5 ms·

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.

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.