their stuff to
> If that is true, why do countries spend money on development aid? Isn't that caring about what's right?
Maybe to recruit most of the people who can question the exploitation of these places? like in Africa?
Why are there little aid to helping to develop economic corridors/systems but billions to treat diseases are mostly side effects of poverty that won't be issues if said places are not so poor
Spain has very few large technology companies relative to the US. This tax is effectively a tariff on US technology companies operating in Spain, making it no longer an internal affair.
Not trolling, but is there anything that says they're breaking the current laws in Spain? (I'm from the UK, so no dog in this fight althought I can see our gov implementing it at some point I reckon)
Sure, they're taking advantage of tax loopholes I'd bet but in themselves, they're not necessarily against the law.
They're probably paying all the tax in Spain they're currently, legally obliged to pay at the moment.
Just my £0.02
Edit: Just thought of something? Is there a google.es? If this is what they are talking about, would it not be easier for Google just to bin that one and for Spaniards to be automatically redirected to another Spanish-speaking version, like one of the South American ones?
They're probably paying all the tax in Spain they're currently, legally obliged to pay at the moment.
That's true, but it's also true that Spain is free to change its laws whenever and however the Spanish government wants. If Spain wants to change their laws to negatively impact American companies by modifying the 'loophole' so it no longer works they're completely within their liberty to do that. America using tariffs to protect American interests is also fine. That's just how international politics works.
There's no such thing as a tax loophole. It's the law, and is written specifically the way it is for a reason. "Loophole" by definition implies that it's a mistake, and with the amount of money at stake that's incredibly unlikely.
There are many real tax loopholes even by your definition.
For example, there is an interaction between US and Dutch laws that essentially means that US companies that transfer copyright to Dutch subsidiaries don't owe any tax to anyone on the profits from that copyright (it's something like this: Dutch laws say that the tax is payed in the country of origin, US laws say that the tax is payed in the country where the copyright owner resides).
So all countries individual tax laws interacting with each other is completely "bug free"? Seems very unlikely. Maybe if there was a single global law for taxation, but even then it would have to be perfectly designed.
A much more likely scenario is that not all outcomes can be accounted for, and for those willing to pick through the laws there is money to be made by finding the loophole.
When one is found the politics of changing the law to fix it come into play of course.
I upvoted your comment but I respectfully disagree: If a country has a law that says "you pay X tax using this law/method but Y tax using this other law/method" Google are perfectly within their rights to say, "Let's use Y".
Who in their right mind would say "you know what, I'm going to pay more tax"?
Have you seen the size of modern tax laws?[1] They're utterly gargantuan!
It sounds like you agree with me. That's not a loophole. That's a conscious decision on the part of whomever wrote that section of law to basically say "pay the lesser of these two methods."
Usually a loophole is more complicated like the Double Irish with the Dutch Sandwich which requires some complex maneouvering on the part of the company to pay minimal tax.
I run a small business and that kind of thing is beyond my capabilities and would also cost too much but not for Google.
That's what I assumed you meant by loopholes... my explanation of the process was a bit too simplistic.
To me, a loophole is looking through all the laws and saying, "ooh, if we put our money here, then declare this thing, we can show a loss that allows us a rebate on a particular tax" or something... it's a symptom of excessive complexity in our tax systems.
Because they aren't internal - they are impacted by it with broad reach.
There have been many stupid attempts to target Google in the past from vested interests (snippet tax, link tax) - but this one isn't very objectionable.
The main legitimacy to the complaint is that even though nation neutral it is defacto targetted by industry concentration because of the lack of international Spanish internet companies. A flimsier one but there. The second is the populist rhetoric to sell it caused offense by targetting their companies. Plus countries in international relations are best anthropoisized as a bunch of hypocritical petty bastards.
A flatter 3% corporate tax rate wouldn't have those grounds but would piss off the local corporate interests and possibly ideologe powers abroad still.
Historically, it has always been understood that companies only pay income tax in their country of residence. BMW isn't taxed on its US income by the US, just like Google isn't taxed on its German income by Germany. I think it's more accurate to say that the so-called "Google tax" is actually a tariff on Internet services. Traditionally, tariffs were only levied on imported goods but the concept works for services as well. That said, if a country unilaterally imposes tariffs, it shouldn't be surprised to see retaliatory tariffs in return.
You can't really compare BMW and Google. Google provides a service, BMW sells goods.
Services are usually taxed at the point of delivery, goods are usually taxed at the point of import or on the manufacturers net profits based on where they are based. Either way, taxes are paid, directly or indirectly.
With Google the situation is such that all their income is abroad, and the service is free so not taxable. This is arguably a situation that the present day tax regime did not foresee so an adjustment is logical. A similar thing has happened inside the EU with respect to transnational sales tax. See MOSS.
The concept of residence no longer makes any sense when a company is just a pile of associate shell companies across the globe and its residence is whatever tax haven lets them pay the least.
Maybe instead of retaliatory tariffs, we should try to actually tax the massive tax evading tech giants in the USA properly.
