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The problem here is that it permits tech companies to pass the bill on. These sorts of taxes need to account for the fact that the companies it's leveraged on a

The problem here is that it permits tech companies to pass the bill on. These sorts of taxes need to account for the fact that the companies it's leveraged on are monopolies, and can raise prices without issue. They should've coupled this tax with a ban on raising their rates or passing it on as an additional fee.

rlpb 6y ago
> They should've coupled this tax with a ban on raising their rates or passing it on as an additional fee. This is simply not practical to implement or enforce.
- ocdtrekkie 6y ago
  At least one Russian lawmaker seems to plan to attempt it: https://www.macrumors.com/2020/09/02/russia-could-cap-apple-app-store-commission/ https://www.macrumors.com/2020/09/02/russia-could-cap-apple-...
  - metiscus 6y ago
    Russia has a long and storied history of working against economic gradients - it usually ends poorly.
- flak48 6y ago
  India tried to do this anyway when the new Goods and Services Tax was launched : http://gstcouncil.gov.in/anti-profiteering-mechanism http://gstcouncil.gov.in/anti-profiteering-mechanism Which led to issues like https://www.bloombergquint.com/business/higher-grammage-vs-lower-prices-how-to-pass-gst-benefit https://www.bloombergquint.com/business/higher-grammage-vs-l...
trentnix 6y ago
You're trying to hold a river back with your outstretched arms. Taxes are always passed on to the consumer because they are a cost of doing business. Raise taxes, you raise prices. Always. Only competitive pressure and consumer discernment will drive down the price.
- Retric 6y ago
  Taxing profits can’t be passed on. A company that maximizes profits can’t change it’s choices to suddenly make more profits because that’s what it’s already doing. At most they can hide profits via various loopholes intentionally left open, but that doesn’t impact customers.
  - metiscus 6y ago
    Assuming a perfectly spherical cow, if the tax is based on a percent of profit, the company can and will raise prices (if the market will bear it) to ensure that their gross profit numbers remain constant or continue to grow.
    - Retric 6y ago
      That assumes they are intentionally making less profit than possible at stage one. If even monopolies have limits, if the cheapest cellphone cost 2,000$ a month few people would have them thus lowering prices increases profits after a point.
      - robjan 6y ago
        If the company charges higher "just because" then it creates an inefficiency in the market and allows new products to enter the market at a lower price point. If they charge higher due to taxes it doesn't create this gap.
        Retric 6y ago
        Monopolies can always lower prices at any time a new player enters the market. Theoretical future competition has zero impact on current prices. Just look at what happens to drug prices when the original patent expires. Similarly, ISP prices maintain high until just before a new options become available. Simply announcing Google fiber was eventually going to enter a city did not instantly lower prices. Sure, eventually that happened but ISP continued to charge high prices until forced to lower them.
gruez 6y ago
>They should've coupled this tax with a ban on raising their rates or passing it on as an additional fee. What's preventing them from selling a "localized" product that's 10% crappier (assuming 10% tax)?
- ocdtrekkie 6y ago
  The App Store, Play Store, and Ad Market don't really work that way: They're just rent-collectors on a market between developers and users. It would cost more to provide separate products than in other countries. They're just pure profit rent-seeking entities.
  - disgruntledphd2 6y ago
    I agree with you on the stores, but neither Google nor Facebook ads are rent-collectors in the traditional sense. To illustrate, consider a new ad network, which miraculously has access to all Google and Facebook users. Assuming that all is necessary is the market then this network should take 1/3rd of their revenue. However, this wouldn't happen as what people actually pay for is the optimisation of advertising, i.e. sending the ads to the "right" users such that costs can be controlled. Like, both of the companies are almost monopolies in terms of their consumer products, but they do in fact provide a very useful service to advertisers, and indeed have created a whole host of businesses that wouldn't have been possible without this optimisation.
    - ocdtrekkie 6y ago
      Both Google and Facebook want you to believe this. But while a Google-operated study found a 52% revenue benefit to targeted advertising, an independent academic study found a 4% benefit.
      - disgruntledphd2 6y ago
        Look, this stuff is not easy to measure, at all. It's even harder when the two largest platforms (i.e Goog and FB) won't co-operate (for potentially legitimate privacy reasons). On the other hand, I can assure you that for most niche brands/services (i.e. the ones that spend money on digital advertising), spending $1m dollars on CPM ads on everyone in your audience, versus spending $1mn dollars on optimised advertising will have wildly different impacts on your bottom line. Source: did a lot of ads measurement analysis over the past few years.

rlpb 6y ago

> They should've coupled this tax with a ban on raising their rates or passing it on as an additional fee. This is simply not practical to implement or enforce.

ocdtrekkie 6y ago
At least one Russian lawmaker seems to plan to attempt it: https://www.macrumors.com/2020/09/02/russia-could-cap-apple-app-store-commission/ https://www.macrumors.com/2020/09/02/russia-could-cap-apple-...
- metiscus 6y ago
  Russia has a long and storied history of working against economic gradients - it usually ends poorly.
flak48 6y ago
India tried to do this anyway when the new Goods and Services Tax was launched : http://gstcouncil.gov.in/anti-profiteering-mechanism http://gstcouncil.gov.in/anti-profiteering-mechanism Which led to issues like https://www.bloombergquint.com/business/higher-grammage-vs-lower-prices-how-to-pass-gst-benefit https://www.bloombergquint.com/business/higher-grammage-vs-l...

trentnix 6y ago

You're trying to hold a river back with your outstretched arms. Taxes are always passed on to the consumer because they are a cost of doing business. Raise taxes, you raise prices. Always. Only competitive pressure and consumer discernment will drive down the price.

Retric 6y ago
Taxing profits can’t be passed on. A company that maximizes profits can’t change it’s choices to suddenly make more profits because that’s what it’s already doing. At most they can hide profits via various loopholes intentionally left open, but that doesn’t impact customers.
- metiscus 6y ago
  Assuming a perfectly spherical cow, if the tax is based on a percent of profit, the company can and will raise prices (if the market will bear it) to ensure that their gross profit numbers remain constant or continue to grow.
  - Retric 6y ago
    That assumes they are intentionally making less profit than possible at stage one. If even monopolies have limits, if the cheapest cellphone cost 2,000$ a month few people would have them thus lowering prices increases profits after a point.
    - robjan 6y ago
      If the company charges higher "just because" then it creates an inefficiency in the market and allows new products to enter the market at a lower price point. If they charge higher due to taxes it doesn't create this gap.
      - Retric 6y ago
        Monopolies can always lower prices at any time a new player enters the market. Theoretical future competition has zero impact on current prices. Just look at what happens to drug prices when the original patent expires. Similarly, ISP prices maintain high until just before a new options become available. Simply announcing Google fiber was eventually going to enter a city did not instantly lower prices. Sure, eventually that happened but ISP continued to charge high prices until forced to lower them.

gruez 6y ago

>They should've coupled this tax with a ban on raising their rates or passing it on as an additional fee. What's preventing them from selling a "localized" product that's 10% crappier (assuming 10% tax)?

ocdtrekkie 6y ago
The App Store, Play Store, and Ad Market don't really work that way: They're just rent-collectors on a market between developers and users. It would cost more to provide separate products than in other countries. They're just pure profit rent-seeking entities.
- disgruntledphd2 6y ago
  I agree with you on the stores, but neither Google nor Facebook ads are rent-collectors in the traditional sense. To illustrate, consider a new ad network, which miraculously has access to all Google and Facebook users. Assuming that all is necessary is the market then this network should take 1/3rd of their revenue. However, this wouldn't happen as what people actually pay for is the optimisation of advertising, i.e. sending the ads to the "right" users such that costs can be controlled. Like, both of the companies are almost monopolies in terms of their consumer products, but they do in fact provide a very useful service to advertisers, and indeed have created a whole host of businesses that wouldn't have been possible without this optimisation.
  - ocdtrekkie 6y ago
    Both Google and Facebook want you to believe this. But while a Google-operated study found a 52% revenue benefit to targeted advertising, an independent academic study found a 4% benefit.
    - disgruntledphd2 6y ago
      Look, this stuff is not easy to measure, at all. It's even harder when the two largest platforms (i.e Goog and FB) won't co-operate (for potentially legitimate privacy reasons). On the other hand, I can assure you that for most niche brands/services (i.e. the ones that spend money on digital advertising), spending $1m dollars on CPM ads on everyone in your audience, versus spending $1mn dollars on optimised advertising will have wildly different impacts on your bottom line. Source: did a lot of ads measurement analysis over the past few years.