4 ms·

How do you tariff a software service ? Tariffs are applied at import ? Are you paying US software if its hosted in EU datacenter by EU subsidiary ? Or if softwa

How do you tariff a software service ? Tariffs are applied at import ? Are you paying US software if its hosted in EU datacenter by EU subsidiary ? Or if software licence is sold by EU subsidiary ? The concept makes no sense to me.

rhdjebejdbd 2y ago
Toll-wires
- rafaelmn 2y ago
  Exactly what I was thinking. We need a great firewall of EU that is charging for packets crossing the Atlantic
  - hoseyor 2y ago
    Of course, what is needed to preserve democracy and freedom is *checks notes* ideas from totalitarian dictatorships.
kolinko 2y ago
Kind of like Vat is applied now - you’re from a given country, you pay more per month for a subscription
- rafaelmn 2y ago
  But software/services are sold by EU companies (subsidiary)
  - jillyboel 2y ago
    It's a nice accounting trick, but that's all it is.
  - coldtea 2y ago
    If it's a subsidiary, there's a way to assosiate with the parent company.
    - michpoch 2y ago
      Sure, but then the other side can do the same. VW producing cars in their factories in the USA? Put a tariff on these cars as the parent company is based in Europe. It’s really not that simple, as e.g. big tech has their development centering the EU as well - so these products are at least partially produced here. If you want to write some custom rules, sure, but then you’re really opening a pandora box. Technically you could just add 100% tax just on vehicles that have Tesla in their name. Try making such moves and look as investors immediately drop any trust in your countries political system (and currency).
      - coldtea 2y ago
        >Sure, but then the other side can do the same That's expected. The other side already imposes some tarrifs (as did the EU - it's BS that Trump's tarrifs to EU are some unprecedented move, the EU already had tarrifs of US cars and other products). The problem we're discussing (at least according to a parent comment) is that the US has a lot more "digital services" products than actual physical products where EU tarrifs are currently applied. So, what's discussed is how to tax those (and how to sidestep "but it's a European subsidiary, not a US company" hurdle). So, sure the US can counter EU digital services by also using the same sidestepping. But it's not like EU has many such worth talking about. All the big players are from the US (Facebook, Google, Amazon, MS, etc).
- DanielHB 2y ago
  Software companies just open subsidiaries in the target country and sell services through the subsidiaries. The only thing this does is make it harder to move profit to the home country (and there are ways sound this) and add a lot of accounting work
- wqaatwt 2y ago
  What do you mean by that? That’s not how VAT works.
  - kolinko 2y ago
    It is how it works. Go to any website with saas. If you mark eu as your country, you will be charged extra for vat. Or, going the other way - if you’re an EU company but your software users are outside EU, you don’t need to charge them VAT. When I was running Appcodes, I didn’t want to ask about the country directly, so I got an official opinion from Polish IRS that if I store geolocated IP address of registration and browser timezone for additional confirmation, it’s a good enough proof to not charge vat to consumers outside EU.
thinkindie 2y ago
something I learned recently: payments to foreign bank accounts in Brazil have an automatic 25% tax imposed regardless of the purpose of the transfer. This seems to applied to companies of a certain size, or moving certain volume of transfer, but still.
coldtea 2y ago
>How do you tariff a software service ? Tariffs are applied at import ? Are you paying US software if its hosted in EU datacenter by EU subsidiary? If there's a political will and your position is strong enough, a scheme / legal formula is trivial to find. Even something like "5% of what you make off showing ads to European users" would be enough. Can add any arbitrary qualifier like "if your main base of operations is outside the EU" - which could hold whether you're a EU subsidiary or not.
- frereubu 2y ago
  I don't agree that it's "trivial". The devil will be in the detail and could drag out in the courts depending on the language definitions. Quite apart from the fact that anything dreamt up at short notice is going to have shortcomings, tariffs are much easier impose when you're transporting physical objects across physical borders.
- hoseyor 2y ago
  That still does not make sense. Do you block your own citizens from accessing sites hosted in foreign countries if those sites/companies don’t comply with your foreign law? Do you arrest your citizens for accessing those sites anyways or use VPNs to circumvent blocking? And there are dozens of other questions that raises, but you’re talking about what most people describe as totalitarian states.
  - coldtea 2y ago
    >Do you block your own citizens from accessing sites hosted in foreign countries if those sites/companies don’t comply with your foreign law? Sure happens, including in the EU. There are some european anti-copyright-theft laws for example, and local ISPs are forced to block some warez/pirated ebook etc websites (you can bypass via VPN, but the "official" gateways/DNS block them). >Do you arrest your citizens for accessing those sites anyways or use VPNs to circumvent blocking? Not at the moment. And the logistics do not make it very easy (can't track each individual). But you can sure fine any commercial company accessing such sites, prohibit state infrastructure and any company doing work with your state from using them, etc. I'm not sure what the objection is. Do you mean "does not make sense" from a democratic/open society standpoint (as if european countries are a bastion of that, and such moves are beneath the legislators)? Or that it "does not make sense" from a technical aspect? For the latter, when there's a will, there's a way.
pjc50 2y ago
I'm reminded of how the EU had to sue Ireland to get them to properly enforce their own tax rules against Apple.
- disgruntledphd2 2y ago
  Yeah, fair. I will note (as an Irish person who's followed this case), that it wasn't about this specific case (and the first deal was in 1991, when Apple was not in a good place) rather it was to demonstrate to multinationals that we'd support them if the EU decided there was an issue. It was a signalling thing rather than a principles thing. Also note that Apple last got that deal in 2007, before the iPhone was launched.

rhdjebejdbd 2y ago

Toll-wires

rafaelmn 2y ago
Exactly what I was thinking. We need a great firewall of EU that is charging for packets crossing the Atlantic
- hoseyor 2y ago
  Of course, what is needed to preserve democracy and freedom is *checks notes* ideas from totalitarian dictatorships.

kolinko 2y ago

Kind of like Vat is applied now - you’re from a given country, you pay more per month for a subscription

rafaelmn 2y ago
But software/services are sold by EU companies (subsidiary)
- jillyboel 2y ago
  It's a nice accounting trick, but that's all it is.
- coldtea 2y ago
  If it's a subsidiary, there's a way to assosiate with the parent company.
  - michpoch 2y ago
    Sure, but then the other side can do the same. VW producing cars in their factories in the USA? Put a tariff on these cars as the parent company is based in Europe. It’s really not that simple, as e.g. big tech has their development centering the EU as well - so these products are at least partially produced here. If you want to write some custom rules, sure, but then you’re really opening a pandora box. Technically you could just add 100% tax just on vehicles that have Tesla in their name. Try making such moves and look as investors immediately drop any trust in your countries political system (and currency).
    - coldtea 2y ago
      >Sure, but then the other side can do the same That's expected. The other side already imposes some tarrifs (as did the EU - it's BS that Trump's tarrifs to EU are some unprecedented move, the EU already had tarrifs of US cars and other products). The problem we're discussing (at least according to a parent comment) is that the US has a lot more "digital services" products than actual physical products where EU tarrifs are currently applied. So, what's discussed is how to tax those (and how to sidestep "but it's a European subsidiary, not a US company" hurdle). So, sure the US can counter EU digital services by also using the same sidestepping. But it's not like EU has many such worth talking about. All the big players are from the US (Facebook, Google, Amazon, MS, etc).
DanielHB 2y ago
Software companies just open subsidiaries in the target country and sell services through the subsidiaries. The only thing this does is make it harder to move profit to the home country (and there are ways sound this) and add a lot of accounting work
wqaatwt 2y ago
What do you mean by that? That’s not how VAT works.
- kolinko 2y ago
  It is how it works. Go to any website with saas. If you mark eu as your country, you will be charged extra for vat. Or, going the other way - if you’re an EU company but your software users are outside EU, you don’t need to charge them VAT. When I was running Appcodes, I didn’t want to ask about the country directly, so I got an official opinion from Polish IRS that if I store geolocated IP address of registration and browser timezone for additional confirmation, it’s a good enough proof to not charge vat to consumers outside EU.

thinkindie 2y ago

something I learned recently: payments to foreign bank accounts in Brazil have an automatic 25% tax imposed regardless of the purpose of the transfer. This seems to applied to companies of a certain size, or moving certain volume of transfer, but still.

coldtea 2y ago

>How do you tariff a software service ? Tariffs are applied at import ? Are you paying US software if its hosted in EU datacenter by EU subsidiary? If there's a political will and your position is strong enough, a scheme / legal formula is trivial to find. Even something like "5% of what you make off showing ads to European users" would be enough. Can add any arbitrary qualifier like "if your main base of operations is outside the EU" - which could hold whether you're a EU subsidiary or not.

frereubu 2y ago
I don't agree that it's "trivial". The devil will be in the detail and could drag out in the courts depending on the language definitions. Quite apart from the fact that anything dreamt up at short notice is going to have shortcomings, tariffs are much easier impose when you're transporting physical objects across physical borders.
hoseyor 2y ago
That still does not make sense. Do you block your own citizens from accessing sites hosted in foreign countries if those sites/companies don’t comply with your foreign law? Do you arrest your citizens for accessing those sites anyways or use VPNs to circumvent blocking? And there are dozens of other questions that raises, but you’re talking about what most people describe as totalitarian states.
- coldtea 2y ago
  >Do you block your own citizens from accessing sites hosted in foreign countries if those sites/companies don’t comply with your foreign law? Sure happens, including in the EU. There are some european anti-copyright-theft laws for example, and local ISPs are forced to block some warez/pirated ebook etc websites (you can bypass via VPN, but the "official" gateways/DNS block them). >Do you arrest your citizens for accessing those sites anyways or use VPNs to circumvent blocking? Not at the moment. And the logistics do not make it very easy (can't track each individual). But you can sure fine any commercial company accessing such sites, prohibit state infrastructure and any company doing work with your state from using them, etc. I'm not sure what the objection is. Do you mean "does not make sense" from a democratic/open society standpoint (as if european countries are a bastion of that, and such moves are beneath the legislators)? Or that it "does not make sense" from a technical aspect? For the latter, when there's a will, there's a way.

pjc50 2y ago

I'm reminded of how the EU had to sue Ireland to get them to properly enforce their own tax rules against Apple.

disgruntledphd2 2y ago
Yeah, fair. I will note (as an Irish person who's followed this case), that it wasn't about this specific case (and the first deal was in 1991, when Apple was not in a good place) rather it was to demonstrate to multinationals that we'd support them if the EU decided there was an issue. It was a signalling thing rather than a principles thing. Also note that Apple last got that deal in 2007, before the iPhone was launched.