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I had to kind of laugh at the seeming distress expressed in the article the Google merely passed on the taxes to the consumer, as in who do politicians and jour

I had to kind of laugh at the seeming distress expressed in the article the Google merely passed on the taxes to the consumer, as in who do politicians and journalist think pay all taxes? Business taxes are merely an indirect means of taxation on the populace, it is done to fool the general population into believing someone else carries the load.

adaml_623 13y ago
Yes and no. The services that Google provides are already priced at the supply/demand meeting point. Tax is merely reducing profits that are already made. Google is not going to insist on making X% net profit and will not put up it's rates just because a tax rate changes. You can't pretend that Google dropped their rates in the UK by a few percent when the corporate tax rates dropped last year?
- waps 13y ago
  You neglect that a new supply-demand equilibrium will form, and since taxes effectively reduce supply, it will form at a higher price, with less demand. End result : less sales, customers paying more, and Google earning less. I do think you should consider that this will only raise prices for advertisers in France though. So it will be even easier for out-of-country advertisers to undercut France's local suppliers. The problem is that most citizens don't realize just how big the state's take on a normal wage is. You believe it's ~55% of your income. Well, no. In France, a business has to pay taxes to pay you, then you pay taxes on what you get (to make matters more complicated, these taxes are collected by your employer). In reality your bruto pay is about 130% of what you get quoted (just due to taxes). Out of that 45% remains (taxed at 55%). Then you have local taxes, since you have to live somewhere, these are at least 2% of income. And you add VAT 20% on most things you actually buy. This ignores various other things, like the fact that keeping track of all this requires people, and obviously the state doesn't pay for those, so they yet again increase costs for businesses. But let's calculate. Out of what your employer pays you in France, you get to spend ... 100% * (100/130) * 45% * 80% = 27,6%. So the tax rate in France is 72.4%, for a person having a decent job in IT. We're not talking bank director here. And of course the French state is raising these levels. Also these are MINIMUM levels (for a decent wage), it's assuming you aren't investing in stock, assuming you don't own a house (or God forbid - more than one house), you don't own a car, ... If any of those are not true, you'll be paying even more. I think it's beyond obvious that this tax level, even if it weren't going up, is not sustainable.
  - adaml_623 13y ago
    Sorry you've neglected to explain why a tax on profits is going to reduce supply. You have totally ignored my point that changes in profit do not necessarily get passed onto the consumer. And my example was that Google pricing in the UK did not go 'down' when the tax rate went 'down'. So why would the price go 'up' when the tax rate goes 'up'.
yodsanklai 13y ago
Can you elaborate? how google being taxed has an impact on my own income?
- csomar 13y ago
  it has impact on your disposable income if you are buying Google services.
- colechristensen 13y ago
  It's a bit of a stretch but it has some truth... On one extreme, Google keeps it's prices static and it's customers don't change their buy resulting in the tax coming only out of Google's profit. On the other extreme, Google raises it's prices exactly proportional to the tax, it's customers buy the same amount of ads and raise their prices exactly proportional to the increase and you pay them for service or good $x. Your income stays the same but it buys less because everything is more expensive. The real result is in the middle, google eats some of the loss from tax, raises it's prices and customers somewhat lower their ad spend and somewhat raise their own prices eating some of the loss from tax. Which extreme any individual believes is more accurate has more to do with political bias than truth.
  - flyinglizard 13y ago
    Then, of course, Google has shareholders which are none other than the public (either by direct ownership of stocks or through funds of various sorts). Whatever taxing Google can not offset by raising prices, is passed on to the shareholders in the form of reduced EPS.
tbarbugli 13y ago
yeah, its all connected man, cant you see it?
JumpCrisscross 13y ago
Yes, taxes on businesses are a proxy for taxes on individuals. But business tax does not necessarily pass along to the consumer - that only happens for businesses with pricing power, i.e. with leverage. For companies with less pricing power, e.g. a small commodity processor, a business tax will more likely pass along to owners via a hit on margins.

adaml_623 13y ago

Yes and no. The services that Google provides are already priced at the supply/demand meeting point. Tax is merely reducing profits that are already made. Google is not going to insist on making X% net profit and will not put up it's rates just because a tax rate changes. You can't pretend that Google dropped their rates in the UK by a few percent when the corporate tax rates dropped last year?

waps 13y ago
You neglect that a new supply-demand equilibrium will form, and since taxes effectively reduce supply, it will form at a higher price, with less demand. End result : less sales, customers paying more, and Google earning less. I do think you should consider that this will only raise prices for advertisers in France though. So it will be even easier for out-of-country advertisers to undercut France's local suppliers. The problem is that most citizens don't realize just how big the state's take on a normal wage is. You believe it's ~55% of your income. Well, no. In France, a business has to pay taxes to pay you, then you pay taxes on what you get (to make matters more complicated, these taxes are collected by your employer). In reality your bruto pay is about 130% of what you get quoted (just due to taxes). Out of that 45% remains (taxed at 55%). Then you have local taxes, since you have to live somewhere, these are at least 2% of income. And you add VAT 20% on most things you actually buy. This ignores various other things, like the fact that keeping track of all this requires people, and obviously the state doesn't pay for those, so they yet again increase costs for businesses. But let's calculate. Out of what your employer pays you in France, you get to spend ... 100% * (100/130) * 45% * 80% = 27,6%. So the tax rate in France is 72.4%, for a person having a decent job in IT. We're not talking bank director here. And of course the French state is raising these levels. Also these are MINIMUM levels (for a decent wage), it's assuming you aren't investing in stock, assuming you don't own a house (or God forbid - more than one house), you don't own a car, ... If any of those are not true, you'll be paying even more. I think it's beyond obvious that this tax level, even if it weren't going up, is not sustainable.
- adaml_623 13y ago
  Sorry you've neglected to explain why a tax on profits is going to reduce supply. You have totally ignored my point that changes in profit do not necessarily get passed onto the consumer. And my example was that Google pricing in the UK did not go 'down' when the tax rate went 'down'. So why would the price go 'up' when the tax rate goes 'up'.

yodsanklai 13y ago

Can you elaborate? how google being taxed has an impact on my own income?

csomar 13y ago
it has impact on your disposable income if you are buying Google services.
colechristensen 13y ago
It's a bit of a stretch but it has some truth... On one extreme, Google keeps it's prices static and it's customers don't change their buy resulting in the tax coming only out of Google's profit. On the other extreme, Google raises it's prices exactly proportional to the tax, it's customers buy the same amount of ads and raise their prices exactly proportional to the increase and you pay them for service or good $x. Your income stays the same but it buys less because everything is more expensive. The real result is in the middle, google eats some of the loss from tax, raises it's prices and customers somewhat lower their ad spend and somewhat raise their own prices eating some of the loss from tax. Which extreme any individual believes is more accurate has more to do with political bias than truth.
- flyinglizard 13y ago
  Then, of course, Google has shareholders which are none other than the public (either by direct ownership of stocks or through funds of various sorts). Whatever taxing Google can not offset by raising prices, is passed on to the shareholders in the form of reduced EPS.

tbarbugli 13y ago

yeah, its all connected man, cant you see it?

JumpCrisscross 13y ago

Yes, taxes on businesses are a proxy for taxes on individuals. But business tax does not necessarily pass along to the consumer - that only happens for businesses with pricing power, i.e. with leverage. For companies with less pricing power, e.g. a small commodity processor, a business tax will more likely pass along to owners via a hit on margins.