6 ms·

Europe’s Planned Digital Tax Heightens Tensions with U.S.

33 points by kimsk112 9y ago

pkaye 9y ago
The problem seems to be rooted within the EU itself with Ireland, Luxembourg and others allowing these companies to pay little or not taxes.
- StavrosK 9y ago
  Isn't that exactly what the article says? That's why the EU is trying to fix it.
  - dogma1138 9y ago
    The EU very skillfully and intentionally crafted the current Dutch Sandwich style scheme by essentially legislating tax heavens in various EU and quasi EU territories (the EU outermost territories make it a very fun map to look at). The thought behind it was to both attract large companies to pay tax in the EU and allow EU multinationals to remain competitive without having to go somewhere else. But a lot has changed the EU became less and less competitive and it didn’t really manage to bootstrap any new giants and lost a lot of its former ones. The plan also did not account for companies like Google, Microsoft and Apple to exist with their market cap nor that companies would love nothing more than to sit on piles of cash that amount to the entire GDP of Europe when those laws were legislated. Now with US companies actually repatriating cash the EU is basically looking for a new way to get some of that money back and more.
- tdb7893 9y ago
  The problem is that if those countries raise their taxes companies will just find other tax havens. I think that's why they are trying to find a solution that will work no matter where someone is technically headquartered
  - AstralStorm 9y ago
    You cannot move latency sensitive infrastructure easily if at all. (Most of networking infrastructure including cloud services.) At least once laws relating revenue (not income) at location to tax at location committee into play. Otherwise everyone would already operate out of Christmas Islands etc.
- derriz 9y ago
  Ireland's corporate tax rate is 12.5% which is in the lower half of the table of EU rates but that's no basis to brand it a "tax haven". People get riled up because of an exclusively American twist to their corporate tax rule which allows American companies to defer paying US corporate tax on foreign earnings until the money is "repatriated". This is why you never see UK, German, Japanese, etc. companies use Ireland as a tax "haven". Ireland follows international law in taxing multinationals on the profits generated in Ireland. When you hear a claim along the lines of "Apple only pays 2% on its revenues in Ireland", it's because the vast majority of the profit is taxable in the US not in Ireland but payment is deferred because of this US tax loophole. Just because the cash hasn't been handed over to Uncle Sam, doesn't mean it isn't due. It's perfectly understandable that the US government is unhappy at this attempt by a foreign government to grab corporate tax which by all international standards belongs to the US treasury. If the EU (and I'm a proud European) wants a share of digital tax, then they should grow their own profitable tech companies to tax instead of selectively eyeing up US tech companies. The US doesn't get to impose corporate tax on German car makers or French wine producers - nor should the EU get to impose a corporate tax on US tech companies.
  - FigBug 9y ago
    On car makers or wine producers the US can impose import duties i.e. 25% on light trucks. There is no equivalent to import duties for online businesses, hence this tax plan.
    - derriz 9y ago
      Sure every country can just impose duties on imports. But it's an impoverishing move for the planet. The last time every country believed this was a good idea was in the 1930s and it lead to economic devestation and arguably contributed to WW2.
  - mdekkers 9y ago
    The US doesn't get to impose corporate tax on German car makers or French wine producers Yes they do, they are called import and excise duties, and they currently don't apply to services, which is what the EU is going after.
HumanDrivenDev 9y ago
More incentive for tech companies to move to the UK?
- oh-kumudo 9y ago
  UK is out of EU. And what is the point of moving to UK, when you want to the market of EU?
  - HumanDrivenDev 9y ago
    To escape silly EU laws like this one, while still being a part of the continent and close to the market.
    - jgh 9y ago
      How would that escape this? They're making money off of EU people, they would have to pay the tax.
      - pkaye 9y ago
        Not according to Ireland and Luxembourg.
        jgh 9y ago
        I'm not sure what you mean by that. As far as I'm aware the no law has been passed around this yet, the proposed law from the other day was a flat 3% tax on any revenue made in the EU (which includes Ireland and Luxembourg).
        pkaye 9y ago
        I'm saying they are paying taxes per the Ireland and Luxembourg requirement so what is the concern for the other countries in the EU?
    - themihai 9y ago
lainga 9y ago
US aside, is there any word on how Ireland et al. are reacting to the EU trying to cut off their cash cow?
- sqdbps 9y ago
  "...other member states like Ireland have opposed changes to a system in which they can use tax policy to attract businesses." They don't like it.
- oh_sigh 9y ago
  It may not be that bad for Ireland. Ireland had stipulations in bringing a certain amount of operations(ie jobs) into the country to get their favorable tax rate. If the tax benefits are cut back, these businesses may decide it is worth while to keep operations ongoing in Ireland even without the favorable tax regime. Only time will tell on that front if Google et al will remain there.
  - derriz 9y ago
    There is no "favourable tax rate" in Ireland - around 1990 or so, the EU ruled against selective favourable tax rates. Before that, Ireland used to have a 10% rate for exporting (largely foreign) companies and 25% for non-exporting companies. As a result of the ruling, a single 12.5% rate was introduced. It's been like that since.
    - MagnumOpus 9y ago
      But with the Double Irish strategy and its successors, no US company actually pays those 12.5%, but less than 0.1% instead...
      - derriz 9y ago
        Eh no to the 0.1%. But I have to concede that the power of shocking but nonsense headline numbers is hard to argue against given how I'm burning through Karma here. The 0.1% is a number concocted by treating the value of European retail sales as a numerator and the Irish corporation tax as a denominator. The problem is that the dimensions in this division are not-compatible. By the same calculation Walmart only paid 1.2% corporate tax in the US in 2014 (corporate tax paid / total revenue). In actual fact, Walmart paid an effective rate of over 30% because corporate tax is calculate on profits - not on revenue.
deleted 9y ago
[deleted]
sqdbps 9y ago
"... that push has prompted complaints from American tech giants, which argue that they are being unfairly singled out by Brussels. European officials strongly deny those claims..." After so many targeted requirements, restrictions, investigations, fines, and taxes no one's really buying that denial. It's tariff by other name, which lends credence to Trump's rhetoric about how we haven't been treated fairly by our so called allies. EU governance and enforcement lends itself to be hijacked by the bloc's most powerful members (france and germany, in this particular case the french) and use them as a cudgel against perceived business threats.
- dozzie 9y ago
  Though it's not like you treat your so called allies fairly, either.
  - sqdbps 9y ago
    We have far lower tariffs and fewer business barriers than any other market.
- JanSt 9y ago
  No it's not. Amazon pays less taxes on books sold than any bricks-and-mortar store in countries like Germany. They abuse the broken tax system and force smaller players that can't afford those structures (or get an illegal special Ireland tax treatment like Apple) out of business because they can't compete against massive scale combined with lower taxes. The EU now tries to fix the system because those companies keep evading all other measures. The EU population and local businesses do not accept that damaging behavior anymore. You want to make profit in our countries? Don't abuse the system or it will be fixed to be fair again.
  - sqdbps 9y ago
    If you are going to benefit from the EU's consolidated market you can't complain about the benefits companies are extracting from that same arrangement. Not to mention that taxing specific companies that happen to come from the same country while the keeping the tax rules unchanged for the rest of the economy isn't fair or free trade and would justifiably require retaliation.

33 points by kimsk112 9y ago

The problem seems to be rooted within the EU itself with Ireland, Luxembourg and others allowing these companies to pay little or not taxes.

StavrosK 9y ago
Isn't that exactly what the article says? That's why the EU is trying to fix it.
- dogma1138 9y ago
  The EU very skillfully and intentionally crafted the current Dutch Sandwich style scheme by essentially legislating tax heavens in various EU and quasi EU territories (the EU outermost territories make it a very fun map to look at). The thought behind it was to both attract large companies to pay tax in the EU and allow EU multinationals to remain competitive without having to go somewhere else. But a lot has changed the EU became less and less competitive and it didn’t really manage to bootstrap any new giants and lost a lot of its former ones. The plan also did not account for companies like Google, Microsoft and Apple to exist with their market cap nor that companies would love nothing more than to sit on piles of cash that amount to the entire GDP of Europe when those laws were legislated. Now with US companies actually repatriating cash the EU is basically looking for a new way to get some of that money back and more.
tdb7893 9y ago
The problem is that if those countries raise their taxes companies will just find other tax havens. I think that's why they are trying to find a solution that will work no matter where someone is technically headquartered
- AstralStorm 9y ago
  You cannot move latency sensitive infrastructure easily if at all. (Most of networking infrastructure including cloud services.) At least once laws relating revenue (not income) at location to tax at location committee into play. Otherwise everyone would already operate out of Christmas Islands etc.
derriz 9y ago
Ireland's corporate tax rate is 12.5% which is in the lower half of the table of EU rates but that's no basis to brand it a "tax haven". People get riled up because of an exclusively American twist to their corporate tax rule which allows American companies to defer paying US corporate tax on foreign earnings until the money is "repatriated". This is why you never see UK, German, Japanese, etc. companies use Ireland as a tax "haven". Ireland follows international law in taxing multinationals on the profits generated in Ireland. When you hear a claim along the lines of "Apple only pays 2% on its revenues in Ireland", it's because the vast majority of the profit is taxable in the US not in Ireland but payment is deferred because of this US tax loophole. Just because the cash hasn't been handed over to Uncle Sam, doesn't mean it isn't due. It's perfectly understandable that the US government is unhappy at this attempt by a foreign government to grab corporate tax which by all international standards belongs to the US treasury. If the EU (and I'm a proud European) wants a share of digital tax, then they should grow their own profitable tech companies to tax instead of selectively eyeing up US tech companies. The US doesn't get to impose corporate tax on German car makers or French wine producers - nor should the EU get to impose a corporate tax on US tech companies.
- FigBug 9y ago
  On car makers or wine producers the US can impose import duties i.e. 25% on light trucks. There is no equivalent to import duties for online businesses, hence this tax plan.
  - derriz 9y ago
    Sure every country can just impose duties on imports. But it's an impoverishing move for the planet. The last time every country believed this was a good idea was in the 1930s and it lead to economic devestation and arguably contributed to WW2.
- mdekkers 9y ago
  The US doesn't get to impose corporate tax on German car makers or French wine producers Yes they do, they are called import and excise duties, and they currently don't apply to services, which is what the EU is going after.

HumanDrivenDev 9y ago

More incentive for tech companies to move to the UK?

oh-kumudo 9y ago
UK is out of EU. And what is the point of moving to UK, when you want to the market of EU?
- HumanDrivenDev 9y ago
  To escape silly EU laws like this one, while still being a part of the continent and close to the market.
  - jgh 9y ago
    How would that escape this? They're making money off of EU people, they would have to pay the tax.
    - pkaye 9y ago
      Not according to Ireland and Luxembourg.
      - jgh 9y ago
        I'm not sure what you mean by that. As far as I'm aware the no law has been passed around this yet, the proposed law from the other day was a flat 3% tax on any revenue made in the EU (which includes Ireland and Luxembourg).
        pkaye 9y ago
        I'm saying they are paying taxes per the Ireland and Luxembourg requirement so what is the concern for the other countries in the EU?
  - themihai 9y ago

lainga 9y ago

US aside, is there any word on how Ireland et al. are reacting to the EU trying to cut off their cash cow?

sqdbps 9y ago
"...other member states like Ireland have opposed changes to a system in which they can use tax policy to attract businesses." They don't like it.
oh_sigh 9y ago
It may not be that bad for Ireland. Ireland had stipulations in bringing a certain amount of operations(ie jobs) into the country to get their favorable tax rate. If the tax benefits are cut back, these businesses may decide it is worth while to keep operations ongoing in Ireland even without the favorable tax regime. Only time will tell on that front if Google et al will remain there.
- derriz 9y ago
  There is no "favourable tax rate" in Ireland - around 1990 or so, the EU ruled against selective favourable tax rates. Before that, Ireland used to have a 10% rate for exporting (largely foreign) companies and 25% for non-exporting companies. As a result of the ruling, a single 12.5% rate was introduced. It's been like that since.
  - MagnumOpus 9y ago
    But with the Double Irish strategy and its successors, no US company actually pays those 12.5%, but less than 0.1% instead...
    - derriz 9y ago
      Eh no to the 0.1%. But I have to concede that the power of shocking but nonsense headline numbers is hard to argue against given how I'm burning through Karma here. The 0.1% is a number concocted by treating the value of European retail sales as a numerator and the Irish corporation tax as a denominator. The problem is that the dimensions in this division are not-compatible. By the same calculation Walmart only paid 1.2% corporate tax in the US in 2014 (corporate tax paid / total revenue). In actual fact, Walmart paid an effective rate of over 30% because corporate tax is calculate on profits - not on revenue.

deleted 9y ago

[deleted]

sqdbps 9y ago

"... that push has prompted complaints from American tech giants, which argue that they are being unfairly singled out by Brussels. European officials strongly deny those claims..." After so many targeted requirements, restrictions, investigations, fines, and taxes no one's really buying that denial. It's tariff by other name, which lends credence to Trump's rhetoric about how we haven't been treated fairly by our so called allies. EU governance and enforcement lends itself to be hijacked by the bloc's most powerful members (france and germany, in this particular case the french) and use them as a cudgel against perceived business threats.

dozzie 9y ago
Though it's not like you treat your so called allies fairly, either.
- sqdbps 9y ago
  We have far lower tariffs and fewer business barriers than any other market.
JanSt 9y ago
No it's not. Amazon pays less taxes on books sold than any bricks-and-mortar store in countries like Germany. They abuse the broken tax system and force smaller players that can't afford those structures (or get an illegal special Ireland tax treatment like Apple) out of business because they can't compete against massive scale combined with lower taxes. The EU now tries to fix the system because those companies keep evading all other measures. The EU population and local businesses do not accept that damaging behavior anymore. You want to make profit in our countries? Don't abuse the system or it will be fixed to be fair again.
- sqdbps 9y ago
  If you are going to benefit from the EU's consolidated market you can't complain about the benefits companies are extracting from that same arrangement. Not to mention that taxing specific companies that happen to come from the same country while the keeping the tax rules unchanged for the rest of the economy isn't fair or free trade and would justifiably require retaliation.