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> Often it seems tech/IT is simpler. A software engineering team in California write the code, then it's clear that nearly all of the value was created in Calif

> Often it seems tech/IT is simpler. A software engineering team in California write the code, then it's clear that nearly all of the value was created in California. It's fairly easy to price the cost of foreign datacenters for cloud hosting. I don't follow. Just because the software was written in California doesn't mean they don't have customers and derive profit from other regions. Likewise, sales tax on physical goods is applied at the point of sale, not manufacturing.

derriz 9y ago
I should have made clear that I was discussing corporation tax where the principle is that where the value is created determines how the generated profit should be subjected to tax. This is the principle behind the current international tax system for corporations, I believe. But actually my point was really to try to refute the intuitively attractive idea that intangibles are more difficult to tax than physical goods within this framework. Taxing consumer goods is extremely complex these days because of global supply chains and vertical integration. On the other hand in many cases, services like legal work, consulting, etc. are simple to tax under this system despite the fact that intangibles are being traded.
- jcfrei 9y ago
  Not intangibles in general but websites in particular make it very difficult. I think there's just not detailed enough reporting available to associate revenue and costs. And if you would create much more extensive reporting frameworks you would likely put a huge burden on small companies. Let's take the facebook news feed as an example. Loading just the page might cause requests from CDNs in three different countries. Then the frontend might have been written in the UK and the backend in the US. The ads manager for the ad you just clicked worked in Germany. I doubt any modern IT company can track expenses on that level of detail. And associating costs with revenues is non-trivial either: Did the front end contribute to the revenue generated with the ad click? Did the backend or just the work of the ads manager in Germany? There's so much leeway for companies right now. IT companies like Google and Facebook have one single product (ads) that generates most of their revenues. The country where the revenue occurred can be easily established (eg. an ad sold to a German company). But the costs to create this product (the whole platform) have been accrued all over the world. Without intimate knowledge of the corporate structure and the technical setup companies can basically tell you any story about where these costs were incurred.

derriz 9y ago

I should have made clear that I was discussing corporation tax where the principle is that where the value is created determines how the generated profit should be subjected to tax. This is the principle behind the current international tax system for corporations, I believe. But actually my point was really to try to refute the intuitively attractive idea that intangibles are more difficult to tax than physical goods within this framework. Taxing consumer goods is extremely complex these days because of global supply chains and vertical integration. On the other hand in many cases, services like legal work, consulting, etc. are simple to tax under this system despite the fact that intangibles are being traded.

jcfrei 9y ago
Not intangibles in general but websites in particular make it very difficult. I think there's just not detailed enough reporting available to associate revenue and costs. And if you would create much more extensive reporting frameworks you would likely put a huge burden on small companies. Let's take the facebook news feed as an example. Loading just the page might cause requests from CDNs in three different countries. Then the frontend might have been written in the UK and the backend in the US. The ads manager for the ad you just clicked worked in Germany. I doubt any modern IT company can track expenses on that level of detail. And associating costs with revenues is non-trivial either: Did the front end contribute to the revenue generated with the ad click? Did the backend or just the work of the ads manager in Germany? There's so much leeway for companies right now. IT companies like Google and Facebook have one single product (ads) that generates most of their revenues. The country where the revenue occurred can be easily established (eg. an ad sold to a German company). But the costs to create this product (the whole platform) have been accrued all over the world. Without intimate knowledge of the corporate structure and the technical setup companies can basically tell you any story about where these costs were incurred.