5 ms·

That has already happened to some degree, we just need to expand it and simplify it. Within the EU you have to pay the VAT of the country of the buyer for "digi

by jeltz 7y ago

That has already happened to some degree, we just need to expand it and simplify it. Within the EU you have to pay the VAT of the country of the buyer for "digital services". But shouldn't Google and Amazon already be subject to that since they have EU subsidiaries?

bluecalm 7y ago
You have to pay the VAT when you sell to EU even if you don't have presence in EU. Google pays that. The fuss is about some countries wanting more than that.
- the-dude 7y ago
  The customer pays the VAT. Google collects it and returns it to the government.
  - mrep 7y ago
    For ads at least, I'm pretty sure Google and Facebook are effectively paying 100% of that. As far as I know, their ad systems work on a bidding process and common wisdom is to bid the average profitability of a new customer * the conversion rate from those that click on your ad. Thus, as long as your bid wins out (you pay the second highest price) you will make money on each ad click. This represents a case of perfectly elastic demand. No matter how taxes change, the price the advertiser is going to bid never changes and thus all taxes will be off burdened onto google and facebooks margin until obviously the point where the would lose money and then shut it off but that's unlikely to happen. khan academy article on elasticity and tax revenue: https://www.khanacademy.org/economics-finance-domain/microeconomics/elasticity-tutorial/price-elasticity-tutorial/a/elasticity-and-tax-incidence https://www.khanacademy.org/economics-finance-domain/microec...
  - bluecalm 7y ago
    It's a moot point who "pays". The tax is added to the transaction which means less profit for the company. I pay VAT. I can sell my product for X. Just because I need to add VAT doesn't mean I can magically sell for X +23% because people wouldn't buy it. The price is set by demand/supply. Paying VAT means the company makes less profit. I send the VAT money to my government every month. If I didn't have to do that it would be my profit. "The customer pays" rhetoric doesn't hold water. Customers don't care how much of the price is the tax. They make their buying decision based on sticker value.
    - kgwgk 7y ago
      > If I didn't have to do that it would be my profit. If your competitors didn’t have to do that either there would be pressure on prices and a new price would be set by demand/supply. When VAT changes (usually increasing) if doesn’t just affect profits. It also affects prices (to what extent and how rapidly depends on many factors).
      - bluecalm 7y ago
        Yes, the same way if suddenly raw materials got more expensive. The prices would increase and the companies would make less money as fewer people would be buying. That is assuming the price before the cost increase or VAT was set at a point to maximize profits.
nabla9 7y ago
Their local EU subsidiaries are just for expenses and business. These companies show their profits in places like Bermuda (British Overseas Territory) Ireland, or Luxembourg and use all kinds of schemes and special arrangements to reduce them.
- balfirevic 7y ago
  The parent poster was talking about VAT, which has nothing to do with profits or where the profits are shown.
Mirioron 7y ago
As a European, I thought so as well. I really can't imagine that they're not collecting VAT.

by jeltz 7y ago

bluecalm 7y ago

You have to pay the VAT when you sell to EU even if you don't have presence in EU. Google pays that. The fuss is about some countries wanting more than that.

the-dude 7y ago
The customer pays the VAT. Google collects it and returns it to the government.
- mrep 7y ago
  For ads at least, I'm pretty sure Google and Facebook are effectively paying 100% of that. As far as I know, their ad systems work on a bidding process and common wisdom is to bid the average profitability of a new customer * the conversion rate from those that click on your ad. Thus, as long as your bid wins out (you pay the second highest price) you will make money on each ad click. This represents a case of perfectly elastic demand. No matter how taxes change, the price the advertiser is going to bid never changes and thus all taxes will be off burdened onto google and facebooks margin until obviously the point where the would lose money and then shut it off but that's unlikely to happen. khan academy article on elasticity and tax revenue: https://www.khanacademy.org/economics-finance-domain/microeconomics/elasticity-tutorial/price-elasticity-tutorial/a/elasticity-and-tax-incidence https://www.khanacademy.org/economics-finance-domain/microec...
- bluecalm 7y ago
  It's a moot point who "pays". The tax is added to the transaction which means less profit for the company. I pay VAT. I can sell my product for X. Just because I need to add VAT doesn't mean I can magically sell for X +23% because people wouldn't buy it. The price is set by demand/supply. Paying VAT means the company makes less profit. I send the VAT money to my government every month. If I didn't have to do that it would be my profit. "The customer pays" rhetoric doesn't hold water. Customers don't care how much of the price is the tax. They make their buying decision based on sticker value.
  - kgwgk 7y ago
    > If I didn't have to do that it would be my profit. If your competitors didn’t have to do that either there would be pressure on prices and a new price would be set by demand/supply. When VAT changes (usually increasing) if doesn’t just affect profits. It also affects prices (to what extent and how rapidly depends on many factors).
    - bluecalm 7y ago
      Yes, the same way if suddenly raw materials got more expensive. The prices would increase and the companies would make less money as fewer people would be buying. That is assuming the price before the cost increase or VAT was set at a point to maximize profits.

nabla9 7y ago

Their local EU subsidiaries are just for expenses and business. These companies show their profits in places like Bermuda (British Overseas Territory) Ireland, or Luxembourg and use all kinds of schemes and special arrangements to reduce them.

balfirevic 7y ago
The parent poster was talking about VAT, which has nothing to do with profits or where the profits are shown.

Mirioron 7y ago

As a European, I thought so as well. I really can't imagine that they're not collecting VAT.