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France Plans 5% Digital Tax as Governments Chase Internet Giants

• yann63 8y ago
  Couldn't we just ban tax evasion? What makes it so hard? (honest question) A recent European study has shown that the more company win money, the less they pay in taxes (in percentage). Is it because of bad laws? Corrupt politicians? Something else?
  • jstanley 8y ago
    Tax evasion is already illegal.
    • mtsr 8y ago
      Tax evasion is, but tax avoidance isn’t.
      • madeofpalk 8y ago
        What's 'tax avoidance'? Doesn't everyone avoid tax when they claim expenses and make deductions?
        • ui-explorer12 8y ago
          yes - so maximizing your use of any method to reduce your tax burden is (a) the smart thing to do and (b) the (a)moral imperative of a corporation. not a judgement call, just not sure how you frame the raison d'etre for something that oesn't embody life to begin with.
          • cheerlessbog 8y ago
            Why moral imperative? Perhaps you mean ethical or legal, but is not even legally required, so far as I know, that a corporation must maximize return to investors. More broadly, society created the concept of the corporation and imbued it with valuable privileges such as limited liability and a potentially favorable tax regime. Some argue it would be morally reasonable to require it balance the interests of stakeholders.
        • mtsr 8y ago
          Exactly, and when companies do the same thing it’s legally considered perfectly fine. Morally can be a different matter, though.
        • hackeraccount 8y ago
          Evasion is a bug in the tax code. Avoidance is a feature. Laws are written to create the possibility of avoidance - e.g. we add a 20% tax on cigarettes. We create a 20% tax credit on solar panels. We don't tax interest gains off of savings accounts. For what it's worth it's pointless to complain about tax law complexity. Complexity increases with the amount of money you're trying to drag out of the economy. The more money you want the greater the temptation to create loopholes because they end up being worth more. Imagine a country where the tax rate is 100%. If you pass a law that taxes building cars at 90% you've effectively created an industry. Compare that with how much you'll be loved if the tax rate is 10% and you lower the tax on making cars to 9%. Still good but you'll only garner like not love. Honestly this is why the details of tax law - how fair it is for example - only marginally interest me. The overall rate - and for that you might as well include borrowing, so it's easier to just ask - what percentage of GDP does the government spend are a lot more interesting to me.
      • whynyc 8y ago
        Illegal avoidance is called evasion.
  • meuk 8y ago
    My guess: Big corporations often have more potential to outsource, and are better known, and have a stronger PR and legal department. These traits give them a much better negotiation position (don't remember that governments profit from taxes, so it's a bit of a demand and supply thing: If taxes are high in one country, a big company will threaten to move to another, which costs the country money in the end). At least, this is the argument that the Dutch government uses to abandon as many taxes for companies as possible.
    • Fnoord 8y ago
      Yeah, the Dutch government, ran by the VVD...
  • yoz-y 8y ago
    It's because for an international company there is really no clear cut way to say what is tax evasion and what is not. If your company is incorporated in France, has offices in Ireland and serves customers all over the world, how do you calculate where to pay what? Sovereign countries are free to set their tax rate to 0 in order to attract companies there.
    • gzeus 8y ago
      But shouldn't they like pay taxes for where the customer is from? Suppose a guy from US purchases the service, shouldn't tax be paid there. Isn't that how its supposed to work? Taking only in terms of Giants.
      • izacus 8y ago
        It gets really hairy in cases like Google and Facebook, where the guy paying the service might be a US agency paying to show ads to YouTube/FB users in Europe.
      • yoz-y 8y ago
        Note that there already is a tax that people are paying 'where the customers are'. It's the VAT, which is one of the biggest sources of income for a state.
      • Veelox 8y ago
        To complicate the situation, a French citizen, living in Spain, the sole owner of a company incorporated in Ireland, buys software from an American company to run for a customer in Brazil. Which country/countries should be able to tax the revenue?
        • johneth 8y ago
          The company would pay corporation tax in Ireland. The French citizen, if resident in Spain, would probably pay taxes in Spain (generally countries tax residents). The customer may need to pay sales tax on the purchase to Brazil, if Brazil has such a thing. But I agree with your point - it does get quite complicated and bureaucratic.
  • betterunix2 8y ago
    First, it is not tax evasion if the law is being followed. The real problem is that tax laws have these various loopholes, and the question is why the law is written that way. Almost always it is because wealthy people benefit from the loopholes and lobby for politicians to either keep them in place or replace them with new loopholes (which is the likely outcome from this French tax). When the tax code is complicated enough, as it will inevitably become over time, you wind up with a situation where accountants find creative ways to combine different aspects of the tax code to minimize a company or individual's tax bill.
  • ui-explorer12 8y ago
    tax evasion is illegal; tax minimization is lowering your tax burden using existing laws and is not illegal. Governments should reduce the number of unintentional loopholes but (a) it's far easier to pass new laws than amend old ones, (b) if you change a law that an existing big domestic firm or voting block is exploiting they will let you know at the polls; with a new law you can sell it as "balanced fiscal justice - righting a great wrong by making big foreign multinationals pay their fair share!" I'm definitely not against tax reform, my big concern is the common approach of new taxes as political theater without any honest attempt at simplification, broad application or coordination with other jurisdictions. All this tax is doing is targeting a small, low-vote target that will figure out a complicated way to shift taxable revenue into a different jurisdiction, perpetuating the exact problem it supposedly addresses.
    • josefx 8y ago
      > without any honest attempt at simplification, broad application or coordination with other jurisdictions. The problem with that is that the other jurisdictions have no interest in closing tax loopholes. The irish bend over backwards to let Apples unique sheme qualify as double irish (their tax office had to issue several private rulings) and they had no interest in getting rid of the double irish itself either. For a tax haven making even a cent in taxes they wouldn't have otherwise gotten while costing a different country a million is a win.
      • diarmuidc 8y ago
        The double Irish was gotten rid of in 2015 https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp https://www.investopedia.com/terms/d/double-irish-with-a-dut...
        • microcolonel 8y ago
          You can see the impact of that crackdown in their tax receipts and tax to GDP ratio. Government revenue from Double Irish tax arrangements was fully 5% of their GDP. https://data.oecd.org/tax/tax-revenue.htm https://data.oecd.org/tax/tax-revenue.htm
  • ddebernardy 8y ago
    > Couldn't we just ban tax evasion? What makes it so hard? (honest question) Two things, mostly. The first is lack of financial transparency. The other is how corporate tax is levied. With respect to transparency, there's no shortage of options to create structures in tax havens such that there's little if any paper trail that ties it to their owners or beneficiaries. And just in passing, the US and the UK are not void of problems here; on the contrary, they regularly appear on worst offenders lists: https://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware https://www.theguardian.com/us-news/2016/apr/06/panama-paper... The other issue is basically related to accounting and how corporate tax gets levied. If you're a multinational, it's possible to set up a subsidiary in a place with to no corporate tax and make your international profits all appear there instead of coming home where they get taxed. (This is the reason US businesses were so many billions abroad in the run up to Trump's tax cuts.) Related to this is the ability to move money out of countries that do tax, using questionable licensing fees and accounting tricks the like. Example: https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-france-faces-300m-tax-bill-over-luxembourg-link/ https://www.telegraph.co.uk/business/2016/04/20/mcdonalds-fr... Anyway, to fix this you basically need to get all countries together so there's more transparency, and dig into how corporate taxes get levied.
  • 3pt14159 8y ago
    Political economy and a race to the bottom. Though take hope, there are many people working on this and the silver lining of tech's centralization is that it will be easy to chase them down once the right laws are in place.
  • bobl 8y ago
    Europe is losing ~globalization and we are fighting over the scraps. Which European country do you think will be overall obviously better in ten years? And not in the sense that "everything gets better", but in the sense of having a high rate of success in converting progress to prosperity. I don't know of any.
    • TomVDB 8y ago
      What exactly are they losing?
      • deleted 8y ago
        [deleted]
      • bobl 8y ago
        Essentially competitiveness. Countries that are, or at least aspires to be, competitive would be restricting foreign companies and invest in infrastructure. While Europe is doing the opposite. We are selling our companies and restricting the building of infrastructure. And while you can point to specific examples, like startups, that are successful in Europe it is mostly an illustration of how much we are leaving on the table.
      • sbacic 8y ago
        As a European, I feel like the EU, in general, is on the losing side of globalization. There is not a single European internet company in the top 15. I think part of the reason for this is cultural (aversion to risk), part of it is due to the environment (relatively low salaries for IT, limited access to venture capital) and a part of it is due to bad policies being enacted by the EU - most notably the EU VAT on digital services, the GDPR and now the Copyright directive. When it comes to digital services, Europe is seen as a place to sell things, not make them. This state of affairs has left Germany and France bitter over the success of American tech giants, particularly as they put ever increasing pressure on local businesses. So the EU reacted in pretty much the only way it knows how - by introducing legislation against said businesses. This had the unintentional consequence of targeting European tech startups as well, making Europe an even worse place to start a new business than it already was. Instead of a single digital market, you have 28 different national markets, each with their own rules and regulation, only ~11 of which are actually interesting due to their size and purchasing power. At the same time, austerity policies enacted after the 2008 recession have resulted in cuts in the scope and quality of public services. Prices for most goods and services are rather high. The middle and lower classes are particularly hard hit, leaving many to wonder whether globalization is worth it.
  • cpursley 8y ago
    Banning tax evasion is easy. Just get rid of corporate income taxes and replace it with a sales tax. It's not like corporations pay taxes anyways; their customers do as tax is built into the cost of products.
    • iguy 8y ago
      Yup. Tax things which really exist within a country, not accounting fictions (like precisely which arm of a multinational made how much profit). Although I'd also like everyone to stop using the term "income tax" for this. It's a tax on corporate profits, and has nothing at all to do with personal income tax, a tax on wages.
    • cheerlessbog 8y ago
      That wouldn't prevent some of the shenanigans described above. For example, giving my IP away for cheap to a subsidiary in a low tax jurisdiction that actually performs the sale.
      • iguy 8y ago
        No, it would, that's the point. If your subsidiary in the Bahamas sells something in France, it pays French VAT.
        • cpursley 8y ago
          Exactly!
    • lr4444lr 8y ago
      ... and you ban cash and all ad hoc barter networks. Good luck.
      • cpursley 8y ago
        Make cash / ad hoc tax free. Want to avoid tax? Buy used!
    • 8y ago
  • snarf21 8y ago
    As others have said, it isn't evasion but avoidance. The issue is that there a lot of ways to put the money on the books wherever you want it. Let's say you want to sell mobile phones. You could create one company in France that builds, buys and sells phones. In this case it becomes pretty clear it is a French company and all the money will be taxed in France. But let's say you have that same company and split it up into three companies. You put your corporate company A in Ireland. That company A owns a company B in India that makes the phones. The corporate company A also owns a company C in France that only sells phones. Company A can decide which company is profitable by deciding who much B charges C for the phones they make. Company A can also charge B and C consulting fees for helping to run their businesses. Basically A can decide which of the three companies is profitable and make the others even "lose" money as far as the accounting goes. It is now very unclear if this is a French company and at who's tax laws the money should be assessed. Obviously, the company A can make this much more complicated. It is also really hard to know which of these organizational things are about tax avoidance and what is about efficiency of manufacturing and running a business.
    • alkonaut 8y ago
      The difference between avoidance and evasion is only relevant if you have tax law interpreted to the letter only. Tax law should be interpreted by the lawmakers intention and companies should be ready to be fined or uptaxed if authorities find they pay less taxes than is reasonable given global profits and relative turnover within their jurisdiction. Constructs such as paying “royalties” to parent companies, or taking very expensive internal loans to effectively move all profits to tax havens (using Dutch BV’s etc) should simply be outlawed. Countries simply shouldn’t recognize these as acceptable practices. This obviously leads to what companies like to call a “hostile business climate” - so a country will need to be pretty attractive in other aspects to not scare off international business.
      • nradov 8y ago
        It's unreasonable to expect judges to divine lawmakers' intent on subtle issues of tax policy. If lawmakers want a tax to work a certain way then they need to just write that down so that it's clear to everyone.
  • microcolonel 8y ago
    The problem is that European politicians and their sympathizers have gone to great lengths to make you think it is tax evasion that they are policing. Tax evasion is illegal, these companies read the rules and follow them, but in the EU they are still in jeopardy in the courts, because the courts are arbitrary.
  • lr4444lr 8y ago
    Anything taxed has to have an asset value determined for it, and reliably recorded. This is extremely complicated to enforce on almost anything if you sit down and really think about how - if it were the only thing you had of value to offer - you might be able to hide it's true value.
  • Proven 8y ago
    > Is it because of bad laws? No, it's because of the good laws. Taxation is theft. And it's not called tax evasion but tax planning. No one is obliged to pay more than the minimum.
    • tonyedgecombe 8y ago
      > Taxation is theft. No it isn't. Property rights are determined by the state, hence taxation by the state cannot be considered theft.
      • morpheuskafka 8y ago
        I agree that taxation isn't necessarily theft, as part of the social contract, but aren't property rights at least in some cases fundamental?
      • kortilla 8y ago
        That’s not really a valid argument against “taxation is theft”. As a citizen born in a country, you never enter into an agreement that the government should be able to take a cut of all of your transactions, but that’s what happens and refusal to partake results in violence (an arrest and time in prison). It’s no different than the local mob going around giving beatdowns to get protection money from businesses. The people that voted for the government sure think it’s different, but it’s not much different to the people who didn’t. There is a reason they had to put the ability to tax right in the constitution. And there is also a reason the US is no longer part of Britain.
        • tonyedgecombe 8y ago
          No, but you also don't have to partake in the economic system, that is your choice.
        • anoncake 8y ago
          It's easy to establish the duty to pay your taxes even using "freedom of contract". By stepping foot on a public road, you accepted the terms and conditions. Market extremism is a funny thought experiment, but ultimately absurd.
  • yann63 8y ago
    Thanks a lot to all your answers. My question was badly formulated. I meant to ask: why are we tolerating this situation? Regardless of tax evasion / tax optimization or whatever is the wording, most people agree that these companies are not paying the amount of taxes they should. I get the why and how these companies are doing this. I just don't understand why we, as a society, accept that. Our society has never been so rich, yet we see decline in education, health, etc. I do think we should only have progress: more culture, better life, less work, etc.
    • burlesona 8y ago
      That is a great philosophical question. My banal answer: entertainment is also better than it ever has been, and the messes of people are this more numb and manipulable than they ever have been.
    • iguy 8y ago
      > most people agree that these companies are not paying the amount of taxes they should They will say this because the news tells them this is true. But it seems far from obvious to me. If a multinational sets up shop in France, then a whole pile of taxes do get paid: VAT is 20% of all sales. Then there is income tax / social security / etc. I don't know any French details, but I'm quite sure it's above 30% in total... all of which you should think of as being collected on the transaction that A pays Mr. B. If the company spends most of their revenue on salaries, then this already sounds like order of 50% of throughput goes to tax. In addition to this, they may make some profit. And it seems pretty hard to know where the profit was made. How much is iOS worth? Or the Starbucks logo... quite a bit, your groggy airport customers know what they're getting, but there's no really obvious way to put a unique number on this. And thus it's honestly difficult to say where the profit was made. Yet this is often the whole violent argument! Over maybe 20% of say 5% profit, 1% of sales... 1/50th of the taxes already collected above. If they wished to collect more, they could easily tweak those numbers. I'd go so far as to suggest that we should just give up, set the tax on corporate profits to zero globally... but at least they are generally moving down. > Our society has never been so rich, yet we see decline in education, health, etc But we collect more tax than ever. It it buys us worse healthcare, or education, than it did in the past, then the problem may lie elsewhere.
  • rb808 8y ago
    You make it sound as if taxation is a good thing. In much of the world capitalism, retained profits and growing the economy is used to make people wealthier. The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Europe has the advantage that it got rich through its empires (and low taxes) and is now stagnating into poverty. Companies and people already pay a lot of tax compared to the rest of the world, Europeans should be trying to reduce this burden instead of figuring out how to tax more.
    • yason 8y ago
      The countries with fastest growth and highest employment, healthiest companies tend to have lower tax rates (China, USA). Another yardstick for comparing countries is how they treat and take care of the poor ones. High-tax countries often fare well in that and China, USA not so much.
    • anoncake 8y ago
      > Countries that treat companies as if they a problem that need more tax (much of Western Europe) tend to have high unemployment and poorly performing economies where young people leave. Maybe countries with high unemployment and poorly performing economies have a problem with companies paying too little taxes.
      • growlist 8y ago
        If only it were that simple.
      • Mirioron 8y ago
        How does that fix the problem though? The government doesn't create jobs, companies do.
  • Mirioron 8y ago
    The point isn't tax evasion, it's France wanting more tax revenue without pissing off the public. Remember that the yellow vests protest started because of a tax increase on the general public.
• ddebernardy 8y ago
  Might anyone have insights on why they're stopping at 5%? If the idea is to tax the internet giants on the business they do in France, why not seek to tax them at the usual corporate tax rate? The internet giants will, I presume, fight it either way, and it's not like a tax is going to stop them from serving French customers.
  • glutamate 8y ago
    As I understood the article, this is a tax on sales, not profits.
    • ulfw 8y ago
      To ddebernardy's point then, why not charge VAT?
      • glutamate 8y ago
        I assume this is on top of VAT (the article does not say).
        • throwaway123mmm 8y ago
          Companies dont pay VAT. And google's reveneus are mostly ads for companies.
          • kgwgk 8y ago
            Companies do pay VAT when buying ads (but it’s Google Ireland doing the sale, I think).
            • laurentl 8y ago
              Everyone pays VAT but if you’re a company you get reimbursed (by having your accountant compute all paid VAT and asking the state for a refund IIUC). VAT is only supposed to apply to the last transaction with the consumer, hence the “value added” in the tax ;) Selling fake goods between companies and applying for the VAT refund for all the fake transactions is known as a VAT carrousel.
• allahreturns 8y ago
  Tax on sales is bad. It will hit the startups the most. Why? Most big companies have economies of scale and small companies must pinch every dollar. Already tax avoidance is best done by large players, not small ones. So please vote against it if you are an entrepreneur and wanna become rich through entrepreneurship and hard work.
  • Waterluvian 8y ago
    That sounds very fixable without abandon sales tax altogether. Lots of rules already target larger companies and not smaller ones.
  • MatthewWilkes 8y ago
    TFA says: it applies to companies with global sales of "750 million euros and French sales above 25 million euros"
    • allahreturns 8y ago
      Someday company by any entrepreneur will also do 750M in sales, should we tax such entrepreneur who risked his everything just so that bunch of politicians are able to plunder that money and pass on to their relatives? Thing is tech companies are very efficient compared to old type of companies like Real Estate etc .. Politicians/Mafia see that money is being made but they don't know how to get cut of it. Most of the money is moving digitally and politicians are growing poorer day by day
      • MatthewWilkes 8y ago
        A higher tax rate for very large companies helps start-ups by compensating for that economy of scale you mentioned in your previous comment. If you disagree with the concept of taxation in general just say so, don't pretend that this is somehow unfairly targeting small businesses.
• sytelus 8y ago
  At least in US Amazon already adds tax in purchase price. Similarly when you buy copy of software, tax is already added. For ad bills to publishers, I would think it’s the same. So what does this “digital tax” is about? The big issue here is that eventually all taxes will be transferred to end customers. The profits for businesses don’t get lowered because of more taxes (unless demand drops). So people in every country should be worried when government eyes for more taxes.
  • throwaway2048 8y ago
    To portray taxes as only being paid by the end customers is a massive oversimplification, if businesses could charge the amount extra the tax supposedly increased prices by and retain optimal profitability, they already would. Taxes hit profit margins first, possibly pushing companies into non viability (unlikely to be much of a concern in this arena). Remember that businesses don't just operate based on the cost of their inputs, they operate based on the price customers are willing to pay for their outputs aswell, which is often divorced entirely from the cost of inputs, especially in markets dominated by a few companies.
• seanalltogether 8y ago
  Since this is applied to revenue, is this like a reduced VAT reclaimation or something?
• puzzle 8y ago
  This is not very helpful or informative. In the case of Google, who are they going to tax? Google Ireland? Google France? How exactly?
  • beagle3 8y ago
    Money collected for services rendered through a French IP. That is, on ads shown to French viewers, on GSuite accounts paid while connected to a French IP address, etc.
    • puzzle 8y ago
      The money is collected by Google Ireland. So they're going to charge Google Ireland? It's probably safe to assume they're not charging Google LLC in Delaware.
      • cheerlessbog 8y ago
        Presumably France has access to the not in considerable French origin advertising revenues.
        • puzzle 8y ago
          How? Based on VAT? I can think of multiple approaches, but each of them is convoluted or deviating from existing norms in its own way. Every time there's an announcement like this, it's often surprisingly low on actual details.
      • beagle3 8y ago
        So what? If I rent out an apartment in Paris, does it really matter if I collect the money as Pierre Francois, a french resident, or Pierre Francois LLC, a Delaware corporation? It mostly doesn't - I'm bound by French rent law, and pay french taxes related to rent either way (Income is more complicated). Such a law is very simple: "You pay 5% of ad/media sales for the privilege to send data to french IPs", residence of person/corporation collecting the money not important.
• deleted 8y ago
  [deleted]
• readhn 8y ago
  Why wont government taxation agencies have tax bounty programs? If you, as a tax professional, find a taxation loophole that allows big businesses to lower their taxes - you get a $$$ compensation and the loophole gets publicized and "officially" patched.
  • donatj 8y ago
    I don’t think knowledge of the loopholes is the issue. It’s reasonable to determine what loopholes were used after the fact. The problem is actually closing them and the political fallout involved.
    • readhn 8y ago
      perhaps the loopholes should be exposed to the general public then so that we can hold the public officials accountable to fix them.
• titanix2 8y ago
  Very good but where the 5% come from? I’m reading another article in French about it and they’re speaking of 3%.
  • kgwgk 8y ago
    “Son taux sera modulé en fonction du chiffre d’affaires avec un maximum de 5%.” https://www.gouvernement.fr/taxe-gafa-que-prevoit-le-futur-projet-de-loi https://www.gouvernement.fr/taxe-gafa-que-prevoit-le-futur-p... It seems they’ve decided to make it 3% now? Edit: that’s apparently the case: https://www.lesechos.fr/economie-france/budget-fiscalite/0600826885966-la-taxe-gafa-aura-finalement-un-taux-unique-de-3-2249138.php https://www.lesechos.fr/economie-france/budget-fiscalite/060...
• Leader2light 8y ago
  Anyone following French news already knows they are hurting for money and screwed long term. Same story with Britain. Hell, the same story with most of the world. Nobody can pay for all these massive social programs, the tax base is simply not big enough. Too many people are freeloaders. Migrants are also a huge issue. The working class and middle class are tapped out. Just look up the yellow jacket protesters in France. Look up Brexit. These are all symptoms of the same problems. Europe is going to see a huge influx of African's during the next 50 years. Their society is on the brink.
• microcolonel 8y ago
  In France, taxes account for an ever increasing proportion of a stagnant GDP. Nobody stops to ask if a "Digital Tax" makes any sense: are they saying that digital properties make use of some public resource without taxation, or is this just basically a tariff? [0]: https://data.oecd.org/tax/tax-revenue.htm https://data.oecd.org/tax/tax-revenue.htm
• throwaway_9168 8y ago
  This reminds me of a horrible tax I came to know of recently - something called the EU VAT MOSS on digital goods. Apparently, it is supposed to target giants like Amazon who route money via multiple countries to evade taxes. Not surprisingly, this ends up affecting the smallest players most drastically. Worst, the glib language used to describe who should pay the tax is utterly confusing. As always, this means the actual target company of this tax chalks it down as yet another thing they need to remember (amongst a million other things), while the tiniest players who are starting out and who don't reside in the EU will have to worry and stress endlessly about the stupidity of dealing with something like this. Here is what I have learnt about Eurocrats: a) they don't understand economics b) they definitely don't understand unintended consequences c) I am willing to bet not one of them has ever bootstrapped a successful venture and finally d) there is a good reason why no country in Europe is able to create its own Silicon Valley - they are just too busy creating more busywork for themselves. And to the well-intentioned person who comes along and says "Well, if you are clearly not the target of this, then why do you even worry?" I have a question - if it turns out that you are wrong, are you going to pay the taxes on my behalf? Actually, this is literally what I asked a friend of mine from Europe who expressed that sentiment. Not surprisingly, he wasn't really willing to put his money where his mouth was. I am frankly astonished by all the people from EU who come in and comment things like "Oh, you don't really know how European laws actually work. If you did, then you wouldn't be worried". Do you not have nothing better to do in life than trying to understand the nuances between the "letter of the law" and the "spirit of the law" in every country around the world? Oh, and by the way - HN will be very interested to know this: right now, there is a company called Paddle which is a Stripe competitor - and this one law (EU VAT MOSS) seems to have single handedly revived this company. It was (and apparently still is) a painful software to use, and Stripe is faaar superior in terms of API and integrations [1], but Paddle has now become the defacto choice [2] for everyone who actually cares about the EU VAT MOSS because Paddle handles all the annoying crap on your behalf. My guess is, Stripe - which is too Silicon Valley focused - is going to be blindsided by EU VAT MOSS, hand over a lot of their next generation of customers to Paddle, and won't even know what hit them in a few years if they don't pay careful attention to what is going on here. [1] https://www.indiehackers.com/forum/anyone-using-paddle-for-subscriptions-experiences-7d0c5fe4f6 https://www.indiehackers.com/forum/anyone-using-paddle-for-s... [2] https://www.indiehackers.com/forum/how-do-you-handle-vat-moss-8be8ebdf98 https://www.indiehackers.com/forum/how-do-you-handle-vat-mos...
• glenrivard 8y ago
  Guess the US will need to add a tax on all European cars.
• iguy 8y ago
  Can anyone comment on how this interacts with the idea of the single market? Why can Google Ireland Ltd. be charged a special tax for doing business in France? In my (limited) understanding I thought this was not supposed to happen, and that most goods and services could automatically be sold EU-wide. France could not charge import duties on Guinness trucks, nor demand that beer good enough to be sold in Ireland is not good enough to be sold in France. (This does not sound at all like the usual discussion of the tax on multination's profits, and whether declaring that your business unit in the Bahamas actually made the profit is avoidance or evasion. It seems to be a brand new tax on some kinds of business-to-business sales.)
  • jsty 8y ago
    There is already a difference in tax (VAT) rates based on the consumer's location. This move would be distinct from import duties or product standards in that it's not really creating a clear barrier to sales across the single market. On the other hand, the really quite high threshold might well be subject to complaints on the basis of distorting the single market. All the large multinationals that would hit the threshold reside in Ireland / Luxembourg, whilst lots of French firms don't hit the threshold and thus gain a competitive advantage. I'm neither a lawyer nor a tax advisor.
    • r00fus 8y ago
      Wouldn’t it be more accurate to say that it’s correcting an imbalance? Google operates in France but is able to undercut France businesses for digital content sold to French people ( merchandise is traceable ) because it happens to have an Ireland operation?
      • jsty 8y ago
        IIRC, under EU VAT regs Google Ireland will charge and remit French VAT rates to the French treasury for digital content sold to consumers in France, so there's no imbalance there. The big issue is that digital services, particularly advertising, are so insanely profitable that most governments would also like to get their hands on a proportion of the profits accruing from sales of digital services in their country. They see the fact that Ireland / Luxembourg are able to book all the profit in one jurisdiction as unfair. There's probably not a huge likelihood of that happening any time soon at an EU level, so France has gone with the next best option from their POV. (Tax avoidance strategies that allow a large multinational to not pay much tax to their host country is a different kettle of fish, since most of the benefit of tackling those would probably accrue to the country of incorporation not France - e.g. the Apple settlement)
• Marazan 8y ago
  A key feature in many obfuscated corporate structures designed to avoid tax is differing corporate structure declarations in different tax juristictions. As companies are made up of many different sub companies by declaring your corporate structure as one way to the US tax authorities and another to the, say, Luxembourg tax authorities you can make intra group loans appear and disappear from different sets of accounts. And as a result the costs and, crucially, income from those 'loans' materialise wherever you want. Or not appear at all.
• gok 8y ago
  So will this apply to AWS, Netflix, Spotify?
• Neil44 8y ago
  Well, killing off the high street shops then making all the money disappear tax free is not a path to a sucessfull society.
• onetimemanytime 8y ago
  The government needs funding to operate, efficiently or ineffectively but that's the voters problem. They tax individual and corporate entities. Companies gets cute and exploit loopholes with dozens of companies and locations to avoid paying the normal tax rate. So the state strikes back and imposes a 5% (sorta sales) tax that cannot be circumvented. No big deal, other than for Google, FB etc companies that choose to do business in France. I'm sure they can still keep their quintuple sandwich tax schemes
• lurker213 8y ago
  why are governments such parasites? wanting to stick their finger in every pie?
  • infinity0 8y ago
    why are corporations such parasites? benefiting from the citizens in a country like France that are supported by its social services and infrastructure like roads, healthcare, a justice system that prevents the corporation's property from being stolen, but not contributing their fair share of the tax back and even arrogantly denying that they are benefiting from the infrastructure that they are taking advantage of for free?
    • lurker213 8y ago
      you do know that the citizens of said country pay tax for that infrastructure right? failing governments should stop using big companies as scapegoats. the bits and bytes used by FB and other big companies aren't degrading the fibre optics like a highway... what I find funny is that if politicians wanted to close these tax loopholes, they could, I think they'd rather keep them open for them and their friends to use. The optics are better if they point the finger at something foreign and say 'oooh they are the bad ones', even though technically they are not breaking any laws. I say this not as a fan of Facebook or Google. But you need to be realistic about government's always wanting more money.
    • sparkie 8y ago
      A corporation is a person, but it's a legal fiction. The corporation is simply a gathering of non fictitious people who come together to collaborate and earn revenue as a collective. Each of those people pays taxes from their salaries like anyone else - they pay their fair share. So what is a tax levied on a corporation? It's simply an additional tax levied on the human people who make up the corporation. They're already paying their share, now they should be paying more? If you're just a lowly employee with no control or insight into a corporation's finances, you might think it doesn't matter to you. Wrong. You're part of the corporation too. Money the government is taking out of the corporation is money that could potentially be added to your paycheck if the corporation prospers and you play your role.
• julioo 8y ago
  Please I want to pay this tax and avoid the 30% Profit tax.
• ilrwbwrkhv 8y ago
  all this nonsense is because we are trying to tie internet businesses which are uniting and global by default into "countries".
• skookumchuck 8y ago
  France is hardly short of taxation revenue.
• fosk 8y ago
  As usual, highly inefficient governments trying to expand into every wallet in their sight, in order to keep funding their inefficiency with no accountability. We need market de-regulation. End of government-sponsored monopolies. Accountability on budget spending. Enablement of profit-oriented policies that generate surpluses. Enabling equal opportunities to people of all social classes, and performance reviews to keep everybody accountable. Then, and only then, equal and fair taxation that promotes social wellness and stability.
  • jlebar 8y ago
    What would you say is an example of a country that -- more or less -- follows these principles?
    • dsfyu404ed 8y ago
      Different governments do different parts of that well. If there was any government that did it all perfectly we would be saying "we should do things like X" not describing policy in the abstract.
  • Gpetrium 8y ago
    Although I can partially agree with you, I think it is worth looking at the other side of the coin to understand why things don't go the way you think is best. Below I will give you a few examples to consider (there will be ways to refute, but bare with me since the goal is to start/move a dialogue) Government-sponsored (oli)monopolies - This is sometimes a policy tool to get the country's key strategic interest moving. Sometimes some goods & services are obscenely expensive without Gov support directly or indirectly (that includes g&s you take for granted). In another case, if you don't sponsor, but other countries do, the other countries will become more competitive in the global market, impacting your countries long-term economic success. Equal opportunity for all classes - At what point would you create equal opportunity? Is it providing basic, quality educational institutions? How do you account for parents willing to pay for extracurriculars, tutor and any new technologies that come along? Will you forbid higher income parents to spend their hard earned money to get their kids ahead in the name of equality? Accountability on budget spending - Most advanced democracies allow you to review the budget of your city, state, federal and even get involved in the process (via elections, open forum,etc). It is mostly someone's prerogative to get engaged or not. Also, since governments are usually required to help create jobs, etc through different forms of stimulus, you will see money being spent in different ways with different levels of return. Performance review - Govs and private institutions have performance review, even politicians have it via re-election. How would you optimize it? How would you fix its issues to ensure people don't exploit it? What makes your solution function better than the ones already tried? As I said, although I agree that we should strive to be better at some, if not all the points you have listed, I think we need to move past throwing the words out there, and become more engaged in our communities. This will help everyone to better understand how the world around them actually works and how to improve it
• HNBRN 8y ago
  French guy here. I think a lot of comments miss the point of the new tax : Some US tech companies use fake transfer prices to avoid paying income taxes in France. Eg Irish facebook subsidary owns the Facebook brand for Europe and charges other subsidiaries for using it. The French Facebook subsididary was charged so much in past years that it didnt declare any benefits in France. This is fraud. But this is fraud at EU level and EU is not yet organized to face it. So French government is taking the lead and expects other countries to follow soon (very likely). You have to understand that French companies and French taxpayers a getting reasonnably upset for paying high taxes when some US companies dont.
  • ecaradec 8y ago
    French guy too. I have to add that’s not specific to US company : Total, Ikea, and even EDF (french electricity state owned company ) also use the same practices. I too would prefer that they fix the law. It has been decades we know this and nothing seems to be done. I hope that the fact that population is getting more and more upset by the situation will push the politics to move. Btw the way the same companies dont seem to pay taxes in the US either.
    • Ntrails 8y ago
      I think the key point here is that all global companies structure their tax in the most efficient fashion possible. They pay a bunch of money (millions) to save far more in tax globally. Forget morality. They are behaving optimally for their incentives. The only way forward is to shut down the model of "redirecting profits to the place with the lowest tax". Kill it with fire.
• grondilu 8y ago
  I'm French and I love Amazon. I buy many stuff on Amazon that I have absolutely no idea how I could get them otherwise. That news makes me anxious about Amazon deciding not to offer its service in France one day.
  • apexalpha 8y ago
    Then there will be a competitor that will offer it. In NL we have a local grown Bol.com that does exactly what Amazon does (minus AWS). Would it be fair if Amazon started competing while they pay no tax here when Bol.com does? I don't think so.
    • thirdsun 8y ago
      Unless Amazon is breaking any laws by not paying taxes, yes, I think it's fair. What I'm trying to say is that in order to prevent tax avoidance proper legislation is required. Before we punish the players for utilizing the framework to their advantage we need to fix the system.