4 ms·

The 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 ago
This 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 ago
But 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.
- vosper 8y ago
  > Amazon UK pays a very large amount of VAT. Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon.
  - philjohn 8y ago
    Correct.
  - tomatocracy 8y ago
    > Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon. Economists would say that who should be viewed as "paying" any indirect tax (the tax incidence) depends on the price elasticity of demand for the goods/services in question. For highly inelastic goods/services, buyers should be viewed as paying the tax. For highly price elastic goods, sellers (who amount to the employees and ultimate individual shareholders of Amazon) should be viewed as paying. In the middle, it's a mixture. The "solution" the UK has proposed is another indirect tax, so whatever applies to VAT applies to that as well.
  - candiodari 8y ago
    By that reasoning, it's the customers paying company tax, too. Hell, customers' are the ones paying Jeff Bezos' capital gains tax by that reasoning.
    - tomatocracy 8y ago
      Corporate direct tax incidence is typically thought of as applying to some split of capital providers (shareholders and lenders) and employees. Most economists think it falls mostly, if not entirely, on capital providers. Customers might figure in that in an even smaller way but its probably very minor.
- mtgx 8y ago
  VAT is a consumer tax not a corporate tax. VAT is always considered only after the company has considered all costs and profit for its business.

Eridrus 8y ago

This 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 ago

But 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.

vosper 8y ago
> Amazon UK pays a very large amount of VAT. Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon.
- philjohn 8y ago
  Correct.
- tomatocracy 8y ago
  > Amazon collects a very large amount of VAT, no? It's the customers who are paying, not Amazon. Economists would say that who should be viewed as "paying" any indirect tax (the tax incidence) depends on the price elasticity of demand for the goods/services in question. For highly inelastic goods/services, buyers should be viewed as paying the tax. For highly price elastic goods, sellers (who amount to the employees and ultimate individual shareholders of Amazon) should be viewed as paying. In the middle, it's a mixture. The "solution" the UK has proposed is another indirect tax, so whatever applies to VAT applies to that as well.
- candiodari 8y ago
  By that reasoning, it's the customers paying company tax, too. Hell, customers' are the ones paying Jeff Bezos' capital gains tax by that reasoning.
  - tomatocracy 8y ago
    Corporate direct tax incidence is typically thought of as applying to some split of capital providers (shareholders and lenders) and employees. Most economists think it falls mostly, if not entirely, on capital providers. Customers might figure in that in an even smaller way but its probably very minor.
mtgx 8y ago
VAT is a consumer tax not a corporate tax. VAT is always considered only after the company has considered all costs and profit for its business.