8 ms·

And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with

by flexie 8y ago

And this is where the main issue is. Local newspapers, local advertising companies, global search companies that could have been; all of them are competing with Google on vastly unfair terms. Google is not paying tax. The others have to.

TAForObvReasons 8y ago
Same thing played out with Amazon. The embedded 7-9% sales tax advantage gave them a massive price advantage (even if the headline price is the same, the price the consumer pays is less) that retailers couldn't keep up with.
- candiodari 8y ago
  You forget the effects of the "full reinvestment" policy. Amazon barely paid any tax at all. Not on sales, not on storage space, not on profits, not on ... (note: Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS. Oh, and since it's "paper profits only" (mostly) he hasn't paid tax on it either) People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly) The reality is Amazon, and to a lesser extent Google, Apple Yahoo, Microsoft and Facebook are government-sponsored companies that have been given extreme preferential treatment for close to two decades now. Without that 20% advantage, there is no way Amazon could compete with Walmart. Without that, the business model is absurd, even now. Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole. (note: they don't sell to "you". They sell to, say, Microsoft Ireland for $final_price - 5%, then the "only profit" is that 5%, and that's all they pay tax on. For FB/Yahoo/Google/... it's even worse) As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.
  - jeffreyrogers 8y ago
    What is the 20% subsidy that other companies couldn't also have? Other companies could reinvest all their profits and pay close to no taxes as well, right?
    - WalterBright 8y ago
      That's correct. Also, anybody can buy&hold AMZN stock long term and not pay regular income tax rates on it. Amazon doesn't get any special tax treatment, and neither do investors in it.
    - candiodari 8y ago
      1) Not paying sales tax in the US due to "interstate commerce" exception 2) Ability to shop around for the cheapest jurisdiction for international sales (which means outside of the US Amazon paid low single digit tax rates on everything) 3) Ability to sell stuff from people and not being forced to prove they pay taxes or have it impounded All 3 above are not available for brick&mortar retailers. In case you were wondering why the CEO of Amazon, Jeff Bezos, is a Wall Street banker and not a geek.
  - adventured 8y ago
    > if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size That's wrong and impossible to support in fact. You can spot a fraudulent claim like that easily because it wings an arbitrary number that on the surface appears absurd (and as it turns out, is). Tax Microsoft at the OECD median, their net income for 2018 would be about ~$25 billion. Their tax rate for Q1 was 14%, which is comparable to the effective corporate tax rate in much of Europe. So you don't like their 14% rate and think it's too low? How would raising that to 18% or 20% change anything fundamentally? It wouldn't. And it certainly wouldn't "rapidly shrink [them] to 10% of their current size." Whether their net income is $23b or $26b or $28b annually, Microsoft remains worth a similar value as to what they are today (ie well over half a trillion dollars). The same holds true for Facebook, Apple and Google. Making ridiculous claims without anything supporting them, doesn't make for a very good argument position.
dzink 8y ago
True, though small companies can be held as LLCs or taxed as SCorporations if they have less than 100 investors, and they wouldn't pay corporate taxes anyway. At that point taxes on gains trickle to the owners/partners and are taxed at personal tax rates. C-Corporations pay taxes twice (Corporate taxes, then taxes on distributions as salaries or dividends).
- rbranson 8y ago
  Employee salaries are tax deductible in the US.
marcosdumay 8y ago
What is stopping countries from taxing the importation of services?
- digi_owl 8y ago
  I'm no accountant, but i have the impression that there are various international agreements in place that basically says that earnings are to be taxed where they are made. This is why there has been a bunch of hoopla over Irish tax incentives for example, as it allowed the likes of Microsoft, Apple and Google to claim all sales inside EU was done by their Irish office. The rest simple earned just enough to cover expenses...
  - marcosdumay 8y ago
    It's a tax on import, not on earnings. The buyer would pay it, not the seller.
  - gambiting 8y ago
    At least in the EU, you pay the tax where the company is registered, or in case of individuals - where you declare your tax residency is. If you own a German construction company that occasionally drives across the border to France and builds houses there, you pay taxes on your earnings in Germany, of course. If you work for a Swedish company in Malmo, but actually commute every day from Copenhagen(I know a few people who do that) you pay taxes on your salary in Denmark, because that's where you live and where your tax residency is.

by flexie 8y ago

TAForObvReasons 8y ago

Same thing played out with Amazon. The embedded 7-9% sales tax advantage gave them a massive price advantage (even if the headline price is the same, the price the consumer pays is less) that retailers couldn't keep up with.

candiodari 8y ago
You forget the effects of the "full reinvestment" policy. Amazon barely paid any tax at all. Not on sales, not on storage space, not on profits, not on ... (note: Jeff Bezos DID get enough money out of it to become the richest man on earth, but not through profit. Rather he got "capital gains on his shares", which is the same thing in practice, but a very different thing for the IRS. Oh, and since it's "paper profits only" (mostly) he hasn't paid tax on it either) People think the internet businesses got successful because it's "just a better way to do business", but it gets a ~20% government subsidy. 30% if hailing from China (for instance, free shipping really is free from China, or I should say, paid by the US taxpayer mostly) The reality is Amazon, and to a lesser extent Google, Apple Yahoo, Microsoft and Facebook are government-sponsored companies that have been given extreme preferential treatment for close to two decades now. Without that 20% advantage, there is no way Amazon could compete with Walmart. Without that, the business model is absurd, even now. Microsoft, selling software "locally" (ie. tax free in the Bahamas) but internationally, and even more so, Yahoo, Facebook, Google, ... selling services "locally" (in Delaware, Ireland and the Bahamas) is a homongous tax loophole. (note: they don't sell to "you". They sell to, say, Microsoft Ireland for $final_price - 5%, then the "only profit" is that 5%, and that's all they pay tax on. For FB/Yahoo/Google/... it's even worse) As an analysis of the cost structures of these companies will tell you : if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size. This seems absurd to many, but rewriting the financial statements of these companies taking normal tax structures into account will tell you this.
- jeffreyrogers 8y ago
  What is the 20% subsidy that other companies couldn't also have? Other companies could reinvest all their profits and pay close to no taxes as well, right?
  - WalterBright 8y ago
    That's correct. Also, anybody can buy&hold AMZN stock long term and not pay regular income tax rates on it. Amazon doesn't get any special tax treatment, and neither do investors in it.
  - candiodari 8y ago
    1) Not paying sales tax in the US due to "interstate commerce" exception 2) Ability to shop around for the cheapest jurisdiction for international sales (which means outside of the US Amazon paid low single digit tax rates on everything) 3) Ability to sell stuff from people and not being forced to prove they pay taxes or have it impounded All 3 above are not available for brick&mortar retailers. In case you were wondering why the CEO of Amazon, Jeff Bezos, is a Wall Street banker and not a geek.
- adventured 8y ago
  > if these loopholes were all closed, the internet "revolution" would end. All these companies would rapidly shrink to 10% of their current size That's wrong and impossible to support in fact. You can spot a fraudulent claim like that easily because it wings an arbitrary number that on the surface appears absurd (and as it turns out, is). Tax Microsoft at the OECD median, their net income for 2018 would be about ~$25 billion. Their tax rate for Q1 was 14%, which is comparable to the effective corporate tax rate in much of Europe. So you don't like their 14% rate and think it's too low? How would raising that to 18% or 20% change anything fundamentally? It wouldn't. And it certainly wouldn't "rapidly shrink [them] to 10% of their current size." Whether their net income is $23b or $26b or $28b annually, Microsoft remains worth a similar value as to what they are today (ie well over half a trillion dollars). The same holds true for Facebook, Apple and Google. Making ridiculous claims without anything supporting them, doesn't make for a very good argument position.

dzink 8y ago

True, though small companies can be held as LLCs or taxed as SCorporations if they have less than 100 investors, and they wouldn't pay corporate taxes anyway. At that point taxes on gains trickle to the owners/partners and are taxed at personal tax rates. C-Corporations pay taxes twice (Corporate taxes, then taxes on distributions as salaries or dividends).

rbranson 8y ago
Employee salaries are tax deductible in the US.

marcosdumay 8y ago

What is stopping countries from taxing the importation of services?

digi_owl 8y ago
I'm no accountant, but i have the impression that there are various international agreements in place that basically says that earnings are to be taxed where they are made. This is why there has been a bunch of hoopla over Irish tax incentives for example, as it allowed the likes of Microsoft, Apple and Google to claim all sales inside EU was done by their Irish office. The rest simple earned just enough to cover expenses...
- marcosdumay 8y ago
  It's a tax on import, not on earnings. The buyer would pay it, not the seller.
- gambiting 8y ago
  At least in the EU, you pay the tax where the company is registered, or in case of individuals - where you declare your tax residency is. If you own a German construction company that occasionally drives across the border to France and builds houses there, you pay taxes on your earnings in Germany, of course. If you work for a Swedish company in Malmo, but actually commute every day from Copenhagen(I know a few people who do that) you pay taxes on your salary in Denmark, because that's where you live and where your tax residency is.