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Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. How far can the EU push

Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. How far can the EU push before these companies decide it is not worth having actual businesses there?

mtkd 9y ago
So how would you fix the national treasury impact of profitless megacorps moving in to a country and taking out layers of smaller businesses (some of whom make profit and pay tax on it)? Are you really going to threaten those countries with taking your non-tax paying elsewhere? Edit: Amazon paid just £15m in tax on European revenues of £19.5bn https://www.theguardian.com/technology/2017/aug/10/amazon-uk-halves-its-corporation-tax-to-74m-as-sales-soar-to-7bn https://www.theguardian.com/technology/2017/aug/10/amazon-uk...
- merb 9y ago
  Well Amazon actually has low profits so they barly pay taxes, because they use all their money in expanding their business. This is actually something which you can do as a german in germany anyways. And since ~2016 or earlier? amazon pays taxes in every country they operate. In germany they even changed the invoice address to be german ~2016-2017. a long time they used luxemburg as their invoice address which was really clever, until it broke out a scandal. http://europa.eu/rapid/press-release_IP-17-3701_en.htm http://europa.eu/rapid/press-release_IP-17-3701_en.htm It contains a good picture, which explained it. And now all sales are recorded in the operating countries. and amazon now needs to provide certain tax related information on a per country basis.
matthewmacleod 9y ago
Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. True, in that it would better to fix the underlying problems that allow companies to pretend they have no profit. In practice though, it’s not likely to be a problem. How far can the EU push before these companies decide it is not worth having actual businesses there? Very, very far. They’re not being pushed much at the moment.
- ucaetano 9y ago
  > True, in that it would better to fix the underlying problems that allow companies to pretend they have no profit Profit is a complex calculation when talking about cross-borders. If you company spends $20B in country A, $0 in country B, has revenue of $10B in country A and $10B in country B, how much profit did it generate in country B? Just because information services have a near-zero marginal cost, it doesn't mean they have zero cost.
  - matthewmacleod 9y ago
    Just because information services have a near-zero marginal cost, it doesn't mean they have zero cost. I totally agree, but equally we know that the company makes profit in both countries, regardless of how the figure is juggled. That leaves regulators with the puzzle of figuring out how to fairly tax them; a levy on revenue isn't an awful idea if it's correctly applied, but there might be better solutions.
    - ucaetano 9y ago
      > a levy on revenue isn't an awful idea if it's correctly applied, but there might be better solutions. It is a terrible idea, because it tends to favor companies that have their cost base in the country. In other words, local companies. This is a trade war move.
      - louthy 9y ago
        > because it tends to favor companies that have their cost base in the country. Which is just the opposite of the current situation where the non-EU/offshore company has an advantage. My UK based company pays taxes in the UK on its profits, but a US company could come in and undercut us with the mechanisms already discussed. Why shouldn’t the EU have the unfairness stacked against the non-EU organisations? It seems that’s what they should be doing. If there’s a way to make the situation into a level playing field then that’s even better. But you can’t play the ‘trade war’ argument when it’s already being abused to the detriment of EU companies and tax payers.
Barrin92 9y ago
>How far can the EU push before these companies decide it is not worth having actual businesses there? Given that it's one of the single biggest and lucrative markets on the planet, much farther I would guess. People are way too screamish about the threat of companies running away. Service providers aren't going to abandon hundreds of millions of high income users.
- refurb 9y ago
  Capital doesn't have borders. You may have people willing to build products, but can you get the capital you need to execute if those same investors can send their money to another country and get a better return?
  - vidarh 9y ago
    It doesn't matter where the money is sent if the EU starts getting court orders to block your services in the EU if you don't pay taxes for targeting EU consumers.
  - deleted 9y ago
    [deleted]
- user5994461 9y ago
  And it doesn't matter if they leave. There will be plenty of companies willing to take their spot.
- NicoJuicy 9y ago
  Don't forget, most Europeans also speak English. But tech companies don't have profits here because of their tax optimizations. So, I guess it's not difficult where they got their sauce from. Edit: (downvotes not agreeing with the term "most") > robinson7d mentioned 38% as second language, 13 % as first language. So => 51% (or, "most") Source: https://en.wikipedia.org/wiki/English_language_in_Europe#Other_countries https://en.wikipedia.org/wiki/English_language_in_Europe#Oth...
  - jfaucett 9y ago
putlake 9y ago
There are some states e.g. Washington that also tax businesses on revenue instead of profit. And different categories of business have different tax rates. Services business are the highest iirc at 1.5%
- davidw 9y ago
  They tried that here in Oregon. I'm not an anti-tax guy, but it was a very poorly designed tax.
- news_to_me 9y ago
  Some more info about Washington's B&O tax (which I believe you are referring to): http://www.seattlebusinessmag.com/article/infamous-bo-tax http://www.seattlebusinessmag.com/article/infamous-bo-tax
deleted 9y ago
[deleted]
jlg23 9y ago
It is a pretty straight forward way to fix the current practice of setting up companies that hand over their profits to the parent company for $service (licenses, administrative fees, whatever).
- sokoloff 9y ago
  Is it? That sounds like the subject of a Steve Yegge rant. http://steve-yegge.blogspot.com/2009/04/have-you-ever-legalized-marijuana.html http://steve-yegge.blogspot.com/2009/04/have-you-ever-legali... (search for legalization)
- andruby 9y ago
  How straight forward is it to fix licensing and fiscal laws in 30 “independent” countries which have their own agendas without introducing new loopholes? I agree that it’s rediculous that the double dutch (irish) sandwhich is still legal, so they should work on closing that hole. As a datapoint: "Apple's 2017 accounts showed they made $44.7bn outside the US and paid just $1.65bn in taxes to foreign governments, a rate of around 3.7%. That is less than a sixth of the average rate of corporation tax in the world." [0] [0] http://www.bbc.com/news/world-us-canada-41889787 http://www.bbc.com/news/world-us-canada-41889787
- ucaetano 9y ago
  That practice is not only the standard in accounting, but somewhat impossible to move out of. As I mentioned in another post: Profit is a complex calculation when talking about cross-borders. If your company spends $20B in country A, $0 in country B, has revenue of $10B in country A and $10B in country B, how much profit did it generate in country B?
  - 3pt14159 9y ago
    In a sane world: $0B But we don't live in a sane world. All these multi-country tax schemes effectively mean that corporate profits can't be trusted to be reported accurately. It's easier to just stick the tax on revenue and then corporations may finally have an incentive to lobby to live in a sane world again. Another option I can think of is for countries in the EU to set guidelines and impose harsh provision (a doubling of the tax rate, say) if a court finds that the guidelines have been breached. It isn't right if Wall St is overjoyed at EU earnings, but the EU hasn't collected a dime of profit.
FigBug 9y ago
Isn't taxing on revenue just sales tax, or at least, it will have the same effect? If companies have to pay 5% of revenue as tax they'll just raise prices to cover it?
- mtkd 9y ago
  Everyone in the game pays the same sales tax. The issue is that some of the bigger players avoid making a profit on the operation in the EU. The national budgets expect a certain level of corporate profit and tax on sales to make the numbers. When you have many massive players avoiding that tax - plus smaller players unable to get the same tax structures/advice to even compete - it starts to become an issue. For a long time the megacorps have argued they create a lot of jobs - but they've likely crested on that now as they push to eliminate jobs - and there is a lot of evidence that government is supporting many of the low paid jobs these companies do 'create' (£11BN in UK in 2014 according to this report - https://www.theguardian.com/sustainable-business/2015/apr/20/taxpayers-spend-11bn-to-top-up-low-wages-paid-by-uk-companies https://www.theguardian.com/sustainable-business/2015/apr/20...)
  - distances 9y ago
    > For a long time the megacorps have argued they create a lot of jobs Plus I don't get this reasoning to start with. Isn't it inherently more efficient to provide services as a large corporation? Thus, lots of smaller companies would probably employ quite a bunch more people to achieve the same.
    - mtkd 9y ago
      This is likely to become a more heavily debated subject as AI starts to strip-out professions that need people today (truck drivers). Small inefficient local businesses that provide some local families an income and pay a bit of corp tax - start to become more important to a country than global megacorps providing a few government subsidised minimum wage jobs whilst offshoring all the gains from capturing massive market share.
JumpCrisscross 9y ago
> How far can the EU push before these companies decide it is not worth having actual businesses there? Why would they leave? Just raise prices in the EU to compensate.
- julbaxter 9y ago
  Raising the price also means being less competitive.
  - mattmcknight 9y ago
    tax wouldn't apply to competitors?
    - slededit 9y ago
      Conceivably the local competitors would be paying more in taxes and this should be calculated to be as close to neutral as possible for them.
bluecalm 9y ago
Taxing on profit rather than revenue feels wrong. If I use the very same resources the competing company is using but I buy expensive cars instead of energy efficient ones I am taxed less. If I use country's resources like roads and pollute I am still not taxed, my more efficient competitor is sponsoring my existence by their tax revenue. Hell, if I have any profit left I will just buy Ferraris as company cars so I pay even less taxes and hey, now I am driving a Ferrari while my sucker competitor is driving Nissans Leaf and paying more taxes to top it. Taxing companies on profits is just punishing efficiency. The tax has other disadvantages like being very easy to dodge by big corporations and difficult to dodge by small/honest guys. It's the worst possible tax and I hope it dies soon. Taxing on revenue is at least something new that seems more fair.
- CompelTechnic 9y ago
  Certain industries have a much slimmer margin than others. Automotive manufacturing (and many other types of manufacturing) hovers below a 10% profit margin. Agriculture is similarly low-margin. The tech giants have much larger margins. If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. It is unusual that the tax plan in the article targets the specific high-margin tech companies. I wonder how the implementation will accomplish this.
  - NutriSugar 9y ago
    >Certain industries have a much slimmer margin than others. I don't see how this has any impact. Either the companies that exist will find a way to make the market work, or they will leave and a new company will.
  - bluecalm 9y ago
    >>If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. They will raise prices, what's the problem? Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Taxing on profit on the other hand... licensing fees, expensive company cars, "consulting" fees. There is now way to police what is and what isn't a justified expense. We need a way to tax in more fair way to encourage efficiency. Taxing on revenue is one such idea.
gaius 9y ago
If you run a loss you're still on the hook for taxes? That doesn't make sense to me But what if by SHEER COINCIDENCE the profit you would have made by normal accounting standards just so happens to be EXACTLY the licensing fee an overseas subsidiary charges to use your own brand? Google spent a billion quid on their new HQ building in London. That's an awful lot to invest in a country where you make no profits...
- ucaetano 9y ago
  > profit you would have made by normal accounting standards These are normal accounting standards.
  - FridgeSeal 9y ago
    Just because it was legal and normal before doesn't mean it should stay that way. If we decide that the double duct/Irish sandwich/etc are loopholes that are being explored and we'd like them closed, then it's entirely valid to do so. Money made in the past does not mean that your are entitled or guaranteed to make money in the future.
    - ucaetano 9y ago
      Sure, but it is up to the countries to get together and change them. If companies are paying fewer taxes by following the law, don't blame it on companies, they are doing exactly what they are supposed to do. I am completely in favor of designing new tax laws that close such loopholes. But taxing revenue in this way is a very, very dumb idea.
    - jopsen 9y ago
      Is it even legal? It's surely also most impossible prosecute, but speculation wrt. taxes is generally not legal.
  - andruby 9y ago
    I wonder if companies have a fiscal accounting and an economic accounting. The latter would be used to base economic decision on. That accounting should show a nice profit in EU countries.
StreamBright 9y ago
This is why you pay tax on your income and not on how much is left at the end of the month, right?
- pmontra 9y ago
  Right, but unfortunately for me I'm not taxed at 2-6%. More like an extra zero.
- manfredo 9y ago
  Not exactly. It's more like you're taxed even if you are unemployed and not making any money at all. Taxing based on revenue rather than profit would mean that a company making no profit would still have to pay tax.
tluyben2 9y ago
> Taxing on revenue rather than profit feels wrong This is for companies that make money in the EU but don't pay taxes here. If Apple decides to pay taxes here like we all do then they will get taxed on profits. Revenues is just far simpler to calculate if you know/assume 'tax optimization'.
kolbe 9y ago
You can lose money this year, but still owe property taxes. This is not an unheard of concept.
cm2187 9y ago
Not a tax expert but I believe lots of taxes work that way. Wealth tax for instance (an individual may end up paying more taxes than it has revenues). All taxes based on employee salaries. Corporate taxes on unrealised capital gains. Not defending these taxes but they are not uncommon.
slededit 9y ago
It is wrong, but Tech companies failed to learn restraint. Had they been less aggressive at tax optimization this wouldn't be happening. Since its not possible for the EU to agree on harmonizing income tax this is the only viable solution.
NutriSugar 9y ago
Seems fine to me. When I make a loss for a year, I still have to pay income tax. And by making it apply to all local business regardless of where the company is located, they can't hide from it if they want to do business with the market in the area. And if they don't, someone else will.
- jopsen 9y ago
  I'm skeptical of the side-effects... Because of how VAT works we have a lot of companies in the EU that lives by essentially reselling stuff. These chains can be long. If you apply revenue taxing to low profit margin businesses with high turn-over and long supply chains we'll see some negative results. It's a decent way to hit tech giants, because a substantial part of the revenue is profit. But the unintended victims might be numerous on this one.
- snark42 9y ago
  > When I make a loss for a year, I still have to pay income tax. Where are you? When I write off business losses that are paid through my personal income taxes I can end up owing no income tax in the U.S.
  - kodablah 9y ago
    GP didn't mention that the losses were business/deductible losses.
tanilama 9y ago
They won't leave. But they will raise price to battle off the revenue loss. After all, they don't want to lose money. Would expect Amazon to raise price universally in EU. I mean that is inevitable anyway.
gascan 9y ago
Taxing on revenue rather than profit feels wrong. Owing absolutely nothing in taxes despite billions in revenue also feels wrong. This seems to be pretty clear retribution for what many believe is rampant abuse of tax law.
- tylersmith 9y ago
  What does the amount of revenue matter if the profit is 0 or less? Just to discourage investment in the future? To punish people that attempt large projects that don't have a guaranteed profit?
tzs 9y ago
The article seemed a bit light on details, so it is not clear to me that they mean that tax will be calculated as a percentage of revenue--just that it will be "based on" revenue. Perhaps they will just use revenue for allocating profits, and then tax based on profits like they currently do? For example, if a company has $1 billion profits based on $2 billion revenue in France and $3 billion revenue in Germany, they could tax based on a similar profits split. The company would owe tax in Germany on $600 million profits and in France on $400 million profits.
- shaki-dora 9y ago
  This is the only comment in this thread that makes any sense.
alkonaut 9y ago
Couldn’t the tax just be on profits as calculated by the fraction of the revenue in the specific country? So if a company has a global revenue of 10B of which 5% was in France and a global profit of 1B then the crude estimate of “profits from France” could be 5% of 1B.
whyever 9y ago
Ever heard of Hollywood accounting?
decebalus1 9y ago
> Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. It does not make sense. For example I too would like to pay taxes only for what's left from my salary after paying my rent, my food, my clothes, all the books I read, entertainment I consume, etc.. Basically only for my 'profits' after I reinvest everything back so I would only pay taxes for my savings account [1] (which will probably be 0 as that money would be invested somehow). It does not make sense! [1] https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-2017-gets-789-million-windfall-from-new-tax-law/ https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-20...

mtkd 9y ago

So how would you fix the national treasury impact of profitless megacorps moving in to a country and taking out layers of smaller businesses (some of whom make profit and pay tax on it)? Are you really going to threaten those countries with taking your non-tax paying elsewhere? Edit: Amazon paid just £15m in tax on European revenues of £19.5bn https://www.theguardian.com/technology/2017/aug/10/amazon-uk-halves-its-corporation-tax-to-74m-as-sales-soar-to-7bn https://www.theguardian.com/technology/2017/aug/10/amazon-uk...

merb 9y ago
Well Amazon actually has low profits so they barly pay taxes, because they use all their money in expanding their business. This is actually something which you can do as a german in germany anyways. And since ~2016 or earlier? amazon pays taxes in every country they operate. In germany they even changed the invoice address to be german ~2016-2017. a long time they used luxemburg as their invoice address which was really clever, until it broke out a scandal. http://europa.eu/rapid/press-release_IP-17-3701_en.htm http://europa.eu/rapid/press-release_IP-17-3701_en.htm It contains a good picture, which explained it. And now all sales are recorded in the operating countries. and amazon now needs to provide certain tax related information on a per country basis.

matthewmacleod 9y ago

Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. True, in that it would better to fix the underlying problems that allow companies to pretend they have no profit. In practice though, it’s not likely to be a problem. How far can the EU push before these companies decide it is not worth having actual businesses there? Very, very far. They’re not being pushed much at the moment.

ucaetano 9y ago
> True, in that it would better to fix the underlying problems that allow companies to pretend they have no profit Profit is a complex calculation when talking about cross-borders. If you company spends $20B in country A, $0 in country B, has revenue of $10B in country A and $10B in country B, how much profit did it generate in country B? Just because information services have a near-zero marginal cost, it doesn't mean they have zero cost.
- matthewmacleod 9y ago
  Just because information services have a near-zero marginal cost, it doesn't mean they have zero cost. I totally agree, but equally we know that the company makes profit in both countries, regardless of how the figure is juggled. That leaves regulators with the puzzle of figuring out how to fairly tax them; a levy on revenue isn't an awful idea if it's correctly applied, but there might be better solutions.
  - ucaetano 9y ago
    > a levy on revenue isn't an awful idea if it's correctly applied, but there might be better solutions. It is a terrible idea, because it tends to favor companies that have their cost base in the country. In other words, local companies. This is a trade war move.
    - louthy 9y ago
      > because it tends to favor companies that have their cost base in the country. Which is just the opposite of the current situation where the non-EU/offshore company has an advantage. My UK based company pays taxes in the UK on its profits, but a US company could come in and undercut us with the mechanisms already discussed. Why shouldn’t the EU have the unfairness stacked against the non-EU organisations? It seems that’s what they should be doing. If there’s a way to make the situation into a level playing field then that’s even better. But you can’t play the ‘trade war’ argument when it’s already being abused to the detriment of EU companies and tax payers.

Barrin92 9y ago

>How far can the EU push before these companies decide it is not worth having actual businesses there? Given that it's one of the single biggest and lucrative markets on the planet, much farther I would guess. People are way too screamish about the threat of companies running away. Service providers aren't going to abandon hundreds of millions of high income users.

refurb 9y ago
Capital doesn't have borders. You may have people willing to build products, but can you get the capital you need to execute if those same investors can send their money to another country and get a better return?
- vidarh 9y ago
  It doesn't matter where the money is sent if the EU starts getting court orders to block your services in the EU if you don't pay taxes for targeting EU consumers.
- deleted 9y ago
  [deleted]
user5994461 9y ago
And it doesn't matter if they leave. There will be plenty of companies willing to take their spot.
NicoJuicy 9y ago
Don't forget, most Europeans also speak English. But tech companies don't have profits here because of their tax optimizations. So, I guess it's not difficult where they got their sauce from. Edit: (downvotes not agreeing with the term "most") > robinson7d mentioned 38% as second language, 13 % as first language. So => 51% (or, "most") Source: https://en.wikipedia.org/wiki/English_language_in_Europe#Other_countries https://en.wikipedia.org/wiki/English_language_in_Europe#Oth...
- jfaucett 9y ago

putlake 9y ago

There are some states e.g. Washington that also tax businesses on revenue instead of profit. And different categories of business have different tax rates. Services business are the highest iirc at 1.5%

davidw 9y ago
They tried that here in Oregon. I'm not an anti-tax guy, but it was a very poorly designed tax.
news_to_me 9y ago
Some more info about Washington's B&O tax (which I believe you are referring to): http://www.seattlebusinessmag.com/article/infamous-bo-tax http://www.seattlebusinessmag.com/article/infamous-bo-tax

deleted 9y ago

[deleted]

jlg23 9y ago

It is a pretty straight forward way to fix the current practice of setting up companies that hand over their profits to the parent company for $service (licenses, administrative fees, whatever).

sokoloff 9y ago
Is it? That sounds like the subject of a Steve Yegge rant. http://steve-yegge.blogspot.com/2009/04/have-you-ever-legalized-marijuana.html http://steve-yegge.blogspot.com/2009/04/have-you-ever-legali... (search for legalization)
andruby 9y ago
How straight forward is it to fix licensing and fiscal laws in 30 “independent” countries which have their own agendas without introducing new loopholes? I agree that it’s rediculous that the double dutch (irish) sandwhich is still legal, so they should work on closing that hole. As a datapoint: "Apple's 2017 accounts showed they made $44.7bn outside the US and paid just $1.65bn in taxes to foreign governments, a rate of around 3.7%. That is less than a sixth of the average rate of corporation tax in the world." [0] [0] http://www.bbc.com/news/world-us-canada-41889787 http://www.bbc.com/news/world-us-canada-41889787
ucaetano 9y ago
That practice is not only the standard in accounting, but somewhat impossible to move out of. As I mentioned in another post: Profit is a complex calculation when talking about cross-borders. If your company spends $20B in country A, $0 in country B, has revenue of $10B in country A and $10B in country B, how much profit did it generate in country B?
- 3pt14159 9y ago
  In a sane world: $0B But we don't live in a sane world. All these multi-country tax schemes effectively mean that corporate profits can't be trusted to be reported accurately. It's easier to just stick the tax on revenue and then corporations may finally have an incentive to lobby to live in a sane world again. Another option I can think of is for countries in the EU to set guidelines and impose harsh provision (a doubling of the tax rate, say) if a court finds that the guidelines have been breached. It isn't right if Wall St is overjoyed at EU earnings, but the EU hasn't collected a dime of profit.

FigBug 9y ago

Isn't taxing on revenue just sales tax, or at least, it will have the same effect? If companies have to pay 5% of revenue as tax they'll just raise prices to cover it?

mtkd 9y ago
Everyone in the game pays the same sales tax. The issue is that some of the bigger players avoid making a profit on the operation in the EU. The national budgets expect a certain level of corporate profit and tax on sales to make the numbers. When you have many massive players avoiding that tax - plus smaller players unable to get the same tax structures/advice to even compete - it starts to become an issue. For a long time the megacorps have argued they create a lot of jobs - but they've likely crested on that now as they push to eliminate jobs - and there is a lot of evidence that government is supporting many of the low paid jobs these companies do 'create' (£11BN in UK in 2014 according to this report - https://www.theguardian.com/sustainable-business/2015/apr/20/taxpayers-spend-11bn-to-top-up-low-wages-paid-by-uk-companies https://www.theguardian.com/sustainable-business/2015/apr/20...)
- distances 9y ago
  > For a long time the megacorps have argued they create a lot of jobs Plus I don't get this reasoning to start with. Isn't it inherently more efficient to provide services as a large corporation? Thus, lots of smaller companies would probably employ quite a bunch more people to achieve the same.
  - mtkd 9y ago
    This is likely to become a more heavily debated subject as AI starts to strip-out professions that need people today (truck drivers). Small inefficient local businesses that provide some local families an income and pay a bit of corp tax - start to become more important to a country than global megacorps providing a few government subsidised minimum wage jobs whilst offshoring all the gains from capturing massive market share.

JumpCrisscross 9y ago

> How far can the EU push before these companies decide it is not worth having actual businesses there? Why would they leave? Just raise prices in the EU to compensate.

julbaxter 9y ago
Raising the price also means being less competitive.
- mattmcknight 9y ago
  tax wouldn't apply to competitors?
  - slededit 9y ago
    Conceivably the local competitors would be paying more in taxes and this should be calculated to be as close to neutral as possible for them.

bluecalm 9y ago

Taxing on profit rather than revenue feels wrong. If I use the very same resources the competing company is using but I buy expensive cars instead of energy efficient ones I am taxed less. If I use country's resources like roads and pollute I am still not taxed, my more efficient competitor is sponsoring my existence by their tax revenue. Hell, if I have any profit left I will just buy Ferraris as company cars so I pay even less taxes and hey, now I am driving a Ferrari while my sucker competitor is driving Nissans Leaf and paying more taxes to top it. Taxing companies on profits is just punishing efficiency. The tax has other disadvantages like being very easy to dodge by big corporations and difficult to dodge by small/honest guys. It's the worst possible tax and I hope it dies soon. Taxing on revenue is at least something new that seems more fair.

CompelTechnic 9y ago
Certain industries have a much slimmer margin than others. Automotive manufacturing (and many other types of manufacturing) hovers below a 10% profit margin. Agriculture is similarly low-margin. The tech giants have much larger margins. If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. It is unusual that the tax plan in the article targets the specific high-margin tech companies. I wonder how the implementation will accomplish this.
- NutriSugar 9y ago
  >Certain industries have a much slimmer margin than others. I don't see how this has any impact. Either the companies that exist will find a way to make the market work, or they will leave and a new company will.
- bluecalm 9y ago
  >>If you tax revenue instead of profit, you push low-margin industries (the ones that are operating the most efficiently/ competitively) out of your country. It is a very silly thing to do. They will raise prices, what's the problem? Importer will still pay the tax on revenue so there won't be at any advantage for being located elsewhere. Taxing on profit on the other hand... licensing fees, expensive company cars, "consulting" fees. There is now way to police what is and what isn't a justified expense. We need a way to tax in more fair way to encourage efficiency. Taxing on revenue is one such idea.

gaius 9y ago

If you run a loss you're still on the hook for taxes? That doesn't make sense to me But what if by SHEER COINCIDENCE the profit you would have made by normal accounting standards just so happens to be EXACTLY the licensing fee an overseas subsidiary charges to use your own brand? Google spent a billion quid on their new HQ building in London. That's an awful lot to invest in a country where you make no profits...

ucaetano 9y ago
> profit you would have made by normal accounting standards These are normal accounting standards.
- FridgeSeal 9y ago
  Just because it was legal and normal before doesn't mean it should stay that way. If we decide that the double duct/Irish sandwich/etc are loopholes that are being explored and we'd like them closed, then it's entirely valid to do so. Money made in the past does not mean that your are entitled or guaranteed to make money in the future.
  - ucaetano 9y ago
    Sure, but it is up to the countries to get together and change them. If companies are paying fewer taxes by following the law, don't blame it on companies, they are doing exactly what they are supposed to do. I am completely in favor of designing new tax laws that close such loopholes. But taxing revenue in this way is a very, very dumb idea.
  - jopsen 9y ago
    Is it even legal? It's surely also most impossible prosecute, but speculation wrt. taxes is generally not legal.
- andruby 9y ago
  I wonder if companies have a fiscal accounting and an economic accounting. The latter would be used to base economic decision on. That accounting should show a nice profit in EU countries.

StreamBright 9y ago

This is why you pay tax on your income and not on how much is left at the end of the month, right?

pmontra 9y ago
Right, but unfortunately for me I'm not taxed at 2-6%. More like an extra zero.
manfredo 9y ago
Not exactly. It's more like you're taxed even if you are unemployed and not making any money at all. Taxing based on revenue rather than profit would mean that a company making no profit would still have to pay tax.

tluyben2 9y ago

> Taxing on revenue rather than profit feels wrong This is for companies that make money in the EU but don't pay taxes here. If Apple decides to pay taxes here like we all do then they will get taxed on profits. Revenues is just far simpler to calculate if you know/assume 'tax optimization'.

kolbe 9y ago

You can lose money this year, but still owe property taxes. This is not an unheard of concept.

cm2187 9y ago

Not a tax expert but I believe lots of taxes work that way. Wealth tax for instance (an individual may end up paying more taxes than it has revenues). All taxes based on employee salaries. Corporate taxes on unrealised capital gains. Not defending these taxes but they are not uncommon.

slededit 9y ago

It is wrong, but Tech companies failed to learn restraint. Had they been less aggressive at tax optimization this wouldn't be happening. Since its not possible for the EU to agree on harmonizing income tax this is the only viable solution.

NutriSugar 9y ago

Seems fine to me. When I make a loss for a year, I still have to pay income tax. And by making it apply to all local business regardless of where the company is located, they can't hide from it if they want to do business with the market in the area. And if they don't, someone else will.

jopsen 9y ago
I'm skeptical of the side-effects... Because of how VAT works we have a lot of companies in the EU that lives by essentially reselling stuff. These chains can be long. If you apply revenue taxing to low profit margin businesses with high turn-over and long supply chains we'll see some negative results. It's a decent way to hit tech giants, because a substantial part of the revenue is profit. But the unintended victims might be numerous on this one.
snark42 9y ago
> When I make a loss for a year, I still have to pay income tax. Where are you? When I write off business losses that are paid through my personal income taxes I can end up owing no income tax in the U.S.
- kodablah 9y ago
  GP didn't mention that the losses were business/deductible losses.

tanilama 9y ago

They won't leave. But they will raise price to battle off the revenue loss. After all, they don't want to lose money. Would expect Amazon to raise price universally in EU. I mean that is inevitable anyway.

gascan 9y ago

Taxing on revenue rather than profit feels wrong. Owing absolutely nothing in taxes despite billions in revenue also feels wrong. This seems to be pretty clear retribution for what many believe is rampant abuse of tax law.

tylersmith 9y ago
What does the amount of revenue matter if the profit is 0 or less? Just to discourage investment in the future? To punish people that attempt large projects that don't have a guaranteed profit?

tzs 9y ago

The article seemed a bit light on details, so it is not clear to me that they mean that tax will be calculated as a percentage of revenue--just that it will be "based on" revenue. Perhaps they will just use revenue for allocating profits, and then tax based on profits like they currently do? For example, if a company has $1 billion profits based on $2 billion revenue in France and $3 billion revenue in Germany, they could tax based on a similar profits split. The company would owe tax in Germany on $600 million profits and in France on $400 million profits.

shaki-dora 9y ago
This is the only comment in this thread that makes any sense.

alkonaut 9y ago

Couldn’t the tax just be on profits as calculated by the fraction of the revenue in the specific country? So if a company has a global revenue of 10B of which 5% was in France and a global profit of 1B then the crude estimate of “profits from France” could be 5% of 1B.

whyever 9y ago

Ever heard of Hollywood accounting?

decebalus1 9y ago

> Taxing on revenue rather than profit feels wrong. If you run a loss you're still on the hook for taxes? That doesn't make sense to me. It does not make sense. For example I too would like to pay taxes only for what's left from my salary after paying my rent, my food, my clothes, all the books I read, entertainment I consume, etc.. Basically only for my 'profits' after I reinvest everything back so I would only pay taxes for my savings account [1] (which will probably be 0 as that money would be invested somehow). It does not make sense! [1] https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-2017-gets-789-million-windfall-from-new-tax-law/ https://itep.org/amazon-inc-paid-zero-in-federal-taxes-in-20...