back to article Europe plans special tax for Google, Apple, Facebook, Amazon

Bruno Le Maire, France's minister for the economy, has revealed that a plan to levy a special tax on Google, Apple, Facebook, and Amazon will soon be revealed by European authorities. Le Maire told French newspaper Le Journal du Dimanche "A European directive will be unveiled in the coming weeks, the minister reveals, and it …

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I'm not sure that targeting specific companies is the way forward.

Tightening up existing legislation to effect a situation where it's more advantageous for all companies to pay their tax should be the way forward I think.

Currently the rules rewards companies that game the system and avoid paying their fair share.

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Re: I'm not sure that targeting specific companies is the way forward.

The problem is that the tax rules are so complicated that without doing a Trump unilaterially and rewriting the tax rules from scratch you won't ever really reform them into something sensible. (and even then, rules written unilaterially and quickly are likely to be a bit iffy) Corporate lobbying will tie the discussions about up for a decade and a couple of elections with large wads of cash on offer to election campaigns if parties will consider making just a few adjustments and exemptions...

The best route is probably to have a really big penalty to managing to evade the existing rules, and I think that a revenue tax is the best way to go for companies that have agressively avoided paying any tax.

The issue I have is simply the numbers mentioned here. Services companies can expect a 20% profit, and retailers can make much more than this.

Assuming that 20% of revenue is profit:-

10% revenue tax would be equivilant to 50% tax on profit

5% revenue tax would be equivilant to 25% tax on profit

2.5% revenue tax would be equivilant to 12% tax on profit

At the moment UK corporation tax is 20% tax on profit. If there is a 2% revenue tax applied as suggested off in the article then companies are still considerably better off than they would have been if they hadn't of gone evading tax to start with.

My take on it is that revenue taxes should be deliberately punitive and painful and applied individually to companies that have taken the piss for a multi year period, following which they can decide if they'd like to pay normal taxes on profits without playing games or if they'd like to keep revenue taxes. I'd say tax them at 15% of revenue (or higher) until Her Majesties Revenue & Customs have collected around 120% of what they think was been evaded by that company and then we could start talking about returning to a percentage tax on profits if they promise to be good.

If the affected companies struggle, good. Public services have been struggling as a direct result of them evading tax. If they become uncompetitive and are then replaced by other companies who pay their tax, then this is a good thing. People have died as a result of public services being overstretched and I see no good reason why corporations shouldn't end up in a worse off position than they would have if they hadn't of gone playing their little games.

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Re: I'm not sure that targeting specific companies is the way forward.

It also misses out on the notion that Amazon's margins are a lot lower than Facebook and Google. Amazon actually have to buy stuff to sell (except for marketplace) whereas Facebook and Google have enviable gross margins.

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Re: I'm not sure that targeting specific companies is the way forward.

This is similar to VAT. Except that there is no added about it. I suppose its simply a sales tax.

Well all that happens is the prices go up and the consumer pays, or they move to a brexited UK :-)

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Re: I'm not sure that targeting specific companies is the way forward.

They might have avoided tax, but tax evasion is a totally different animal and already subject to stiff rules - when they are applied. How many claim their tax free limits in various forms, that is tax avoidance, tax evasion is not declaring your income at all, hopefully all are virtuous in that regard or are we all?

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Anonymous Coward

Re: I'm not sure that targeting specific companies is the way forward.

>The problem is that the tax rules are so complicated

Yeah, about those take rules. I think Juncker might be able to help there as he was architect of them when PM in Luxembourg.

https://www.theguardian.com/business/2017/jan/01/jean-claude-juncker-blocked-eu-curbs-on-tax-avoidance-cables-show

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Re: I'm not sure that targeting specific companies is the way forward.

"Tightening up existing legislation to effect a situation where it's more advantageous for all companies to pay their tax should be the way forward I think.

Currently the rules rewards companies that game the system and avoid paying their fair share".

^ I fully agree with all of the above. The proposed maximum turnover levy was framed at 6% and that should be the very least figure to be imposed on these tax avoiding companies.

That said, I'd really like to hammer them with something like a 16% turnover levy (given the competitive advantage these companies have over conventional companies that pay full corporation tax) and I'd add also two more scally tax avoiders to that list - Microsoft and Ebay.

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Re: I'm not sure that targeting specific companies is the way forward.

"It also misses out on the notion that Amazon's margins are a lot lower than Facebook and Google".

What Amazon does is two things. The first is standard tax avoidance (zero sympathy for them there) and the second is that they do make very good underlying profits but what they do is reinvest to grow which also just happens to be very tax efficient too (again, zero sympathy for them especially when you see how Amazon treats its workers).

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Anonymous Coward

Re: I'm not sure that targeting specific companies is the way forward.

6% sounds better to me. Maybe they can use it to replace all the money they wont be getting once the Brits leave the EU.

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Anonymous Coward

Assuming that 20% of revenue is profit

That assumption is pretty Big (as is the likely real profit-to-revenue ratio).

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Re: I'm not sure that targeting specific companies is the way forward.

Kent Brockman says Avoision!

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Re: I'm not sure that targeting specific companies is the way forward.

"It also misses out on the notion that Amazon's margins are a lot lower than Facebook and Google. Amazon actually have to buy stuff to sell (except for marketplace) whereas Facebook and Google have enviable gross margins."

Boo fucking hoo. Shouldn't have been dicks about paying tax/VAT (yes, also VAT, unless they are based in Luxembourg because of the nice views, although the law was changed to that this doesn't work any more) then should they.

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Re: I'm not sure that targeting specific companies is the way forward.

@ TVU

"The first is standard tax avoidance (zero sympathy for them there)"

No sympathy for following the law. That opens up a can of worms.

"second is that they do make very good underlying profits but what they do is reinvest to grow"

Oh no! The business in investing in building the business which employs more people and is the point of making a business (to grow it to serve more people). If you dont like businesses investing in themselves then I can only recommend state controlled countries. Try N.Korea.

How can providing more of what people want, following the law and being successful now be seen as some kind of bad thing?

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Re: I'm not sure that targeting specific companies is the way forward.

As an ex-Amazon employee; I have absolutely no qualms about how I was treated at Amazon.

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Anonymous Coward

Re: I'm not sure that targeting specific companies is the way forward.

Everyone's "fair" share is zero.

Politicians are the ones who game the system, so taking advantage of their imperfect gangster behavior is a fair game.

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Re: I'm not sure that targeting specific companies is the way forward.

Don't confuse taxation with fairness or economic sense

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Anonymous Coward

Re: I'm not sure that targeting specific companies is the way forward.

Amazon is making a lot more profit on AWS then 're-investing' (aka 21B profit in the last Q but 6.3B of R&D) so they overall don't report a big profit for tax purposes.

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Re: I'm not sure that targeting specific companies is the way forward.

My take on it is that revenue taxes should be deliberately punitive and painful and applied individually to companies that have taken the piss for a multi year period, following which they can decide if they'd like to pay normal taxes on profits without playing games or if they'd like to keep revenue taxes.

That's the problem though - the companies haven't legally taken the piss, they've quite literally played by the rules and obeyed the law. You may feel it morally wrong that in doing so they have paid so little tax, but that not withstanding, they have paid what was legally due. If the law is to be set based upon moral judgements then we need to first determine who's moral judgements they will be - everyones idea of ethics and morals are different and personal to them.

I'd say tax them at 15% of revenue (or higher) until Her Majesties Revenue & Customs have collected around 120% of what they think was been evaded by that company and then we could start talking about returning to a percentage tax on profits if they promise to be good.

You don't seem to understand the difference between evasion and avoidance. Tax evasion is the process of breaking the law in order to minimise the tax paid, rather than the tax due. Tax avoidance is following the law in order to minimise the tax due and thus the tax paid. It's completely legal.

My concern is not how legislators propose to change the system to catch a few companies that are avoiding more tax than the legislators would like, but of the unintended consequences of passing such law. Today they target Google, Amazon etc, but tomorrow they WILL be targetting your local pub, bacon serving cafe etc with the same taxes. Income tax was brought about to fund the war with France. It just never went away. VAT was never intended to apply to all goods - it was supposed to be a luxury goods tax.

That said, if a business pays tax on turnover and makes a loss, does that imply that they can defray 2% of that loss onto the EU? Currently losses one year are deductible the next, so we need careful thought several steps ahead of where we are now, before launching such a tax. The problem with most tax legislation is the people writing it up assume it will be interpreted the way they wish and they assume companies and individuals will not seek to minimise payments due; neither of which has ever been true.

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Re: I'm not sure that targeting specific companies is the way forward.

given the competitive advantage these companies have over conventional companies that pay full corporation tax

As unpopular as it is, these companies HAVE paid the full corporation tax. CT is due upon profits, not turnover. Yes, they use carefully considered strategies to ensure they make most of their profits in lower tax jurisdictions rather than higher ones, but there's nothing illegal about that.

My local Costa coffee franchise does the same - the entity that makes most of the profit is offshore, while the cafe that does the trading is onshore, buying products and services from the offshore entity.

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Re: I'm not sure that targeting specific companies is the way forward.

You don't seem to understand the difference between evasion and avoidance.

You don't seem to understand the difference between semantics and the systematic collapse of public services as a result of companies deciding that they aren't going to pay any tax. If everybody is allowed to get away with this then our society is going to be financially as well as morally bankrupt and frankly we don't have 30 years to debate about it while these companies destroy local companies who are paying tax.

As I noted in my previous post, the revenue tax proposals are well under the levels of tax taken through profits. I am sure that businesses involved will all post huge losses as a result but at this point my sympathy is zero because they would cheerfully produce multi billion pound "losses" every year to offset against their future tax bills to continue paying nothing in tax so ignoring the posted losses is pretty essential really, isin't it?

If they wanted a system that only took a certain percentage of profits then they should have used and not abused the existing systems. I'd also be prepared for the tact that BigCompany™ will simply immediately outsource all operations with revenue in to BigCompanySubsidiary™, to reduce their posted revenue. The answer is simply to play games back faster and harder than they will do so that they come off considerably worse every time. If they go bankrupt as a result then they can stand as a warning to others.

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Re: I'm not sure that targeting specific companies is the way forward.

"As an ex-Amazon employee; I have absolutely no qualms about how I was treated at Amazon."

But were you working in a skilled job or in a warehouse?

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Haha - back to the communist economical theory

Eastern Europe used to use Turnover Tax instead of VAT.

The rationale was exactly that - to prevent endless chains of "low value/no value" addition and to ensure that anyone in the chain actually does something instead of being a letterbox for tax reduction.

USA and Western European economists had a field day chastising the arrangement and it was one of the first things to go once the wall has crumbled. It is quite funny how what goes around, comes around and we have resorted to Soviet Block economical methods.

The current proposal is somewhere in-between as the truth is somewhere in between. VAT in a 20Tn+ market results in the creation of a large amount of "tax efficiency" entities which parasitise on the economy. Pure turnover tax immediately creates vertical monopolies compared to which Amazon is a minnow. The truth is somewhere in between. 18VAT + 2Turnover sounds about right. It should be applied universally instead of targeting the valley.

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You can laugh all you want

Here's the choice : waste more time trying to endlessly discuss a universal tax solution that will take a few decades to get to (and not get any tax money at all from anyone during that period), or decide on something now that will have an effect on the four largest tax evaders of the planet (and see billions come in immediately as a result).

The world is not perfect, and imperfect steps are the consequence.

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Re: Haha - back to the communist economical theory

What is communist about this ?. It is estimated that the big global companies de-fraud the EU for over 1000 billion Euros in taxes.

These taxes have to be paid by the employees, I pay 60%-70% of my disposable income to same State which facilitates by law one of the biggest tax sinkholes in Europe enabling google/Ikea and many others to get away with ten Euro tax on the million of profits they funnel to the Caribbean using the generous "rulings" the tax service of the King grants these poor companies.

And if it is indeed communist, please lets share the communism a bit more fair between the Global companies and me, since they have more than I do. Why am I ruled by communists, while Google is treated like an aristocrat in the period before 1789.

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Re: Haha - back to the communist economical theory

What is communist about this ?.

The insistence that any element in a value chain does something productive and the application of financial instruments to do so and labelling anything that does not significantly increase the value of the goods as an economic parasite to be eradicated.

It is a cornerstone of modern Western economic theory that the amount of entities which goods and services pass through before they reach the consumer is irrelevant and the "economic parasite label" is something regurgitated from communist ideology. This is the whole idea behind VAT - to facilitate the smooth flow of goods and services across an arbitrary length of chains with the tax paid at the end (everyone else in-between gets a rebate).

The fact that we are labelling elements in the Holy VAT chain as parasites and using turnover tax to tackle the issue is as communist as communist gets. You can open any textbook from their 1980-es economics courses - there is a whole chapter on the subject singing odes to the virtues of turnover tax.

As I said before - the truth is somewhere in-between. In its pure form turnover tax is evil. Similarly, at the global level VAT is evil as you can always find a way of evading it. The truth is some combination of both - applied to every one so that the field is level.

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Re: Haha - back to the communist economical theory

If the Netherlands are a lynchpin in arrangements like Double Dutch Irish Sandwiches, the Dutch 'Foundation' system etc, the pressure should be on the Dutch government to change its tax laws to make such things impossible or unprofitable (and I have it from several Dutch citizens that their government will still prefer not to rock the boat because in their view 1% of a decent-sized pie is still better than 15% of a smaller pie or no pie at all).

While it's easy to say 'oh, let's tax Google et al 2% of turnover', the more difficult question then becomes 'who gets what size cut of the 2% pie'... You can be guaranteed that there'll be a lot more squabbling going on then... especially when it then becomes clear that those countries with large offices (like Germany with Berlin, Munich and Frankfurt, France with Paris, Italy with Rome, and the UK with London) are the ones getting the most dosh and the other EU26 countries lose out.

But hey, it's easy to take 'leaks' like this one from the French finance minister as truth when the story is much more complex.

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Anonymous Coward

Re: Haha - back to the communist economical theory

That "estimate" is simply a bald faced lie - designed to appeal to the greed of everyone who wants something for nothing.

Apply a special targeted tax, and watch the consumer - yes, that's you personally - pay that tax. Learn something about tax incidence, companies ultimately don't pay taxes though they may hand over money - the tax is really paid by owners, buyers, and staff in some ratio.

One other, why include Apple. There's some grounds for treating those in a dominant market position as monopolists or at least potential monopolists, but Apple ? Has a minority position in every market it competes in and sells expensive equipment at enviable margins by some combination of clever marketing and superior perceived functionality. They are not at all comparable to Google, Amazon, or Facebook, all of whom dominate most the markets in which they compete. Targeting Apple is even more clearly a simple greed tax - and politicians demands for more of other people's money that they can pretend to hand out to their voters as bribes are insatiable.

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Re: Haha - back to the communist economical theory

>It is estimated that the big global companies de-fraud the EU for over 1000 billion Euros in taxes.

Currently "the EU" doesn't levy taxes, it merely asks member states to contribute a proportion of their GDP. So strictly it is the members' exchequers who are being defrauded...

However, for this turnover tax to work, it will probably need to be levied on EU cumulative turnover and thus, don't be surprised if the revenues from it end up going directly to Brussels - in part because it is going to be difficult to divvy it up between member states, so might as well collect it centrally and use the monies for EU projects...

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Re: You can laugh all you want

or decide on something now that will have an effect on the four largest tax evaders of the planet (and see billions come in immediately as a result).

They can set up new legal entities vastly quicker than politicians can legislate against them. Your premise is flawed, which is why you think it'll raise billions rather than nothing.

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Anonymous Coward

The UK is going to be very useful after brexit for logging revenue in the EU.

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Why?

The UK is going to be very useful after brexit for logging revenue in the EU.

That will be the case only if UK is in the Customs Union. Otherwise it depends on the actual Leave arrangement. Probably - no.

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Anonymous Coward

Re: Why?

I don't know, logic tells me we will be in a customs union or some similar agreement. Too much money involved for either side to cut their nose off to spite their face.

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Re: Why?

The customs union is a red herring. All that does is tie us to a common set of tariffs and trading agreements with the rest of the world. It says nothing about trade between its members, as turkey found to its cosy when it joined a customs union with the eu. Trade between turkey and the eu faces significant barriers, both in terms of tariffs and quotas, and in terms of non-tariff barriers such as detailed border inspections and shirty customs officials.

The bit that leads to "frictionless trade", as I think the buzzword us now, is the single market. As an EEA member, Norway is a member of the single market, but not a member of the customs union. The result is that Norway enjoys nearly no barriers to trade with the rest of the EEA, but can set its own trade relationship with the rest of the world, rather than being tired to the common customs code of the customs union.

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Re: Why?

@Graham Dawson, but Norway has to, like Switzerland, pay in for regulations (and is bound to them), which is what Brexit was all about breaking free from... i.e. 'Taking back control'.

But as usual, Britain wants the cake and eat it too, i.e. free trade with the EU with none of the regulations to be bound by, freedom to trade with others the way it sees fit. It wants what it can't have.

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Re: Why?

A customs union would be the very worst of all possible outcomes for the UK economy in the long term. No way of making trading deals with anyone else and controlled by the slowest growing economy on the planet, the EU. Only a knucklehead aka Corbyn, Soubry or ex bureaucrat with an EU pension, e.g. Mandelson, and all members of the Kinnock gang, could possibly thinks its a winner.

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Re: Why?

Norway, Iceland and Lichtenstein (Swiss has its own 120 agreements with the EU) all have customs on imported items. This is a major problem if I want to buy an electronic device from Amazon to Iceland because its not shipped there but it does ship inside the EU just not to EEA country.

UK is going to feel that soon after it leaves the EU.

Norway, Iceland have to deal with import quotas from the EU on their exports (fish, sheep meat and items). This has a been a major complain in Iceland for many years because they wan to import more to EU without import quota, yet at the same time don't want to join the EU that would get rid of those import quotas. The fact is that they can't have it both ways in Iceland or Norway and soon in the UK.

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Re: Why?

@anothercynic the eea only implements a very small subset of regulations from the eu, most of which aren't even generated by the eu anyway, but rather at the international level, such as at the unece, iso or wto. They have none of the requirements for harmonisation of national policies or regulation of internal markets unrelated to their relationship to the eu. The price is that they have less-than-unfettered access to the single market. However they have nearly none of the tariff and non-tariff barriers that a third country faces when trading with the eu and still have freedom of trade policy with the rest of the world.

Had saner minds prevailed, the first words from May's mouth after her appointment as pm would have been "we are switching to the efta and remaining in the eea until we can work out a complete solution". Unfortunately we are governed by idiots who think, as you say, that they can have their cake and sell it to the highest bidder too.

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Re: Why?

Remember though that joining EFTA also requires full agreement from all EFTA members (I recall this analysis being done shortly after the referendum). Norway at the time of *that* discussion pondered whether the UK joining EFTA instead would be a good idea for the other EFTA members, with the implication that Norway would be inclined to vote 'nei' when it came to it. Of course, what was said then and what might be arranged in the future is... two widely different things :-)

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Anonymous Coward

Re: Why?

"UK is going to feel that soon after it leaves the EU."

Unlikely - you can buy pretty much everything you need here in the UK. There is little need to order anything from the rest of the EU. We are not some small third world fish eating nation...

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Re: Why?

>Remember though that joining EFTA also requires full agreement from all EFTA members

However, the UK is already a member of the EEA, I've not seen any argument that successfully explains legally why the UK leaving the EU means it also has to leave the EEA. Now (post-Brexit) with the UK outside of the EU, the EEA might be more than happy for the UK to change its membership to EFTA status...

Yes, I totally accept some Brexiteers want to cut all ties with the EU and Brussels, but that is a different matter to the referendum question.

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GDPR anyone?

They have realised that companies like Google and Apple, and their data processors, would actually make the effort to make all sites GDPR-compliant so now they have to use a different method.

Several hundred years ago such a tactic was usually accompanied by a shout of, "Stand and deliver"

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Anonymous Coward

Re: GDPR anyone?

"They have realised that companies like Google and Apple, and their data processors, would actually make the effort to make all sites GDPR-compliant so now they have to use a different method.

Several hundred years ago such a tactic was usually accompanied by a shout of, "Stand and deliver""

If you are suggesting that GDPR is designed as a hidden tax then you are very mistaken. It's designed to make sure it's far more expensive to break EU data protection law than to break US law for any company pressured by US extra territorial data grabs - a rather different objective.

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I wonder....

...what this is going to mean for businesses trying to claim back the VAT from services they buy from the big four. Probably a headache for the accounting departments.

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Re: I wonder....

VAT is not being evaded by the companies. They have to pay it, and the paper trail is incontrovertible. No amount of offshore patent invoices will erase VAT.

So the accounting departments will have the usual amount of headache, nothing more.

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Re: I wonder....

Yes, but if I'm a business and I buy something from Google, I pay 20% VAT. If Google are charged a flat rate, then what does that do to the transaction? Or does VAT carry on as usual, and then Google are charged an extra tax on top of that?

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Anonymous Coward

Re: I wonder....

It will be VAT as usual, and a flat tax on top, so all our Amazon bills will go up by 2% with a new "EU revenue tax" item added to them to cover the extra. Just like hotel bills have that extra little "tourist tax" tacked on at the end. It will make no difference to Amazon et al, and the EU will get blamed for screwing the consumer. As usual.

Just simplify the existing tax rules, FFS.

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Yes, VAT has nothing to do with this tax bill.

The tax bill concerns income, not VAT.

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Re: I wonder....

If you're a VAT registered company, you claim it back...

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Re: I wonder....

"It will be VAT as usual, and a flat tax on top, so all our Amazon bills will go up by 2% with a new "EU revenue tax" item added to them to cover the extra."

No they won't. If you think £5.99 will change to £6.11, you have another thing coming.

The point is that other companies have to pay tax, and now so will Amazon. If that removes some of their competitive advantage (from being close to, but not quite, illegal), then that's great. If Amazon prices have to go up, then good, because they are artificially low right now. If Amazon prices don't go up, even better, as the tax authorities get some of what is due with no problems for anyone other than Amazon.

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Anonymous Coward

Re: I wonder....

If you think £5.99 will change to £6.11, you have another thing coming.

Oh, I'm sure a headline item price like that won't change, but 5.47 could well become 5.58, and when you get to the final basket with all the items, the shipping, etc. you'll see a little extra line appear "includes 2% EU turnover tax".

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