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Spain planning on going ahead with ‘Google tax’ despite US tariff threats

153 points by melenaboija 7y ago

ptah 7y ago
I don't understand why the US constantly interferes in the internal affairs of other countries like this
- ryeights 7y ago
  Spain has very few large technology companies relative to the US. This tax is effectively a tariff on US technology companies operating in Spain, making it no longer an internal affair.
  - megous 7y ago
    Last time I checked, comapnies are subject to the laws of countries they operate in.
    - rat9988 7y ago
      Indeed, the tariffs here aren't about spanish exports to Belgium.
    - ryeights 7y ago
      Obviously. That doesn't mean the US has to like those laws or cooperate with them
    - _Understated_ 7y ago
      Not trolling, but is there anything that says they're breaking the current laws in Spain? (I'm from the UK, so no dog in this fight althought I can see our gov implementing it at some point I reckon) Sure, they're taking advantage of tax loopholes I'd bet but in themselves, they're not necessarily against the law. They're probably paying all the tax in Spain they're currently, legally obliged to pay at the moment. Just my £0.02 Edit: Just thought of something? Is there a google.es? If this is what they are talking about, would it not be easier for Google just to bin that one and for Spaniards to be automatically redirected to another Spanish-speaking version, like one of the South American ones?
      - pc86 7y ago
        There's no such thing as a tax loophole. It's the law, and is written specifically the way it is for a reason. "Loophole" by definition implies that it's a mistake, and with the amount of money at stake that's incredibly unlikely.
        _Understated_ 7y ago
        I upvoted your comment but I respectfully disagree: If a country has a law that says "you pay X tax using this law/method but Y tax using this other law/method" Google are perfectly within their rights to say, "Let's use Y". Who in their right mind would say "you know what, I'm going to pay more tax"? Have you seen the size of modern tax laws?[1] They're utterly gargantuan! [1]https://www.theguardian.com/commentisfree/2015/feb/13/britain-tax-code-17000-pages-long-dog-whistle-very-rich https://www.theguardian.com/commentisfree/2015/feb/13/britai...
        pc86 7y ago
        It sounds like you agree with me. That's not a loophole. That's a conscious decision on the part of whomever wrote that section of law to basically say "pay the lesser of these two methods."
        _Understated_ 7y ago
        Not really. The way I explained it wasn't clear. Usually a loophole is more complicated like the Double Irish with the Dutch Sandwich which requires some complex maneouvering on the part of the company to pay minimal tax. I run a small business and that kind of thing is beyond my capabilities and would also cost too much but not for Google. That's what I assumed you meant by loopholes... my explanation of the process was a bit too simplistic. To me, a loophole is looking through all the laws and saying, "ooh, if we put our money here, then declare this thing, we can show a loss that allows us a rebate on a particular tax" or something... it's a symptom of excessive complexity in our tax systems. I don't blame organisations for doing it.
        7y ago
    - rhino369 7y ago
      And Spanish companies can enjoy operating under America’s new tariff (law).
  - ptah 7y ago
    they will have to be registered as companies in spain or eu to operate there, so this does not affect the US legal entity at all
- rat9988 7y ago
  The us is protecting its own interests. It doesn't care about right or wrong, nor does any other country. Wether the current action is morally right, and wether countries should behave outside the boundaries of ethics is an exercise left to the reader.
  - lucb1e 7y ago
    If that is true, why do countries spend money on development aid? Isn't that caring about what's right? Or to take a more extreme example, why do we give a lifelong salary for nothing in return to people who are unable to work for the rest of their lives? Surely killing them would be more efficient. I do think states should, can, and do care about right and wrong to a certain extent. That's the difference between us and governments like the Chinese.
    - idontknowbout 7y ago
      > If that is true, why do countries spend money on development aid? Isn't that caring about what's right? Maybe to recruit most of the people who can question the exploitation of these places? like in Africa? Why are there little aid to helping to develop economic corridors/systems but billions to treat diseases are mostly side effects of poverty that won't be issues if said places are not so poor
    - baq 7y ago
      > If that is true, why do countries spend money on development aid? 1) so people from benefiting countries don't want to immigrate to the paying country (or to put it differently - aren't as motivated to leave because the differences are smaller) 2) so the paying country has somebody to sell their stuff to
- deleted 7y ago
  [deleted]
- Nasrudith 7y ago
  Because they aren't internal - they are impacted by it with broad reach. There have been many stupid attempts to target Google in the past from vested interests (snippet tax, link tax) - but this one isn't very objectionable. The main legitimacy to the complaint is that even though nation neutral it is defacto targetted by industry concentration because of the lack of international Spanish internet companies. A flimsier one but there. The second is the populist rhetoric to sell it caused offense by targetting their companies. Plus countries in international relations are best anthropoisized as a bunch of hypocritical petty bastards. A flatter 3% corporate tax rate wouldn't have those grounds but would piss off the local corporate interests and possibly ideologe powers abroad still.
  - ptah 7y ago
    to operate in spain they would have to have registered spanish or eu companies edit: spain is merely taxing legal entities within their jurisdiction not in US
nabla9 7y ago
These are patchwork solutions. It would make more sense if EU countries would make laws that extend normal VAT to all internet business in EU and close all Irish loopholes. Google and others use Irish tax arrangement schemes like "The Double Irish" (base erosion and profit shifting), the Single Malt, and CAIA to avoid paying taxes. 12 EU states reject move to expose companies' tax avoidance https://www.theguardian.com/business/2019/nov/28/12-eu-states-reject-move-to-expose-companies-tax-avoidance https://www.theguardian.com/business/2019/nov/28/12-eu-state...
- HorstG 7y ago
  The EU will never close tax loopholes since there will always be a veto from the likes of Ireland, Netherlands, Luxembourgh or UK.
  - jeltz 7y ago
    Add Malta and Cyprus to that list.
  - virmundi 7y ago
    Wow. The EU requires unanimous approval. The Europeans looks at the US’ Articles of Confederation and said, “we can make that work.” They need a rogue group of reformers that create a new system of government, illegally, like the US’ Federalists. Only then will the EU get its shit together.
    - NeedMoreTea 7y ago
      Only for matters considered critical and sensitive for member states - finance, EU membership, harmonisation of legislation etc. it's mostly a hold over from the days of an EEC with 6 or 9 members (ie, right back when UK and Ireland joined in 73), when unanimity worked much better than it can now. Obviously to step back from unanimity requires unanimous vote without use of veto. :) Most matters are done under qualified majority - which is a small super-majority based on population. A post-Brexit UK going full on offshore tax haven might encourage the EU to get their act together on finance, and come up with some ways to crack down. Well, one can hope...
qxnqd 7y ago
They expect to make €850 million in exchange for tariffs from the US which will hurt the already battered primary and secondary sectors. A flawless plan.
- romanovcode 7y ago
  It's not about the money - it's about sending the message. No pun intended.
  - qxnqd 7y ago
    Yes, I know. They are socialists so they don't care if blue collar workers suffer just so they can "send a message". They also raised the minimum wage and admitted it hurt the poorest but they still considered it a success: https://www.elmundo.es/economia/macroeconomia/2019/12/03/5de63c62fc6c83bd028b4654.html https://www.elmundo.es/economia/macroeconomia/2019/12/03/5de... — the wonders of the left.
    - tonyedgecombe 7y ago
      Yes, I know. They are socialists so they don't care if blue collar workers suffer just so they can "send a message". The Conservatives in the UK are planning a similar tax, they are certainly not a socialist party.
      - Nasrudith 7y ago
        It is nationalism in that case or more specifically "tax somebody else who can't vote against" always being a popular plan among voters.
        nicoburns 7y ago
        Is "tax a company who is making vast amounts of money by operating in our country the same rates that we other businesses doing the same" really a controversial policy position?
      - 7y ago
jbduler 7y ago
For me it makes total sense to tax Google, Facebook and all others. Why not? What do you to lose? Parking your IP in some remote country, be it Ireland or Turks and Caicos, is fine until you realize that the IP protection is not as bullet proof as you thought. And please don't come to California to sue to protect your IP. I still can't believe that none of those companies are paying Federal nor state taxes. For now. Well, they do pay some insanely low taxes.
- jacquesm 7y ago
  This has absolutely nothing to do with IP but everything to do with the delivery of services which are free, supplemented by advertising income accounted for abroad where it can not be taxed by the country where the service was delivered. Looked at in a different way: if Google was a paid for service you could levy sales tax on that service.
  - balfirevic 7y ago
    But Google earns it's money from selling ads. If they are selling those ads to business in EU, the mechanics (and taxation) seem to be the same as (for example) a US graphic design company selling logo design services to businesses in EU. What exactly is new here? Is it just the size (and wealth) of Google and similar companies that has encouraged the governments to try to take a larger slice of pie?
    - kazagistar 7y ago
      Companies are always going to find ways to avoid taxes and privatize more profits to fewer and fewer individuals. It's the responsibility of the government to find those loopholes and get them to pay a fair share to maintain the society they exploit for that profit.
      - balfirevic 7y ago
        Thanks, but that is barely related to the specifics of my comment and seems ideologically charged to boot.
prepend 7y ago
I wish the article had more info on the mechanics of the tax. How do they measure “value” and what percent of the value do they want to collect as tax? The ad sales might make sense, but why not just add a tax on all advertising. The marketplace tax is confusing because do they tax the value of the transaction? The full customer value that results of the acquisition? Why not just use existing sales tax for retail transaction (which e-commerce is). The last one is the hardest to understand. Do they mean sale of data from Spanish citizens? Or only people created data while in Spain? It seems simpler to just create a “data sales tax” that happens specifically for transactions where data is sold to or from Spanish orgs. I think this will just result in a tarrif on Spanish goods.
- praptak 7y ago
  > I think this will just result in a tarrif on Spanish goods. I doubt it would be easier than a Spanish tariff on goods from a single US state.
- Mirioron 7y ago
  >Why not just use existing sales tax for retail transaction (which e-commerce is). My guess is that they already do. The government just wants more tax revenue as usual. Tech companies are just a good punching bag right now. Edit: I cannot imagine that they are not collecting VAT on these transactions. Digital VAT is a very explored topic in the EU.
vector_rotcev 7y ago
As a non-economist (amateur or professional), I get the impression that countries are losing their concern of the repercussions of displeasing the USA economically. Is this an accurate interpretation? If so, is it that they're less fearful of reprisals (tariffs?) or that they're less confident in the benefits of cooperation with the USA? Or a mix? Or something else?
- mc32 7y ago
  I think it’s more like they’re trying to catch up with the internet. Kind of like in the US states are finally able to get Amazon to tax sales on their behalf —previously people had to self report; and the reporting rate was very very low...
- pmontra 7y ago
  The USA are entering an isolationist phase (it started with Obama, acccelerated by Trump) so it's natural that the rest of world is a little bit less concerned about their threats. Unfortunately the new possible friends look less friendly than the USA of the second half of '900.
  - corebit 7y ago
    Please use the right words so that no one misunderstands the truth or thinks that you are lying. What the USA is doing is in no way isolationist. That is something completely different with no parallels or relations in any way. Using the word isolationist is misleading to the point of mistruth. It would be more accurate and representative of reality to say the USA appears to be acting more independently on the international stage. Isolation would imply the USA is not acting on the international stage at all.
    - wil421 7y ago
      To add to your comment: Definition of isolationism : a policy of national isolation by abstention from alliances and other international political and economic relations Further reading. American Isolationism in the 1930s[1]. [1] https://history.state.gov/milestones/1937-1945/american-isolationism https://history.state.gov/milestones/1937-1945/american-isol...
asdfasgasdgasdg 7y ago
850M euro, the proposed amount to be raised, would be on the order of 1% of Google's worldwide revenues. Google doesn't break down its revenues by country but it's hard to imagine it derives more than about 1/20 of the revenues from Spain. If we assume 1/20, which seems very generous to Spain, the amount to be raised amounts to about 20% of revenues in Spain. So, this seems very high to me? Is this amount annual, or decennial like how US spending and tax amounts are reported?
- mrep 7y ago
  The tax will effect more than Google like Facebook and Amazon. The 850M number accounts for the tax revenues from all companies.
  - asdfasgasdgasdg 7y ago
    Ah, great point. I was misled by the title, although now I recall that it did discuss Amazon as well.
nwellnhof 7y ago
Historically, it has always been understood that companies only pay income tax in their country of residence. BMW isn't taxed on its US income by the US, just like Google isn't taxed on its German income by Germany. I think it's more accurate to say that the so-called "Google tax" is actually a tariff on Internet services. Traditionally, tariffs were only levied on imported goods but the concept works for services as well. That said, if a country unilaterally imposes tariffs, it shouldn't be surprised to see retaliatory tariffs in return.
- krzyk 7y ago
  It depends what you mean by "understood". For me it is obvious that BMW should pay taxes in US for cars sold in US. Are they taxfree there? And Google should pay tax in country where they sell given good - assuming a tax can be goods based.
  - tzs 7y ago
    > For me it is obvious that BMW should pay taxes in US for cars sold in US. Are they taxfree there? He was talking specifically about income tax, not other taxes such as sales taxes or import taxes.
- jacquesm 7y ago
  You can't really compare BMW and Google. Google provides a service, BMW sells goods. Services are usually taxed at the point of delivery, goods are usually taxed at the point of import or on the manufacturers net profits based on where they are based. Either way, taxes are paid, directly or indirectly. With Google the situation is such that all their income is abroad, and the service is free so not taxable. This is arguably a situation that the present day tax regime did not foresee so an adjustment is logical. A similar thing has happened inside the EU with respect to transnational sales tax. See MOSS.
- kazagistar 7y ago
  The concept of residence no longer makes any sense when a company is just a pile of associate shell companies across the globe and its residence is whatever tax haven lets them pay the least. Maybe instead of retaliatory tariffs, we should try to actually tax the massive tax evading tech giants in the USA properly.
waydowntogo 7y ago
These taxes stuff are just reaction on Trump's bullshits.
tyzerdak 7y ago
I think taxes is already so high that half of person earnings goes to retards in government. Why do we pay taxes? I know many people that have close to 0 benefits from government. I would propose all governments to make taxes 5% or 10% and remove themselves from governing.
- gorgoiler 7y ago
  Taxes redistribute wealth from areas of surplus to areas of need. If one lives alone forever in a log cabin one might indeed never need anything from the government. However, if you need the police to help you, you are already getting something back. If someone else needs the police and the police catch the criminal who would have made you their next target, you are getting a benefit. Now scale that up to the whole country. If you take part in a society where there is generally law and order — and moreover a society where everyone can read and write and some of them can manage air traffic control, and roads exist and people have the skills to build cars and sell them to you — well now you are taking part in the benefits of a society which would not exist without public spending, paid for with taxes.
  - umvi 7y ago
    The government is like a PSU though. Except it achieves nowhere near efficiency of even 80 Bronze. A large percentage of taxes just evaporate as "waste heat". Politicians always just want to raise taxes instead of raising their tax efficiency rating.
  - ixtis7 7y ago
    I agree that it's silly to say that you don't benefit from government spending at all. On the other hand there is often a real sense of not getting what you put in. I imagine especially so on a forum like this where many are professionals of certain industries with relatively high pay. For example: public spending per person in the UK is < £10,000 per year, which is much less than I pay in taxes. And I would estimate that I'm well below average in terms of spending received: I don't have children, don't have any large medical expenses, etc. Of course, my cost to society will rise as I get older, but on average I would estimate that I'm paying at least twice (and probably many times more than) what I'm taking. And yet the current trend is for half of society to say that I'm not paying my 'fair share'. I'm not sure what definition of fairness they're using, but it's not mine.
Roark66 7y ago
This is just a government looking for another tax to levy on its people. Google and Amazon will not pay it. The consumers of services offered by those companies will pay it. If there is 3% tax on every google ad sold in Spain. All will Google do is add 3% to its prices for Spanish users.
- ptah 7y ago
  they can then just buy ads via another EU country
tim333 7y ago
I'm not sure of the details of Spain's proposal but something needs to be done really to make taxation more fair. At the moment you get headlines like "Facebook paid just £28m tax after record £1.6bn revenues in UK" because they fiddle it with offshore tax havens while normal UK businesses have to pay more like 30% of their income in tax, not 1.7%.
- BurningFrog 7y ago
  I recommend reading beyond headlines to understand the world.
  - Sawamara 7y ago
    Help us out, champ.
- thu2111 7y ago
  normal UK businesses have to pay more like 30% of their income in tax UK corporation tax rate is 19%. USA corporation tax rate is 21%. Pushed down partly due to low tax competition from the rest of the world, i.e. places like the UK. Facebook pay little corporation tax in the UK because it isn't a British company. It's an American company. It was created in America. Most of its employees are there. Its headquarters are there. The EU works the same way. Corporate taxes are levied where the company is headquartered. It's arbitrary but all other ways to try and divvy up something inherently multi-national are even more arbitrary. I am British myself and I really don't understand why my fellow Brits have such a hard time understanding this - foreign companies pay little UK tax on profits because they are foreign. They were not made in Britain. If Facebook had been formed in the UK then for sure, most of its corporation tax would be paid to the Exchequer. But unfortunately it wasn't.
  - bb123 7y ago
    I'm sorry if this is a misunderstanding but I thought you pay tax where you do business. So Facebook should be tax on profits generated in the UK - but they play with their corporate structures to make it look like they aren't actually doing any trade here.
AshwinDurairaj 7y ago
An honest question - What outcomes would there be if countries like Spain decide one day to impose exorbant taxes, like those totalling $1b annually for Google? Would it just be cheaper for these companies to pull out? And what international recourse would happen?
- mcv 7y ago
  Only when the taxes reduce their profits to zero. As long as a country only taxes domestic revenue, that's unlikely to happen. And in my opinion, countries should be taxing (domestic revenue - domestic costs), rather than allowing companies to move their undeclared profits around to the nearest tax haven to dodge all taxes.
  - ensignavenger 7y ago
    So if I setup a company to do research and development in Spain, and spend $100 billion dollars creating a breakthrough technology, then I license my breakthrough technology to Americans for $1 billion dollars per year, America should be taxing my $1 billion per year in revenue as if it were 100% profit because I don't have any expenses in America?
    - mcv 7y ago
      Yeah. You already deduct your costs in Spain from your profits there. If you don't do any business in Spain, why are you there? The idea here is to discourage corporations from putting basing in tax havens where they don't do any business. Taxes are paid where the profit is made.
      - ensignavenger 7y ago
        Maybe I am in Spain because I am a Spanish citizen? Maybe I want to do R&D there because that is where the expertise is that I need? Maybe I thought my tech was going to be much more successful in Spain when I set it all up, but found out that the market wasn't there but was in the US?
seibelj 7y ago
IMO the corporate tax rate should be zero, and then everyone would be on the same playing field. Right now the only companies that pay taxes are small ones without the resources and staff to get around it. With 0% corporate tax, all of these games and shenanigans would end. Also, corporate profits are double-taxed anyway, as taxes are paid once on profits then again as dividends / capital gains by the shareholders. This is one reason stock buybacks are so popular - way to benefit shareholders without the ridiculous double taxes.
- tim333 7y ago
  Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.
  - rb808 7y ago
    Right but eventually they money has to get from the company to the consultant - either dividends or wages. Either way it'll be taxed.
    - beefield 7y ago
      Yep. Eventually. Meanwhile Buffett's tax rate on his (and his companies) income is within the distance of epsilon from zero. Can you estimate when Buffett is going to need the bulk of the money from his compankes to buy a new house? How long heis going to have approximately zero tax rate, that is? My personal estimate is with a very good approximation 'never'.
      - s1artibartfast 7y ago
        As long as berkshire hathaway is paying capital gains on every investment, why would you care if the money stays invested in the company?
      - mrep 7y ago
sebsito 7y ago
According to CEIC Spain had $232B of tax revenue in 2018. The article suggests it's going to bring 850M EUR = $943M to state's coffers so would represent around 0.4% of yearly tax revenue. How come it's easier to impose a tax on particular area (which sounds unfair) and risk international relations with US instead of doing something else to gain just 0.4%. Either it's ideologic or they really can't find the money.
sbacic 7y ago
I have been seeing these headlines more and more lately and I have a nagging suspicion that somebody is pushing an agenda. What exactly that agenda is remains to be seen. As for the news article you mentioned, it should be noted that the £28m is corporate tax, not _all_ the taxes. I'm reasonably sure that FAANG is not shirking the government on VAT or payroll taxes. As for why they pay so little corporate tax, I'd guess it's because they're not an EU company. All of FAANG's cost centers are in the US so it makes sense that they are allowed to offset those costs with revenue from the rest of the world. Whether they are doing so fairly is another matter, but even then, I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states.
- zemnmez 7y ago
  > I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states. "An unexpected conclusion from Hines-Rice was that: low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections; by paying little/no foreign taxes, U.S. multinationals had avoided building up foreign tax credits; the 15.5% Tax Cuts and Jobs Act of 2017 levy would prove this finding again in 2017" Scott Dyreng; Bradley P. Lindsey (12 October 2009). "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on US Multinational Firms' Tax Rates". Journal of Accounting Research. 47 (5): 1283–1316. doi:10.1111/j.1475-679X.2009.00346.x. https://en.wikipedia.org/wiki/James_R._Hines_Jr https://en.wikipedia.org/wiki/James_R._Hines_Jr.
- tim333 7y ago
  There are currently a lot of ways for multinational companies to reduce their tax burden to near zero by for example Microsoft allocating most of their European profits to a DVD stamping plant in Ireland which had a near zero rate at the time. Also they are kind of expected to maximise shareholder value by taking advantage of such legal avoidance schemes. The proper way to stop this is for counties to make anti avoidance laws. I recall a fuss in the press over Google along the lines of "Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich', Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent," and Google's CEO said "We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate." And basically if the governments want more tax they have to pass appropriate tax laws: "If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom." Which is kind of what Spain is trying to do.
gorgoiler 7y ago
This feels like a battle between governments, and I’m glad to hear OECD are involved. Corporation tax feels like it should be agreed between nations, not between individual nations and corporations. The Google multinationals of this world expect to pay a certain amount in corporation tax but right now too much of that is concentrated in the US and Ireland. Of course the US government is tied — it doesn’t want to give up the giant share of the pie it currently has, and would lose out on if some of that went to Spain instead. It’s right that it should be a shared source of revenue between all countries in which the multinational operates, but I think a new kind of tax is the wrong way of going about it when corporation tax reform could solve the same issue and be more generally useful. Payroll tax — a significant source of government tax revenue spread around the world, when a corporation has expanded worldwide — is distributed fairly in this way already.
throwGuardian 7y ago
Let's take a moment to savor the irony here - Donald Trump is leading a charge to stop unfair taxation of American tech companies abroad, while they openly work to get him out of office by any means necessary.
- oblio 7y ago
  Why is this taxation unfair?
  - throwGuardian 7y ago
    Someone else explained it well here: https://news.ycombinator.com/item?id=21713883 https://news.ycombinator.com/item?id=21713883 The proposed new tax is on top of everything in place, just to placate political rhetoric about big American tech "getting away". This is entirely a nationalist, protectionist tax Spain is levying, and it's not rooted in reason
- HelloMcFly 7y ago
  Facebook is definitely not try to get Trump out of office.
bassman9000 7y ago
Just a note on the more than likely ruling coalition: Unidas Podemos is not left-wing. It's extreme left (communists). Which helps explain the push.
AzzieElbab 7y ago
None of it is going to end good. Will we have to pay to EU countries for every click from a EU country? The Great Chinese Firewall aint got sh on this

153 points by melenaboija 7y ago

ptah 7y ago

I don't understand why the US constantly interferes in the internal affairs of other countries like this

ryeights 7y ago
Spain has very few large technology companies relative to the US. This tax is effectively a tariff on US technology companies operating in Spain, making it no longer an internal affair.
- megous 7y ago
  Last time I checked, comapnies are subject to the laws of countries they operate in.
  - rat9988 7y ago
    Indeed, the tariffs here aren't about spanish exports to Belgium.
  - ryeights 7y ago
    Obviously. That doesn't mean the US has to like those laws or cooperate with them
  - _Understated_ 7y ago
    Not trolling, but is there anything that says they're breaking the current laws in Spain? (I'm from the UK, so no dog in this fight althought I can see our gov implementing it at some point I reckon) Sure, they're taking advantage of tax loopholes I'd bet but in themselves, they're not necessarily against the law. They're probably paying all the tax in Spain they're currently, legally obliged to pay at the moment. Just my £0.02 Edit: Just thought of something? Is there a google.es? If this is what they are talking about, would it not be easier for Google just to bin that one and for Spaniards to be automatically redirected to another Spanish-speaking version, like one of the South American ones?
    - pc86 7y ago
      There's no such thing as a tax loophole. It's the law, and is written specifically the way it is for a reason. "Loophole" by definition implies that it's a mistake, and with the amount of money at stake that's incredibly unlikely.
      - _Understated_ 7y ago
        I upvoted your comment but I respectfully disagree: If a country has a law that says "you pay X tax using this law/method but Y tax using this other law/method" Google are perfectly within their rights to say, "Let's use Y". Who in their right mind would say "you know what, I'm going to pay more tax"? Have you seen the size of modern tax laws?[1] They're utterly gargantuan! [1]https://www.theguardian.com/commentisfree/2015/feb/13/britain-tax-code-17000-pages-long-dog-whistle-very-rich https://www.theguardian.com/commentisfree/2015/feb/13/britai...
        pc86 7y ago
        It sounds like you agree with me. That's not a loophole. That's a conscious decision on the part of whomever wrote that section of law to basically say "pay the lesser of these two methods."
        _Understated_ 7y ago
        Not really. The way I explained it wasn't clear. Usually a loophole is more complicated like the Double Irish with the Dutch Sandwich which requires some complex maneouvering on the part of the company to pay minimal tax. I run a small business and that kind of thing is beyond my capabilities and would also cost too much but not for Google. That's what I assumed you meant by loopholes... my explanation of the process was a bit too simplistic. To me, a loophole is looking through all the laws and saying, "ooh, if we put our money here, then declare this thing, we can show a loss that allows us a rebate on a particular tax" or something... it's a symptom of excessive complexity in our tax systems. I don't blame organisations for doing it.
      - 7y ago
  - rhino369 7y ago
    And Spanish companies can enjoy operating under America’s new tariff (law).
- ptah 7y ago
  they will have to be registered as companies in spain or eu to operate there, so this does not affect the US legal entity at all
rat9988 7y ago
The us is protecting its own interests. It doesn't care about right or wrong, nor does any other country. Wether the current action is morally right, and wether countries should behave outside the boundaries of ethics is an exercise left to the reader.
- lucb1e 7y ago
  If that is true, why do countries spend money on development aid? Isn't that caring about what's right? Or to take a more extreme example, why do we give a lifelong salary for nothing in return to people who are unable to work for the rest of their lives? Surely killing them would be more efficient. I do think states should, can, and do care about right and wrong to a certain extent. That's the difference between us and governments like the Chinese.
  - idontknowbout 7y ago
    > If that is true, why do countries spend money on development aid? Isn't that caring about what's right? Maybe to recruit most of the people who can question the exploitation of these places? like in Africa? Why are there little aid to helping to develop economic corridors/systems but billions to treat diseases are mostly side effects of poverty that won't be issues if said places are not so poor
  - baq 7y ago
    > If that is true, why do countries spend money on development aid? 1) so people from benefiting countries don't want to immigrate to the paying country (or to put it differently - aren't as motivated to leave because the differences are smaller) 2) so the paying country has somebody to sell their stuff to
deleted 7y ago
[deleted]
Nasrudith 7y ago
Because they aren't internal - they are impacted by it with broad reach. There have been many stupid attempts to target Google in the past from vested interests (snippet tax, link tax) - but this one isn't very objectionable. The main legitimacy to the complaint is that even though nation neutral it is defacto targetted by industry concentration because of the lack of international Spanish internet companies. A flimsier one but there. The second is the populist rhetoric to sell it caused offense by targetting their companies. Plus countries in international relations are best anthropoisized as a bunch of hypocritical petty bastards. A flatter 3% corporate tax rate wouldn't have those grounds but would piss off the local corporate interests and possibly ideologe powers abroad still.
- ptah 7y ago
  to operate in spain they would have to have registered spanish or eu companies edit: spain is merely taxing legal entities within their jurisdiction not in US

nabla9 7y ago

These are patchwork solutions. It would make more sense if EU countries would make laws that extend normal VAT to all internet business in EU and close all Irish loopholes. Google and others use Irish tax arrangement schemes like "The Double Irish" (base erosion and profit shifting), the Single Malt, and CAIA to avoid paying taxes. 12 EU states reject move to expose companies' tax avoidance https://www.theguardian.com/business/2019/nov/28/12-eu-states-reject-move-to-expose-companies-tax-avoidance https://www.theguardian.com/business/2019/nov/28/12-eu-state...

HorstG 7y ago
The EU will never close tax loopholes since there will always be a veto from the likes of Ireland, Netherlands, Luxembourgh or UK.
- jeltz 7y ago
  Add Malta and Cyprus to that list.
- virmundi 7y ago
  Wow. The EU requires unanimous approval. The Europeans looks at the US’ Articles of Confederation and said, “we can make that work.” They need a rogue group of reformers that create a new system of government, illegally, like the US’ Federalists. Only then will the EU get its shit together.
  - NeedMoreTea 7y ago
    Only for matters considered critical and sensitive for member states - finance, EU membership, harmonisation of legislation etc. it's mostly a hold over from the days of an EEC with 6 or 9 members (ie, right back when UK and Ireland joined in 73), when unanimity worked much better than it can now. Obviously to step back from unanimity requires unanimous vote without use of veto. :) Most matters are done under qualified majority - which is a small super-majority based on population. A post-Brexit UK going full on offshore tax haven might encourage the EU to get their act together on finance, and come up with some ways to crack down. Well, one can hope...

qxnqd 7y ago

They expect to make €850 million in exchange for tariffs from the US which will hurt the already battered primary and secondary sectors. A flawless plan.

romanovcode 7y ago
It's not about the money - it's about sending the message. No pun intended.
- qxnqd 7y ago
  Yes, I know. They are socialists so they don't care if blue collar workers suffer just so they can "send a message". They also raised the minimum wage and admitted it hurt the poorest but they still considered it a success: https://www.elmundo.es/economia/macroeconomia/2019/12/03/5de63c62fc6c83bd028b4654.html https://www.elmundo.es/economia/macroeconomia/2019/12/03/5de... — the wonders of the left.
  - tonyedgecombe 7y ago
    Yes, I know. They are socialists so they don't care if blue collar workers suffer just so they can "send a message". The Conservatives in the UK are planning a similar tax, they are certainly not a socialist party.
    - Nasrudith 7y ago
      It is nationalism in that case or more specifically "tax somebody else who can't vote against" always being a popular plan among voters.
      - nicoburns 7y ago
        Is "tax a company who is making vast amounts of money by operating in our country the same rates that we other businesses doing the same" really a controversial policy position?
    - 7y ago

jbduler 7y ago

For me it makes total sense to tax Google, Facebook and all others. Why not? What do you to lose? Parking your IP in some remote country, be it Ireland or Turks and Caicos, is fine until you realize that the IP protection is not as bullet proof as you thought. And please don't come to California to sue to protect your IP. I still can't believe that none of those companies are paying Federal nor state taxes. For now. Well, they do pay some insanely low taxes.

jacquesm 7y ago
This has absolutely nothing to do with IP but everything to do with the delivery of services which are free, supplemented by advertising income accounted for abroad where it can not be taxed by the country where the service was delivered. Looked at in a different way: if Google was a paid for service you could levy sales tax on that service.
- balfirevic 7y ago
  But Google earns it's money from selling ads. If they are selling those ads to business in EU, the mechanics (and taxation) seem to be the same as (for example) a US graphic design company selling logo design services to businesses in EU. What exactly is new here? Is it just the size (and wealth) of Google and similar companies that has encouraged the governments to try to take a larger slice of pie?
  - kazagistar 7y ago
    Companies are always going to find ways to avoid taxes and privatize more profits to fewer and fewer individuals. It's the responsibility of the government to find those loopholes and get them to pay a fair share to maintain the society they exploit for that profit.
    - balfirevic 7y ago
      Thanks, but that is barely related to the specifics of my comment and seems ideologically charged to boot.

prepend 7y ago

I wish the article had more info on the mechanics of the tax. How do they measure “value” and what percent of the value do they want to collect as tax? The ad sales might make sense, but why not just add a tax on all advertising. The marketplace tax is confusing because do they tax the value of the transaction? The full customer value that results of the acquisition? Why not just use existing sales tax for retail transaction (which e-commerce is). The last one is the hardest to understand. Do they mean sale of data from Spanish citizens? Or only people created data while in Spain? It seems simpler to just create a “data sales tax” that happens specifically for transactions where data is sold to or from Spanish orgs. I think this will just result in a tarrif on Spanish goods.

praptak 7y ago
> I think this will just result in a tarrif on Spanish goods. I doubt it would be easier than a Spanish tariff on goods from a single US state.
Mirioron 7y ago
>Why not just use existing sales tax for retail transaction (which e-commerce is). My guess is that they already do. The government just wants more tax revenue as usual. Tech companies are just a good punching bag right now. Edit: I cannot imagine that they are not collecting VAT on these transactions. Digital VAT is a very explored topic in the EU.

vector_rotcev 7y ago

As a non-economist (amateur or professional), I get the impression that countries are losing their concern of the repercussions of displeasing the USA economically. Is this an accurate interpretation? If so, is it that they're less fearful of reprisals (tariffs?) or that they're less confident in the benefits of cooperation with the USA? Or a mix? Or something else?

mc32 7y ago
I think it’s more like they’re trying to catch up with the internet. Kind of like in the US states are finally able to get Amazon to tax sales on their behalf —previously people had to self report; and the reporting rate was very very low...
pmontra 7y ago
The USA are entering an isolationist phase (it started with Obama, acccelerated by Trump) so it's natural that the rest of world is a little bit less concerned about their threats. Unfortunately the new possible friends look less friendly than the USA of the second half of '900.
- corebit 7y ago
  Please use the right words so that no one misunderstands the truth or thinks that you are lying. What the USA is doing is in no way isolationist. That is something completely different with no parallels or relations in any way. Using the word isolationist is misleading to the point of mistruth. It would be more accurate and representative of reality to say the USA appears to be acting more independently on the international stage. Isolation would imply the USA is not acting on the international stage at all.
  - wil421 7y ago
    To add to your comment: Definition of isolationism : a policy of national isolation by abstention from alliances and other international political and economic relations Further reading. American Isolationism in the 1930s[1]. [1] https://history.state.gov/milestones/1937-1945/american-isolationism https://history.state.gov/milestones/1937-1945/american-isol...

asdfasgasdgasdg 7y ago

850M euro, the proposed amount to be raised, would be on the order of 1% of Google's worldwide revenues. Google doesn't break down its revenues by country but it's hard to imagine it derives more than about 1/20 of the revenues from Spain. If we assume 1/20, which seems very generous to Spain, the amount to be raised amounts to about 20% of revenues in Spain. So, this seems very high to me? Is this amount annual, or decennial like how US spending and tax amounts are reported?

mrep 7y ago
The tax will effect more than Google like Facebook and Amazon. The 850M number accounts for the tax revenues from all companies.
- asdfasgasdgasdg 7y ago
  Ah, great point. I was misled by the title, although now I recall that it did discuss Amazon as well.

nwellnhof 7y ago

Historically, it has always been understood that companies only pay income tax in their country of residence. BMW isn't taxed on its US income by the US, just like Google isn't taxed on its German income by Germany. I think it's more accurate to say that the so-called "Google tax" is actually a tariff on Internet services. Traditionally, tariffs were only levied on imported goods but the concept works for services as well. That said, if a country unilaterally imposes tariffs, it shouldn't be surprised to see retaliatory tariffs in return.

krzyk 7y ago
It depends what you mean by "understood". For me it is obvious that BMW should pay taxes in US for cars sold in US. Are they taxfree there? And Google should pay tax in country where they sell given good - assuming a tax can be goods based.
- tzs 7y ago
  > For me it is obvious that BMW should pay taxes in US for cars sold in US. Are they taxfree there? He was talking specifically about income tax, not other taxes such as sales taxes or import taxes.
jacquesm 7y ago
You can't really compare BMW and Google. Google provides a service, BMW sells goods. Services are usually taxed at the point of delivery, goods are usually taxed at the point of import or on the manufacturers net profits based on where they are based. Either way, taxes are paid, directly or indirectly. With Google the situation is such that all their income is abroad, and the service is free so not taxable. This is arguably a situation that the present day tax regime did not foresee so an adjustment is logical. A similar thing has happened inside the EU with respect to transnational sales tax. See MOSS.
kazagistar 7y ago
The concept of residence no longer makes any sense when a company is just a pile of associate shell companies across the globe and its residence is whatever tax haven lets them pay the least. Maybe instead of retaliatory tariffs, we should try to actually tax the massive tax evading tech giants in the USA properly.

waydowntogo 7y ago

These taxes stuff are just reaction on Trump's bullshits.

tyzerdak 7y ago

I think taxes is already so high that half of person earnings goes to retards in government. Why do we pay taxes? I know many people that have close to 0 benefits from government. I would propose all governments to make taxes 5% or 10% and remove themselves from governing.

gorgoiler 7y ago
Taxes redistribute wealth from areas of surplus to areas of need. If one lives alone forever in a log cabin one might indeed never need anything from the government. However, if you need the police to help you, you are already getting something back. If someone else needs the police and the police catch the criminal who would have made you their next target, you are getting a benefit. Now scale that up to the whole country. If you take part in a society where there is generally law and order — and moreover a society where everyone can read and write and some of them can manage air traffic control, and roads exist and people have the skills to build cars and sell them to you — well now you are taking part in the benefits of a society which would not exist without public spending, paid for with taxes.
- umvi 7y ago
  The government is like a PSU though. Except it achieves nowhere near efficiency of even 80 Bronze. A large percentage of taxes just evaporate as "waste heat". Politicians always just want to raise taxes instead of raising their tax efficiency rating.
- ixtis7 7y ago
  I agree that it's silly to say that you don't benefit from government spending at all. On the other hand there is often a real sense of not getting what you put in. I imagine especially so on a forum like this where many are professionals of certain industries with relatively high pay. For example: public spending per person in the UK is < £10,000 per year, which is much less than I pay in taxes. And I would estimate that I'm well below average in terms of spending received: I don't have children, don't have any large medical expenses, etc. Of course, my cost to society will rise as I get older, but on average I would estimate that I'm paying at least twice (and probably many times more than) what I'm taking. And yet the current trend is for half of society to say that I'm not paying my 'fair share'. I'm not sure what definition of fairness they're using, but it's not mine.

Roark66 7y ago

This is just a government looking for another tax to levy on its people. Google and Amazon will not pay it. The consumers of services offered by those companies will pay it. If there is 3% tax on every google ad sold in Spain. All will Google do is add 3% to its prices for Spanish users.

ptah 7y ago
they can then just buy ads via another EU country

tim333 7y ago

I'm not sure of the details of Spain's proposal but something needs to be done really to make taxation more fair. At the moment you get headlines like "Facebook paid just £28m tax after record £1.6bn revenues in UK" because they fiddle it with offshore tax havens while normal UK businesses have to pay more like 30% of their income in tax, not 1.7%.

BurningFrog 7y ago
I recommend reading beyond headlines to understand the world.
- Sawamara 7y ago
  Help us out, champ.
thu2111 7y ago
normal UK businesses have to pay more like 30% of their income in tax UK corporation tax rate is 19%. USA corporation tax rate is 21%. Pushed down partly due to low tax competition from the rest of the world, i.e. places like the UK. Facebook pay little corporation tax in the UK because it isn't a British company. It's an American company. It was created in America. Most of its employees are there. Its headquarters are there. The EU works the same way. Corporate taxes are levied where the company is headquartered. It's arbitrary but all other ways to try and divvy up something inherently multi-national are even more arbitrary. I am British myself and I really don't understand why my fellow Brits have such a hard time understanding this - foreign companies pay little UK tax on profits because they are foreign. They were not made in Britain. If Facebook had been formed in the UK then for sure, most of its corporation tax would be paid to the Exchequer. But unfortunately it wasn't.
- bb123 7y ago
  I'm sorry if this is a misunderstanding but I thought you pay tax where you do business. So Facebook should be tax on profits generated in the UK - but they play with their corporate structures to make it look like they aren't actually doing any trade here.

AshwinDurairaj 7y ago

An honest question - What outcomes would there be if countries like Spain decide one day to impose exorbant taxes, like those totalling $1b annually for Google? Would it just be cheaper for these companies to pull out? And what international recourse would happen?

mcv 7y ago
Only when the taxes reduce their profits to zero. As long as a country only taxes domestic revenue, that's unlikely to happen. And in my opinion, countries should be taxing (domestic revenue - domestic costs), rather than allowing companies to move their undeclared profits around to the nearest tax haven to dodge all taxes.
- ensignavenger 7y ago
  So if I setup a company to do research and development in Spain, and spend $100 billion dollars creating a breakthrough technology, then I license my breakthrough technology to Americans for $1 billion dollars per year, America should be taxing my $1 billion per year in revenue as if it were 100% profit because I don't have any expenses in America?
  - mcv 7y ago
    Yeah. You already deduct your costs in Spain from your profits there. If you don't do any business in Spain, why are you there? The idea here is to discourage corporations from putting basing in tax havens where they don't do any business. Taxes are paid where the profit is made.
    - ensignavenger 7y ago
      Maybe I am in Spain because I am a Spanish citizen? Maybe I want to do R&D there because that is where the expertise is that I need? Maybe I thought my tech was going to be much more successful in Spain when I set it all up, but found out that the market wasn't there but was in the US?

seibelj 7y ago

IMO the corporate tax rate should be zero, and then everyone would be on the same playing field. Right now the only companies that pay taxes are small ones without the resources and staff to get around it. With 0% corporate tax, all of these games and shenanigans would end. Also, corporate profits are double-taxed anyway, as taxes are paid once on profits then again as dividends / capital gains by the shareholders. This is one reason stock buybacks are so popular - way to benefit shareholders without the ridiculous double taxes.

tim333 7y ago
Zero corporate tax would lead to a lot of avoidance and drops in government revenue. Say you are a consultant earning 100k a year who owns a house. You could just pay the 100k to your company and borrow against the house for living costs and pay zero tax for the time being.
- rb808 7y ago
  Right but eventually they money has to get from the company to the consultant - either dividends or wages. Either way it'll be taxed.
  - beefield 7y ago
    Yep. Eventually. Meanwhile Buffett's tax rate on his (and his companies) income is within the distance of epsilon from zero. Can you estimate when Buffett is going to need the bulk of the money from his compankes to buy a new house? How long heis going to have approximately zero tax rate, that is? My personal estimate is with a very good approximation 'never'.
    - s1artibartfast 7y ago
      As long as berkshire hathaway is paying capital gains on every investment, why would you care if the money stays invested in the company?
    - mrep 7y ago

sebsito 7y ago

According to CEIC Spain had $232B of tax revenue in 2018. The article suggests it's going to bring 850M EUR = $943M to state's coffers so would represent around 0.4% of yearly tax revenue. How come it's easier to impose a tax on particular area (which sounds unfair) and risk international relations with US instead of doing something else to gain just 0.4%. Either it's ideologic or they really can't find the money.

sbacic 7y ago

I have been seeing these headlines more and more lately and I have a nagging suspicion that somebody is pushing an agenda. What exactly that agenda is remains to be seen. As for the news article you mentioned, it should be noted that the £28m is corporate tax, not _all_ the taxes. I'm reasonably sure that FAANG is not shirking the government on VAT or payroll taxes. As for why they pay so little corporate tax, I'd guess it's because they're not an EU company. All of FAANG's cost centers are in the US so it makes sense that they are allowed to offset those costs with revenue from the rest of the world. Whether they are doing so fairly is another matter, but even then, I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states.

zemnmez 7y ago
> I suspect the victim here is the US (since the money should be going there instead of some tax haven) and not individual EU member states. "An unexpected conclusion from Hines-Rice was that: low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections; by paying little/no foreign taxes, U.S. multinationals had avoided building up foreign tax credits; the 15.5% Tax Cuts and Jobs Act of 2017 levy would prove this finding again in 2017" Scott Dyreng; Bradley P. Lindsey (12 October 2009). "Using Financial Accounting Data to Examine the Effect of Foreign Operations Located in Tax Havens and Other Countries on US Multinational Firms' Tax Rates". Journal of Accounting Research. 47 (5): 1283–1316. doi:10.1111/j.1475-679X.2009.00346.x. https://en.wikipedia.org/wiki/James_R._Hines_Jr https://en.wikipedia.org/wiki/James_R._Hines_Jr.
tim333 7y ago
There are currently a lot of ways for multinational companies to reduce their tax burden to near zero by for example Microsoft allocating most of their European profits to a DVD stamping plant in Ireland which had a near zero rate at the time. Also they are kind of expected to maximise shareholder value by taking advantage of such legal avoidance schemes. The proper way to stop this is for counties to make anti avoidance laws. I recall a fuss in the press over Google along the lines of "Using dubious tactics dubbed the 'Double Irish' and the 'Dutch Sandwich', Google apparently was able to pay only 3.2 per cent in tax on its overseas profits in 2011 even though most of its sales were in countries with tax rates from 26 to 34 per cent," and Google's CEO said "We pay lots of taxes; we pay them in the legally prescribed ways,” he told Bloomberg. “I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate." And basically if the governments want more tax they have to pass appropriate tax laws: "If the British system changes the tax laws, then we will comply. If the taxes go up, we will pay more, if they go down, we will pay less. That is a political decision for the democracy that is the United Kingdom." Which is kind of what Spain is trying to do.

gorgoiler 7y ago

This feels like a battle between governments, and I’m glad to hear OECD are involved. Corporation tax feels like it should be agreed between nations, not between individual nations and corporations. The Google multinationals of this world expect to pay a certain amount in corporation tax but right now too much of that is concentrated in the US and Ireland. Of course the US government is tied — it doesn’t want to give up the giant share of the pie it currently has, and would lose out on if some of that went to Spain instead. It’s right that it should be a shared source of revenue between all countries in which the multinational operates, but I think a new kind of tax is the wrong way of going about it when corporation tax reform could solve the same issue and be more generally useful. Payroll tax — a significant source of government tax revenue spread around the world, when a corporation has expanded worldwide — is distributed fairly in this way already.

throwGuardian 7y ago

Let's take a moment to savor the irony here - Donald Trump is leading a charge to stop unfair taxation of American tech companies abroad, while they openly work to get him out of office by any means necessary.

oblio 7y ago
Why is this taxation unfair?
- throwGuardian 7y ago
  Someone else explained it well here: https://news.ycombinator.com/item?id=21713883 https://news.ycombinator.com/item?id=21713883 The proposed new tax is on top of everything in place, just to placate political rhetoric about big American tech "getting away". This is entirely a nationalist, protectionist tax Spain is levying, and it's not rooted in reason
HelloMcFly 7y ago
Facebook is definitely not try to get Trump out of office.

bassman9000 7y ago

Just a note on the more than likely ruling coalition: Unidas Podemos is not left-wing. It's extreme left (communists). Which helps explain the push.

AzzieElbab 7y ago

None of it is going to end good. Will we have to pay to EU countries for every click from a EU country? The Great Chinese Firewall aint got sh on this