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Tech giants face 2% UK digital services tax
- dmmalam 8y agohttps://twitter.com/hmtreasury/status/1056942074271072258 https://twitter.com/hmtreasury/status/1056942074271072258
- ilikerashers 8y agoThe UK has gotten very frustrated with the slow movement of international lawmaking in this space. With business rate slashes to help struggling retailers (retaliation against Amazon) and mental health funding increases for schools (retaliation against Facebook/Google), I'm quite happy to see something happen at last. I expect other governments to follow suit. From a tech defence angle, I can't see Trump rallying in support of his good buddy, Jeff Bezos.
- microcolonel 8y ago> The UK has gotten very frustrated with the slow movement of international lawmaking in this space The space of... international laws to transfer money for literally no reason to the government of the UK, even though they have no services or investments to recuperate related to the money in question? I mean, it's fair that everyone asks for a slice of the pie, but that doesn't mean it's fair that they take it.
- Jonnax 8y agoThe slice of the pie? If these companies are upset about it, they can just leave the UK market.
- simonh 8y agoWhen AWS in teh UK can grant share awards of £11.8m to staff, but only pay £155k in tax, that doesn't seem like they are paying their fair share in UK tax.
- joshuamorton 8y agoI'm a bit confused. At least in the us, my stock awards are taxed as income, not by my employer, but by me (well in the us there's also payroll tax but still). Why would you tax Amazon more if they pay their employees? The employees are already paying income tax, aren't they?
- slivym 8y agoNo one is saying that we should tax corporations based on how much their pay roll is. What we're saying is that the scale of those two numbers shows how ridiculously inadequate the current corporation tax laws are. Do you really think that a tax which brings in less revenue from one of the largest retailers in the country than an average employee of that company pays in income tax is a functional tax?
- snthd 8y agoIt's their kitchen.
- kbenson 8y agoI think the space is their market, in which they set the rules and may want to tip things one way or another to prevent starvation and entire dependence on external parties. In the general case, it's once thing to let an industry shrink because they are out-competed, it's another entirely to let them shrink to the point where recovery is extremely hard or event nearly impossible because of the loss of domain knowledge. In addition, there's also first mover advantage, and in some industries that can mean the first mover dominates to such a degree that fair competition (market information is distorted) is hard. There's nothing inherently wrong with trying to alter the market, it all depends on the goal and methods. If this were applied towards bolstering competition by incentivizing Europeans offerings, that might benefit everyone eventually.
- candiodari 8y ago> I think the space is their market, in which they set the rules and may want to tip things one way or another ... So far I'm with you. > to prevent starvation and entire dependence on external parties. Heh. Man I remember when I used to think like this. I remember the time fondly, oddly enough. Sadly, sorry to say, you will be cured of this. THIS is also the UK government: https://en.wikipedia.org/wiki/Independent_Inquiry_into_Child_Sexual_Abuse https://en.wikipedia.org/wiki/Independent_Inquiry_into_Child... or, perhaps, https://en.wikipedia.org/wiki/1978_smallpox_outbreak_in_the_United_Kingdom https://en.wikipedia.org/wiki/1978_smallpox_outbreak_in_the_... The UK KNIGHTED the person who lied in court to get the government out of paying compensation for ONE VICTIM that the UK government, after being forewarned of exactly what would happen ... to which the UK government didn't react to save a buck. Resulting in a problem that could have easily killed 1 million UK citizens, majority of them children. Needless to say, the UK government did impose incredible costs on some of it's citizens, in almost all cases with very flimsy justification (one person's wife being forcibly kidnapped, without informing the guy or their families, never to be allowed to see each other again, after the government killed her. I mean, it's almost a Disney villain plot, except without the good ending) Sorry to say, but if you think the UK government has either your or any of it's citizens' interests at heart. Or any other government. You're sorely delusional.
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- mtgx 8y agoThey should be taxed based on revenues they make from their users in UK. Loopholes such as shell companies and such should be well considered, too. I know revenue tax is far from ideal but it's also way more practical than profit taxation, too.
- ct520 8y ago2% OF REVENUE? NOT PROFIT? LOLLL papa trump don't play that, bezo or not.
- davidhyde 8y agoI wonder if the recent "link tax" forced into the proposed EU copyright legislation has something to do with making this "digital tax" work in practice. Wouldn't be the first time that copyright law is used for something completely different to what it was meant for.
- walshemj 8y agoNope its on faking low profits aka tax avoidance
- fredley 8y agoGood. It is becoming more and more apparent that there is a toll on society created by these companies. They have a negative impact on our domestic businesses (traditional brick and mortar, as well as home-grown digital businesses) not to mention our mental health and even democracy. By taxing them, hopefully we can go some way to reversing some of that damage (although I'm less hopeful of that...).
- notahacker 8y agoAlso, what seems to have provoked this tax in the UK specifically is the tendency for such companies to artificially lower their profits to more or less avoid UK corporation tax altogether by claiming that sales of UK clicks to UK companies handled by UK based account managers were in fact completed in Ireland...
- sofaofthedamned 8y agoExactly. I'm no fan of the current UK Government, but their hand has been forced. I'd rather all countries get together and ratify a standard for where profits can be realised. Hopefully this will open the dam for the others to get involved.
- walshemj 8y agoThat is what Philip Hamond (last sane person in the cabinet) said - that of there was international agreement they would go with that.
- subjectHarold 8y agoThere was a recent article highlighting that Ed Sheeran paid more in tax in 2017 than Amazon or Starbucks...yes, I don't think the current system works well - https://www.fastcompany.com/90251523/ed-sheeran-paid-more-uk-tax-last-year-than-starbucks-or-amazon https://www.fastcompany.com/90251523/ed-sheeran-paid-more-uk... The only possible criticism of the UK govt is that they made this bed for themselves by aggressively narrowing the tax base.
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- rb808 8y agoAny supremely-profitable industry is bound to be taxed sooner or later, esp if its foreign. I haven't seen any details though. Is it a % of ads sold? Or some other mechanism?
- pbalau 8y agoIt's going to "happen" in 2020. Plenty of time to change their minds...
- stephengillie 8y agoThey'll probably back down when companies threaten to leave. Like Amazon did when threatened with the Head Tax. Or how Dole left Hawaii.
- tonyedgecombe 8y agoI don't think they want to do it anyway, they have been lobbying for international cooperation on this and other countries have been dragging their feet. My guess is this is meant to hurry things along a bit.
- ascorbic 8y agoThis isn't like threatening to move offices, which doesn't cost them revenue. The UK is one Amazon's largest markets. Facebook and Google both make billions of dollars in sales in the UK. They're not going to forgo that.
- mr_toad 8y agoIt’s just another sales tax. Amazon already deals with hundreds of different tax rates in different jurisdictions. They’ll just price it in.
- OJFord 8y agoAmazon's not always the cheapest as it is. If it prices it in, then competitor's start to look more attractive; which is exactly the point.
- MrZongle2 8y agoWhen thinking about the UK rolling out new taxes, this inevitably comes to mind: https://youtu.be/pmgcylAxjfY?t=118 https://youtu.be/pmgcylAxjfY?t=118
- user5994461 8y agoI was scared for a minute. I thought this was about taxing consumer for accessing internet. It's fine. It's about taxing giant corporations who are evading taxes.
- infinitone 8y agoIt'll likely trickle down to the consumer... the consumer will end up paying somehow.
- njarboe 8y agoThis only happens in highly competitive markets like say, cotton t-shirts, gasoline, or wheat. It is not like Facebook is now going to have charge more for a social media account to stay afloat among a sea of other social media companies. No, Facebook (and Google, etc) will have to pay their corporate tax like they should. Although I think the new US corporate tax code is already going to prevent the current evasion schemes until, of course, new ones are invented.
- GunlogAlm 8y agoThat's a line pushed by large corporations to convince people that money saved through tax avoision is somehow benefiting the consumer. Companies should pay their fair share of tax. Moreover, the argument makes little sense when dealing with companies like Google and Facebook. The average consumer isn't paying for access to Google Search, Gmail, or Facebook...
- Rjevski 8y ago> It's about taxing giant corporations who are evading taxes. I wouldn't say "evading" unless what they are doing is illegal. If they are following the law, and the law allows what they're doing, then it's not tax evasion. If you're not happy, then change the law to actually make it illegal, and then if those companies are still doing it then you can call it tax evasion.
- nicoburns 8y agoPointing out this distinction makes it sound like it's fine as long as it's legal. It's like when people say "It's not terrorism when a state does it because terrorism is defined as non-state political violence". It's technically true, but largely besides the point.
- dabeeeenster 8y agoEd Sheeran pays more tax in the UK than Amazon.
- biggio 8y agoIs this true? Edit: holy moly it is! https://metro.co.uk/2018/10/12/ed-sheeran-may-be-the-worlds-richest-solo-artist-but-he-pays-more-tax-than-e-com-giant-amazon-8030199/ https://metro.co.uk/2018/10/12/ed-sheeran-may-be-the-worlds-...
- IanCal 8y agoHighly unlikely. People like to look only at corporation tax, and ignore everything else.
- samspenc 8y agoThat article seems to be confusing revenue with profit. The $2 billion Amazon made in the UK is revenue; I suspect its profit is actually smaller.
- cortesoft 8y agoYeah, that confusion is made clear by the earlier statement that he made `1/5` the profit.... he did not make $400 million, which is 1/5th of 2 billion. It says he made $37 million.
- Reason077 8y agoIt’s easy to keep profits small when you pay a large “license fee” to your offshore parent company.
- _trampeltier 8y agoFor so many years this was no problem for the western countrys, when this way came much money to us from africa and other poor places. The "license fee" thing is super old, it's propably the oldest way to "optimise" tax.
- djhworld 8y agoOne thing that will be interesting around this is any future trade negotiations the UK has with the US, especially after we leave the EU. This tax will target the US giants.
- mcintyre1994 8y agoAgreed - it's scheduled for 2020 and it looks like it's just on the books to be negotiated away in that deal. Not a bad idea though, it's a free concession that they didn't have before.
- pastor_elm 8y agoI'm sure Trump is going to bend over backwards for Silicon Valley.
- deleted 8y ago[deleted]
- tinktank 8y agoThe same country that will not lift a finger to stop money laundering from around the globe, being used a the basis for offshore tax havens, and non-dom shenanigans will quickly do tax to the hilt.
- mexicanandre 8y agoYeah fair call this. Their property market is essentially black money bank.
- vorticalbox 8y agoIt's nice to see they can plan a road map for tax but for brexit.... It sounds good but something tells me it will end up increasing prices for consumers.
- rtkwe 8y agoThey did have a plan for Brexit but I think it amounted to 1) eat cake 2) still have total access to mainland Europe's cake markets too. On a more serious note a tax plan is easier because the government only has to negotiate with itself while Brexit actually involves outside countries who are disinclined to give the UK a cushy deal.
- vorticalbox 8y agoI know it's different things but at least this has a road map of what is planned and when by.
- deleted 8y ago[deleted]
- heyman404 8y agoWho are they kidding? it's a tax on US tech companies, it's not right nor fair to build a tax scheme that singles out a specific industry from a specific country, hopefully the US administration will quash this through available means.
- swarnie_ 8y agoI give it 20 minutes before one of the big accountancy firms find the (totally unintentional) loop hole to evade this tax.
- jimnotgym 8y agoIt's getting much harder since you have to register tax evasion schemes now... But probably yes. In the other hand I can't believe it is expected to raise so little.
- mathieuh 8y agoTax avoidance I imagine if you registered your tax evasion scheme you would receive a knock at the door in short order
- noir-york 8y agoThe UK is working really hard to close down tax planning. Its practically dead already for personal tax planning.
- swayvil 8y agoGotta pay for the Brexit fuckup somehow.
- nickdothutton 8y agoThe reality is that the large US tech giants this is aimed at are essentially mercantile companies. Paying little or no UK tax on significant UK revenues, which are then remitted via tax efficient structures to the US parent. Profits are a Will-o'-the-wisp which appears and disappears in whatever tax jurisdiction is most efficient at the time. For this reason I don't see corporation tax (which is <10% of total tax receipts) being something future governments can count on (unless that government is home to the mercantile company). TLDR: Find somewhere else to get the 9%.
- sys_64738 8y agoThis will start out as 2% in 2020 but probably be 10% by 2030. That's usually how these things work in the UK.
- Jmcdd 8y agoGood
- NeonVice 8y agoI disagree that this is good. Volatile tax rates and regulations make businesses less likely to invest and innovate. They will spend more of their time hiring lawyers and accountants, spending less time producing valuable goods and services.
- beastnumber 8y agoThat's how taxes everywhere usually work.
- kbenson 8y ago> That's how taxes everywhere usually work. So, taxes everywhere usually see a 500% increase over 10 years? Forgive me if I require some sort of evidence for a claim as extreme as that.
- beastnumber 8y agoDid I ever say that? Taxes usually increase. Do your own research.
- kbenson 8y ago> Did I ever say that? Yes. Yes you did, by nature of what you said and what it was in response to, which is very specifically a case were taxes raised by 500% over 10 years. > Taxes usually increase. A ridiculous proposition on it's face, as it would mean over times taxes always get higher. In the United States, Federal income taxes have fluctuated up as high as above 90% over the last one hundred years. It's not that high anymore, so taxes have gone down.[1][2] The UK has similarly seem fluctuations over time, and it's not currently at the highest it's been seen.[3] > Do your own research. If you're going to make an assertion, the onus is on you to back it up. That said, you should be careful what you wish for, because someone might just take you up one it. 1: https://www.businessinsider.com/history-of-tax-rates https://www.businessinsider.com/history-of-tax-rates 2: https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx https://bradfordtaxinstitute.com/Free_Resources/Federal-Inco... 3: https://en.wikipedia.org/wiki/History_of_taxation_in_the_United_Kingdom#Income_tax_2 https://en.wikipedia.org/wiki/History_of_taxation_in_the_Uni...
- robot 8y agoThis is a pretty good idea. Tech giants make money in Europe paying little to no tax incorporating in Ireland, while all small to medium businesses incorporated in the UK pay the usual tax. Its simply unfair.
- tomatocracy 8y agoThe global arguments about multinational tax usually conflate at least two issues: - total tax the corporate pays globally; and - share of the cake paid 'locally' vs in the home jurisdiction This measure seems to me to be more about the second of those than the first, but politically thats a hard sell so you see all the statistics about how much tax they paid 'in the UK' etc etc. Most people misread that. Politically of course agreeing on a fair share of the cake is much harder than saying 'we should tax them more globally'.
- albertgoeswoof 8y agoThe fairest way is to pay tax where you do business, you know, like you’re supposed to. It’s not really different for tech companies or global companies.
- Eridrus 8y agoThis is false, exporters usually pay taxes on their profits "at home", rather than in the jurisdictions they sell their goods, with the exception of thing like sales taxes.
- tomatocracy 8y agoBut it's much more complicated than that because the system is not meant to either incentivise or disincentivise insourced vs outsourced functions (and what you seem to be suggesting would create incentives for offshore outsourcing for them, which would be politically unpopular). And corporation tax is a tax on profits, not revenue (VAT already exists and is a tax on revenue and Amazon UK pays a very large amount of VAT). Maybe a couple of examples: if I buy clothes from Amazon's own brand/white label, which are manufactured in another country, what is the appropriate amount of profit that Amazon UK should be allocated and taxed on for my purchase? Now what if Amazon sold that operation to someone else? Should they then be allowed to deduct it? If you get that wrong, then you create a tax incentive to either insource or outsource functions (since for the same cost structure, one will save tax over the other), which is an undesirable outcome. Or let's say I'm a UK Amazon Prime subscriber. I use some of that for video content, some for other services like postage. Some of that video content was created by their own studio in the US or Canada and is only available on their platform; some was licensed from a third party. How much of my prime annual fee should be allocated to the Amazon UK operation? How much to the internal Amazon studio? What about other bits of Amazon which are involved? Again, how do you ensure that that doesn't created a non-level playing field vs third-party studios? Third-party hosting services or CDNs? Third-party payment processors? Etc Then consider that until last year, Amazon in the US would have also been taxed on the whole empire's worldwide profits but been able to deduct taxes already paid under various double tax treaties. So if the UK taxed amazon more, the US would have received correspondingly less. This is still partly true. None of this involves anything which is tax motivated - it's all business motivated. Layer in tax incentives various government put in place for other policy reasons and it becomes even more complicated. "Fair" is very hard when you get to the level of complexity involved in these types of businesses.
- pcurve 8y ago"The Treasury forecasts that the tax will generate £275m in 2019-20, rising to £370m in the following year. It then expects that digital services tax receipts will reach £400m in 2021-22 and £440m the year after. " Smaller amount than I expected, but still a good chunk of change.
- OnlyRepliesToBS 8y ago"payment is required" on youtube today what a coincidence
- jedberg 8y agoThis will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax. Sure maybe the local companies could then undercut Amazon if they somehow don't have to pay the tax, but eventually they'll just raise their rates to match because why give up the profit margin if they don't have to? It doesn't matter anyway, the tax will never happen. They're just using it as a point of negotiation for a new US trade deal after Brexit.
- bertil 8y agoIt will not “hurt” people in the UK. If that tax passes through and is applied, it’s possible that the price transfer will only apply to UK residents. In that case, the Treasury will have more money to spend on services for UK residents which would hardly be hurtful.
- jedberg 8y agoSure but then why not just raise taxes on UK citizens? The whole point of this tax is to penalize the "tech giants" which happen to all be American, and it won't really do that.
- bertil 8y agoThose companies are 100% American: they rely on technologies like the Web invented by an English scientist working at the frontier of France and Switzerland. They rely on algorithms invented by Russian, French, German scientist. They hire students from university around the world, to be engineers, managers, salesperson for clients also from everywhere in the world. If those companies want to keep on hiring people without staggering student’s debt, they need to contribute to the local economy. I know they already do that (I worked for such companies for long enough, and paid a lot of taxes locally) but my point was twofold: - paying more tax is often a good thing for the people who are going to benefit from the corresponding government services; that is certainly the case in the UK; - if your company develops, promotes and sells products in a country, it makes sense to also pay added-value- and profit-tax there, and not avoid tax by claiming that the value was created in a tax shelter like Suriname, where you have no activity.
- ucaetano 8y agoTL;DR: Uk wants to pass a new sales tax, that applies only on "established tech giants" that generate "at least £500m a year in global revenue" of 2% of sales made in the UK.
- walshemj 8y agoRevenue tax not sales tax maybe you should have read it.
- andy_ppp 8y agoI’ll remind every person here that you are taxed on your revenue, not your profit. It’s worth thinking about because it’s not always been the case in the past that companies had more rights than individuals.
- sol_remmy 8y agoYou propose taxing a company on their revenue and also taxing individuals when they realize their capital gains? Such a high level of double taxation would kill all investment in this country overnight
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- djrogers 8y agoThat's actually not the case - expenses related to earning your income are usually (with a few notable exceptions) deductible. Also, capital gains are a real thing, and you are taxed on realized gains - not the full amount you sold for.
- philjohn 8y agoIf you're employed in the UK there's very little you can deduct - mostly it's salary sacrifice arrangements like pension, childcare vouchers etc. The only real deductible I can think of at the moment is mileage allowance, and since very few people do anything but commute to and from their place of work, they can't claim that. It's only if you're a salesperson or area manager driving your own car. If you're self employed however the picture is a little different.
- bepotts 8y agoI know this gets said a lot, but I live for the day the world sees innovation and quality tech companies from Europe instead of taxation and regulation.
- jacquesm 8y agoThere is plenty of innovation and quality tech in Europe and governments tend to levy taxes, in Europe, and elsewhere.
- turbinerneiter 8y agoHonestly, you have to be pretty ignorant to hold this opinion.
- ackidacki 8y agoActually it is more informed than ignorant. Remove Sweden and UK from the the European list and you have needles in a haystack. Even if you account for the 'unicorn' adge there is barely have innovation in Europe. On the social front too too, European pay and ownership is more concentrated in the hands of the leaders and is less evenly distributed than American counterparts. Your comment strikes me a bit as if it comes from a defensive point of view instead of taking a hard look at things.
- retromario 8y ago> On the social front too too, European pay and ownership is more concentrated in the hands of the leaders and is less evenly distributed than American counterparts. I would be very surprised if this was the case. Could you please back this statement with data?
- opaque 8y ago> Remove Sweden and UK from the the European list and you have needles in a haystack. Remove California and New York from the US list and ...
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- scotty79 8y agoWhy would that bother anyone but the customer? Tech giants will just add it to the tab. People have no idea how much digital service is worth so if they want it, they pay whatever is the price. I don't think 2% (or even 10%) price hike will cause them to not advertise online their one simple trick to improve health of your joints. What are they gonna do? Print newspaper ad?
- raesene9 8y agoSure still achieves the UK.Gov goal, raise additional revenue, don't directly impact citizens.
- scotty79 8y agoIt will directly impact people who buy advertisement online in UK because Google and Facebook just raise price by 2% for them.
- raesene9 8y agoyep sure and I'd guess that not many individual UK citizens purchase Google or Facebook ads :) Companies do, but it's just a small bump in their advertising revenue. The UK gov are alll about raising taxes that aren't obvious, so they can raise more cash whilst claiming to be reducing things like income tax. Remember the UK has a really low rate of corp. tax (19%) compared to most other countries, so hitting internet advertisers for a small amount of their budget isn't a big thing.
- walshemj 8y agoThat's not how it works ad buyers are not going to automatically increase their budgets.
- Aqua 8y agoAnd how would that work? Google and Facebook could charge more for ads which impacts mostly the advertisers, Amazon could in fact increase the prices impacting average Joes in the UK, but they would lose the advantage over smaller competition unaffected by this kind of tax. This is a globalisation tax that would most likely not affect "normal" people while still bringing quite a few pounds to the national budget.
- theptip 8y agoThis looks like it is on gross sales? If so that would hurt low-margin companies quite a lot; I imagine Amazon would be essentially forced to increase prices by 2% for example.
- martinald 8y agoThe problem is for highly global, IP based companies it is very difficult to tax profits. You can just create a 'cost' (platform license fee, trademark cost) in another sister company (that is in a low/no tax jurisdiction) and charge it to the UK based one that is equal to the profit. Boom, no profit due to tax. Not really sure what the best solution is. The UK isn't really big (or competent, depending on your outlook) enough to make tech giants like the US, so tech US companies dominate. This has led to a massive outflow of tax revenue to these US giants. Eg, most advertising revenue pre internet would have stayed in the UK and been taxed in the UK. Post internet it is all flowing out to Facebook, Google et al who pay close to zero UK tax on tens of billions of (very high margin) sales.
- mattmanser 8y agoWe've had 6 tech companies breakthrough billion $ threshold this year. We're the biggest tech company creator in the EU. Sounds more like you've got a small (or incompetent, depending on your outlook) source of information. In the past year, the UK has added six billion-dollar tech companies worth $12.4 billion to its club of 26, more than any other European market, and has produced the highest number of billion-dollar companies in Europe since 2000 – contributing $64 billion to Europe’s $240 billion ecosystem of billion-dollar tech companies https://www.information-age.com/tech-titans-europe-end-big-tech-123473280/ https://www.information-age.com/tech-titans-europe-end-big-t...
- martinald 8y agoNot talking about market capitalisation. Talking about profits. The UK doesn't have anything on the scale of FAANG generating enormous (taxable) profits. We are literally 2 orders of magnitude off.
- bcheung 8y agoDiscrimination aside, isn't the UK providing the favorable tax haven to begin with (Double Irish)? Also, how is revenue classified? If someone buys ads on Facebook do you now have to count and prorate clicks based on where the user comes from? And now with GDPR (or whatever the equivalent is in the UK) What if the user does not accept tracking where they come from? Then there's the clause that says the business must track the minimum needed to comply with tax law even if the user does not opt in. So there goes privacy. Seems like there are a lot of laws that contradict and negate each other. What a mess.
- deergomoo 8y ago> Discrimination aside, isn't the UK providing the favorable tax haven to begin with (Double Irish) The Republic of Ireland is not part of the United Kingdom
- neffy 8y agoThat´s not... exactly... what was being referred to. https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
- amaccuish 8y agoI'll repeat the parent. "The Republic of Ireland is not part of the United Kingdom " The Double Irish arrangement refers to the Republic of Ireland, a separate country to that of Northern Ireland, both of which can be found on the island of Ireland.
- walshemj 8y agoThere are Bars in Boston where I would not make that statement :-) More seriously the split between the north and south is no joking matter in a number of places.