6 ms·

Europeans vow to pursue digital tax plans after US “provocation”

40 points by Xoltus 6y ago

dantheman 6y ago
It's insane that they want to propose a global minimum corporate tax.
- yokaze 6y ago
  It's insane, that there isn't one already. https://www.investopedia.com/terms/b/beggarthyneighbor.asp https://www.investopedia.com/terms/b/beggarthyneighbor.asp
- pjc50 6y ago
  On the contrary, it's necessary if corporations can operate internationally and transfer money untaxably between jurisdictions, otherwise the global effective tax rate is that of the lowest country.
  - smabie 6y ago
    What's wrong with that? Countries need to compete just like corporations. Small countries need someway to compete for global talent, and low taxes are a good incentive.
    - Supermancho 6y ago
      > Small countries need someway to compete for global talent, Lower corporate taxes have not resulted in "talent" moving to those countries. It's all legal maneuvering. This is tax evasion 101 (https://en.wikipedia.org/wiki/The_Laundromat_(film) https://en.wikipedia.org/wiki/The_Laundromat_(film)).
    - monadic2 6y ago
      Oh wait the only international orgs with any teeth are the IMF and the World Bank who support each other in a non-competitive, mutually-supportive, DC-based relationship. Too bad these countries were fucked centuries ago I guess.... it was foolish to hope to begin with.
    - endymi0n 6y ago
      I would be even siding with you slightly if this amounted to actually moving people, facilities and capital to that country. However, in the modern world, corporations don't just use low taxes to simply route massive amounts of capital through low-tax countries without a net benefit for anyone — they are actually exploiting tax loopholes in different countries' tax laws against each other. https://en.wikipedia.org/wiki/Dutch_Sandwich https://en.wikipedia.org/wiki/Dutch_Sandwich If Google actually used your machine to port scan and automatically exploit other computers, would you be enraged? Well, that's exactly what their black hat tax lawyers were doing on the financial side: https://en.wikipedia.org/wiki/Dutch_Sandwich https://en.wikipedia.org/wiki/Dutch_Sandwich
      - humanrebar 6y ago
        If it doesn't benefit the Dutch, they would (and I understand they have at least attempted to) close the loopholes. For instance, they could require more presence in the country in particular ways: physically, employed citizens, cash in banks, taxes paid, etc. If the beneficiaries are bribed individuals in various governments, that would be another thing entirely.
      - Mirioron 6y ago
        But these both clearly benefit Ireland and the Netherlands. Many of the major international corporations in the EU are set up in Ireland. Do you think that would be the case if Ireland couldn't attract them with the better tax offers? Ireland even had a referendum that initially rejected the Lisbon Treaty until Ireland got guarantees from the EU that it wouldn't affect their taxation.
    - pnako 6y ago
      In practice, what is done is that big corporations have their headquarters in a few well-developed jurisdictions that have very strong laws to protect their shit (London, New York, etc.) but use shell companies in offshore locations that just offer a mailbox. I don't have an issue with a bank being based in the Bermudas or anywhere, for example; but in that case the HQ should really be based there. There is the same issue with ships registered using flags of convenience. Again, I don't have a problem with that per se. But if there is dispute involving your ship, you go ask Liberia to sort it out. You get your insurance from Liberia too; you get the picture. Now, being French I'm also well-aware that French politicians are completely unrealistic and want to tax French companies doing business abroad in France, and American companies doing business in France, in France (notice the pattern?) There is a middle ground.
    - pinkfoot 6y ago
      Indeed, imagine what the tax rate would be if politicians knew corporations and people had no options. It would ratchet up to strangulation levels. A bit of competition is always sobering.
    - Hamuko 6y ago
      Apple has 137,000 employees of which 80,000 are in the United States and 22,000 are in Europe, and of those 6,000 in Ireland. However, 64% of Apple's sales are (or at least were in 2017) outside the US, which then get funneled to Ireland, despite only housing like 4.3% of Apple's global employees. They're just shifting money, not talent. Money which is then taxed at a very low rate (Apple International had an effective corporate tax rate of 1% in 2003, which was shrunk down to 0.005% by 2014) and in return doesn't really benefit the people of that country.
      - Proven 6y ago
        Oh yeah? Can you guessestimate for us how many employees would Apple have, or how much more (or less) would they be making if Apple had to pay 10 times as much tax?
- monadic2 6y ago
  How do you figure?
- FranzFerdiNaN 6y ago
  If you care about fair trade at all, a minimum tax rate is necessary, else you might as well put it at 0, because that's what it will fall towards eventually.
- tanilama 6y ago
  idk, at least they are trying to get revenue for their own people from somewhere else. Can't see a reason why they wouldn't pursue this objective except US's objection, now the relation had soured anyway.
LatteLazy 6y ago
I find the fact talks fell through particularly concerning as right now we should all be presenting a united front against China. I also think they should call this a digital tax or apply it only to digital services. I understand that’s where the biggest impact will be felt but a minimum corporation tax rate shouldn’t depend on business type and I dislike the idea people are free to target companies for being “too successful”.
- NicoJuicy 6y ago
  You are missing the point. Because of Trump, US allies have to guard more corners than before. It's a serious problem and I think Trump is actually giving Russia/China an unfair advantage. He has already destroyed the Asian partnerships against China that Obama started, he also got out of numerous Western partnerships because it wasn't his signature on it. I would say that the problem is not Europe, it's 100% Trump. Allies won't back him since they can't trust him. Everyone knows he's trying to have as much as personal gain as possible. Even meddling in European affairs,. Eg. Ukraine for the clear sake of money). Every time Trump suggests to help countries handle their affairs, you know he's going for the "pay Trump, get US military assistance" card, it's nuts. The Western alliance since WO II can't survive in it's current form if Trump would get another term, they are all waiting till someone sane comes back. If it doesn't happen, it will become a serious problem :( TLDR; If you wouldn't trust Trump as a business partner, how can other countries trust him. You can't unite/partner with a person like that. Edit: if down vote. Please share something that Trump seems trustworthy without personal gain. I haven't seen any situation during his entire term, trying to redirect US-money to his pockets.
  - paulsutter 6y ago
    Russia’s economy is smaller than Canada, they’re just not terribly relevant globally. China on the other hand will eclipse the US significantly both economically and militarily, reshaping the world.
    - NicoJuicy 6y ago
      I didn't say that Russia is relevant. But they do have a "more deep" ( one-sided) partnership with China to influence Western democracy. They were a lot stronger during the USSR and even then the call for democracy broke it up. Europe has never been closer to Moscow. Important: Without firing even a single gunshot.
knolax 6y ago
More economic saber-rattling. We need less of this jingoist bull.
laser 6y ago
From a purely national interest standpoint, it's hardly surprising the US would be uninterested in negotiations given the fact it's the global digital products leader. While it's certainly true some such rules are worthwhile at the minimum tax level to stop global mega-corps avoiding taxes, like the old Double Irish loophole [1], the negotiations didn't break down over such provision, as the article mentions. The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here. [1] https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement
- Mirioron 6y ago
  The worst part about taxes like this is that they make it even harder for Europe to ever catch up. Taxes like this will make Europe a less attractive location for a business like that. Investors will be less likely to invest, there's a greater regulatory burden for anyone who does want to start the business, and you will and up paying more in taxes.
  - 0xfaded 6y ago
    Europe has VAT, which from a simplified perspective means that businesses don't directly pay any consumption tax, but have to charge VAT on the value of the goods and services sold to consumers. So for purchases within Europe, the end consumer is already paying a 25% tax on the digital services provided by google. But for good and services sold outside the EU, and remember that Europe have export driven philosophies, there is essentially no government revenue from foreign digital services. Europe deserves compensation for buying American digital services in the same way America deserves compensation for buying German cars. It doesn't. Instead it needs to focus on a more competitive business environment where the money is cycled more times through the economy before ultimately making it's way to the government.

40 points by Xoltus 6y ago

dantheman 6y ago

It's insane that they want to propose a global minimum corporate tax.

yokaze 6y ago
It's insane, that there isn't one already. https://www.investopedia.com/terms/b/beggarthyneighbor.asp https://www.investopedia.com/terms/b/beggarthyneighbor.asp
pjc50 6y ago
On the contrary, it's necessary if corporations can operate internationally and transfer money untaxably between jurisdictions, otherwise the global effective tax rate is that of the lowest country.
- smabie 6y ago
  What's wrong with that? Countries need to compete just like corporations. Small countries need someway to compete for global talent, and low taxes are a good incentive.
  - Supermancho 6y ago
    > Small countries need someway to compete for global talent, Lower corporate taxes have not resulted in "talent" moving to those countries. It's all legal maneuvering. This is tax evasion 101 (https://en.wikipedia.org/wiki/The_Laundromat_(film) https://en.wikipedia.org/wiki/The_Laundromat_(film)).
  - monadic2 6y ago
    Oh wait the only international orgs with any teeth are the IMF and the World Bank who support each other in a non-competitive, mutually-supportive, DC-based relationship. Too bad these countries were fucked centuries ago I guess.... it was foolish to hope to begin with.
  - endymi0n 6y ago
    I would be even siding with you slightly if this amounted to actually moving people, facilities and capital to that country. However, in the modern world, corporations don't just use low taxes to simply route massive amounts of capital through low-tax countries without a net benefit for anyone — they are actually exploiting tax loopholes in different countries' tax laws against each other. https://en.wikipedia.org/wiki/Dutch_Sandwich https://en.wikipedia.org/wiki/Dutch_Sandwich If Google actually used your machine to port scan and automatically exploit other computers, would you be enraged? Well, that's exactly what their black hat tax lawyers were doing on the financial side: https://en.wikipedia.org/wiki/Dutch_Sandwich https://en.wikipedia.org/wiki/Dutch_Sandwich
    - humanrebar 6y ago
      If it doesn't benefit the Dutch, they would (and I understand they have at least attempted to) close the loopholes. For instance, they could require more presence in the country in particular ways: physically, employed citizens, cash in banks, taxes paid, etc. If the beneficiaries are bribed individuals in various governments, that would be another thing entirely.
    - Mirioron 6y ago
      But these both clearly benefit Ireland and the Netherlands. Many of the major international corporations in the EU are set up in Ireland. Do you think that would be the case if Ireland couldn't attract them with the better tax offers? Ireland even had a referendum that initially rejected the Lisbon Treaty until Ireland got guarantees from the EU that it wouldn't affect their taxation.
  - pnako 6y ago
    In practice, what is done is that big corporations have their headquarters in a few well-developed jurisdictions that have very strong laws to protect their shit (London, New York, etc.) but use shell companies in offshore locations that just offer a mailbox. I don't have an issue with a bank being based in the Bermudas or anywhere, for example; but in that case the HQ should really be based there. There is the same issue with ships registered using flags of convenience. Again, I don't have a problem with that per se. But if there is dispute involving your ship, you go ask Liberia to sort it out. You get your insurance from Liberia too; you get the picture. Now, being French I'm also well-aware that French politicians are completely unrealistic and want to tax French companies doing business abroad in France, and American companies doing business in France, in France (notice the pattern?) There is a middle ground.
  - pinkfoot 6y ago
    Indeed, imagine what the tax rate would be if politicians knew corporations and people had no options. It would ratchet up to strangulation levels. A bit of competition is always sobering.
  - Hamuko 6y ago
    Apple has 137,000 employees of which 80,000 are in the United States and 22,000 are in Europe, and of those 6,000 in Ireland. However, 64% of Apple's sales are (or at least were in 2017) outside the US, which then get funneled to Ireland, despite only housing like 4.3% of Apple's global employees. They're just shifting money, not talent. Money which is then taxed at a very low rate (Apple International had an effective corporate tax rate of 1% in 2003, which was shrunk down to 0.005% by 2014) and in return doesn't really benefit the people of that country.
    - Proven 6y ago
      Oh yeah? Can you guessestimate for us how many employees would Apple have, or how much more (or less) would they be making if Apple had to pay 10 times as much tax?
monadic2 6y ago
How do you figure?
FranzFerdiNaN 6y ago
If you care about fair trade at all, a minimum tax rate is necessary, else you might as well put it at 0, because that's what it will fall towards eventually.
tanilama 6y ago
idk, at least they are trying to get revenue for their own people from somewhere else. Can't see a reason why they wouldn't pursue this objective except US's objection, now the relation had soured anyway.

LatteLazy 6y ago

I find the fact talks fell through particularly concerning as right now we should all be presenting a united front against China. I also think they should call this a digital tax or apply it only to digital services. I understand that’s where the biggest impact will be felt but a minimum corporation tax rate shouldn’t depend on business type and I dislike the idea people are free to target companies for being “too successful”.

NicoJuicy 6y ago
You are missing the point. Because of Trump, US allies have to guard more corners than before. It's a serious problem and I think Trump is actually giving Russia/China an unfair advantage. He has already destroyed the Asian partnerships against China that Obama started, he also got out of numerous Western partnerships because it wasn't his signature on it. I would say that the problem is not Europe, it's 100% Trump. Allies won't back him since they can't trust him. Everyone knows he's trying to have as much as personal gain as possible. Even meddling in European affairs,. Eg. Ukraine for the clear sake of money). Every time Trump suggests to help countries handle their affairs, you know he's going for the "pay Trump, get US military assistance" card, it's nuts. The Western alliance since WO II can't survive in it's current form if Trump would get another term, they are all waiting till someone sane comes back. If it doesn't happen, it will become a serious problem :( TLDR; If you wouldn't trust Trump as a business partner, how can other countries trust him. You can't unite/partner with a person like that. Edit: if down vote. Please share something that Trump seems trustworthy without personal gain. I haven't seen any situation during his entire term, trying to redirect US-money to his pockets.
- paulsutter 6y ago
  Russia’s economy is smaller than Canada, they’re just not terribly relevant globally. China on the other hand will eclipse the US significantly both economically and militarily, reshaping the world.
  - NicoJuicy 6y ago
    I didn't say that Russia is relevant. But they do have a "more deep" ( one-sided) partnership with China to influence Western democracy. They were a lot stronger during the USSR and even then the call for democracy broke it up. Europe has never been closer to Moscow. Important: Without firing even a single gunshot.

knolax 6y ago

More economic saber-rattling. We need less of this jingoist bull.

laser 6y ago

From a purely national interest standpoint, it's hardly surprising the US would be uninterested in negotiations given the fact it's the global digital products leader. While it's certainly true some such rules are worthwhile at the minimum tax level to stop global mega-corps avoiding taxes, like the old Double Irish loophole [1], the negotiations didn't break down over such provision, as the article mentions. The negotiations broke down because the Europeans have failed to develop as successful a digital economy and run a large digital economic deficit with the United States. They want to levy a tax against an American import to help this trade imbalance, while claiming it doesn't amount to a trade tariff. Given the amount of economic value at stake, of course the Americans are going to view it as an unjust trade tariff and fight against it, while the Europeans will view it as a fair and justified tax for value captured in their domestic market. The global minimum tax has mutual agreement, however, so don't use that to distract or straw-man non-existent disagreement, avoiding the real and essentially intrinsically zero-sum crux of the disagreement here. [1] https://en.wikipedia.org/wiki/Double_Irish_arrangement https://en.wikipedia.org/wiki/Double_Irish_arrangement

Mirioron 6y ago
The worst part about taxes like this is that they make it even harder for Europe to ever catch up. Taxes like this will make Europe a less attractive location for a business like that. Investors will be less likely to invest, there's a greater regulatory burden for anyone who does want to start the business, and you will and up paying more in taxes.
- 0xfaded 6y ago
  Europe has VAT, which from a simplified perspective means that businesses don't directly pay any consumption tax, but have to charge VAT on the value of the goods and services sold to consumers. So for purchases within Europe, the end consumer is already paying a 25% tax on the digital services provided by google. But for good and services sold outside the EU, and remember that Europe have export driven philosophies, there is essentially no government revenue from foreign digital services. Europe deserves compensation for buying American digital services in the same way America deserves compensation for buying German cars. It doesn't. Instead it needs to focus on a more competitive business environment where the money is cycled more times through the economy before ultimately making it's way to the government.