back to article EU will have agreed a tech tax by March, says French finance minister

The French finance minister has said he expects the European Union to agree on a digital services tax by March – a year after the bloc's initial proposal. The European Commission had suggested a 3 per cent levy on firms with a global annual turnover of €750m and annual EU revenue of at least €50m – but the measures were …

  1. ivan5

    So all us plebs will be paying 5% more for anything bought on line if this goes through (an excuse to raise prices an extra 2%). This sort of thing always ends with the last in line having to pay- it is another way for governments to tax the population.

    1. Aladdin Sane Silver badge

      I don't think this will cover all online purchases, just digital services.

      So, buying a blu-ray from amazon won't be covered, but buying the film on their streaming service would be.

    2. bombastic bob Silver badge
      Unhappy

      that's right - consumers will end up paying the tax bill.

      And all of this talk about "fair share" - if FAIRNESS were really a goal, then the tax rate would be EQUALLY APPLIED across the board, not "only them" paying...

      Taxed Enough Already?

    3. Lars Silver badge
      Happy

      Who do you actually think is paying but us, please tell us.

    4. Spazturtle Silver badge

      Yes? Who else pays taxes? Corporations don't actually exist, they are made up of people, owned by people and sell things to people.

      You can't tax corporations without the costs being passes on to people, it's just not possible.

  2. Anonymous Coward
    Anonymous Coward

    That could plug the EU's brexit budget gap.

    Kerching!!!

    And UKers (consumers) would then still be paying into the EU even after leaving. Which would be ironic.

    1. Anonymous Coward
      Anonymous Coward

      Re: That could plug the EU's brexit budget gap.

      > And UKers (consumers) would then still be paying into the EU even after leaving. Which would be ironic.

      The tax is payable based on the location of the downloader. So UK-ers streaming via UK-based ISPs will be paying to the UK Gov.

      At the moment, all EU citizens are subsidising the taxpayers of Luxembourg and Ireland, where these kinds of services tend to be located.

    2. devTrail

      Re: That could plug the EU's brexit budget gap.

      To plug the Brexit budget gap it would be easier to cancel all the contracts to build HS2 already signed with the private firms. The EU is providing 50% of the funds. BTW all the British media has been quite dishonest about the divorce bill. Nobody really explained what the money was for, the purpose was to hide that the gap between what the UK pays to the EU budget and what comes back is quite small.

      1. Credas Silver badge

        Re: That could plug the EU's brexit budget gap.

        The EU is providing 50% of the funds.

        No, the EU is just providing 50% of a small element of the preliminary work on HS2 - up to a maximum of €40m. While it's nice to get back some of the money the UK pays into the EU's infrastructure fund, it's a drop in the ocean compared with the enormous cost of HS2.

      2. Phil O'Sophical Silver badge

        Re: That could plug the EU's brexit budget gap.

        the gap between what the UK pays to the EU budget and what comes back is quite small.

        I wouldn't call £9bn/year all that small, but then I suppose I'm not Jeff Bezos or Larry Ellison.

        1. Hans 1 Silver badge
          Paris Hilton

          Re: That could plug the EU's brexit budget gap.

          If you look at the UK budget, it is rather small, not insignificant, by any means, but small. When you then think of this:

          just in time manufacturing

          passporting (banking)

          farming (e.g. Poles etc coming to pick, subsidies)

          500 million market at our fingertips

          You go: that is cheap. Well, maybe just me ... but all that will be gone pretty soon, good luck!

          1. spunkypete

            Re: That could plug the EU's brexit budget gap.

            I am reliably informed that the EU's main exports are German cars and German hard-core pornography.

            Most of us British should be able to cope for a while without a BMW

    3. Anonymous Coward
      Anonymous Coward

      Re: That could plug the EU's brexit budget gap.

      I expect that the Brexiters will promise free movies from Disney and cut the cord to the EU to escape the fees - Leave the EU and get Free Micky Mouse Movies for the NHS! - gosh, I feel better already!

    4. LucreLout Silver badge

      Re: That could plug the EU's brexit budget gap.

      Not remotely enought o plug the budget gap.

      The European Commission had suggested a 3 per cent levy on firms with a global annual turnover of €750m and annual EU revenue of at least €50m – but the measures were branded fundamentally flawed by some nations.

      Three seconds thought or less and anyone competent with corporate structuring can see a way stright through this.

      Firstly you have a compound condition so staying on one side of it will be enough, and secondly both sides of the conditional have numbers high enough to make staying under them easy, even for Amazon or Apple.

  3. amanfromMars 1 Silver badge

    Of Hooks and Crooks with Cooked Books

    The UK's proposal, meanwhile, is for a 2 per cent levy on revenues of parts of digital businesses that derive "significant value" from British users.

    Is there a reciprocal levy facility for digital business drivers/virtual entrepreneurs, which pays 2 per cent on revenues of parts of digital businesses that deliver "significant value" to British users, or is that just for government scamsschemes?

  4. Pascal Monett Silver badge

    French politicians have a history of declaring what the Eu will decide - and being wrong

    Not saying that my current Finance minister is actually wrong, but I wouldn't be surprised if things were a bit more thorny than that.

    1. Phil O'Sophical Silver badge

      Re: French politicians have a history of declaring what the Eu will decide - and being wrong

      Well, if Amazon starts adding a labelled "3% 'Le Maire' tax" to items in the basket it'll give Les Gilets Jaunes something else to protest about, anyway.

    2. Doctor Syntax Silver badge

      Re: French politicians have a history of declaring what the Eu will decide - and being wrong

      "I wouldn't be surprised if things were a bit more thorny than that."

      He hasn't told you how they've cracked it. The French have actually started already. It'll be done by issuing annual fines for GDPR breaches.

    3. Hans 1 Silver badge
      Happy

      Re: French politicians have a history of declaring what the Eu will decide - and being wrong

      He is not wrong, thick, but not wrong ... on this one, at least ...

  5. Boris the Cockroach Silver badge

    why not

    just ban multi-nationals from setting up local companies , then using IP transfer pricing to shift all the profits out of the country....

    Oops sorry too easy... we need a solution involving tax rates, and charging the end users more

    1. JimJimmyJimson

      Re: why not

      You can't do that - it lead to a whole bunch of undesirable consequences.

      Company A develops software in the US. Company B (its subsidiary) sells that software in the UK. Company B needs to pay a licence fee to A otherwise A doesn't have any revenue to pay its costs.

      In your world A is going to make a loss in the US, whilst B makes an unrealistic profit in the UK - because now its cost of goods becomes close to zero. B will pay a stack of tax but A will not pay any tax - but will also not have any income to offset their losses.

      Transfer pricing is very heavily regulated anyway - calculating and managing it represents a significant cost to do business.

      1. Ye Gads

        Re: why not

        Sorry, I don't follow.

        Company A writes the software in the US. Fine, got that.

        Company B sells the software in the UK. I'm assuming that either Company A owns Company B or Company A has sells the software to Company B, which re-sells it.

        In the first case, Company B pays corporation tax on profits in the UK and ships the surplus back to the US. In the second case, Company A makes a profit from its sales and pays corporation tax on its profits. Company B will also make a profit from selling on the software and will then pay corporation tax on its profit

        I'm struggling to find a problem with this except that, perhaps, neither Company A or B wants to pay tax. Your argument seems to imply that Company A can only get money for its software/services through an IP transfer. What am I missing?

        1. LucreLout Silver badge

          Re: why not

          What am I missing?

          Company A will be in a "tax haven" rather than America.

          Software Biz (America) Plc sells to Sandy Shores Inc which sells to YouNeedIt (UK) Ltd.

          SandyShores hangs on to the profit and doesn't repatriate it, thus it remains mostly untaxed. Because Software Biz (America) Plc owns Sandy Shores Inc, it can borrow against the money held there to pay dividends on shore.

          That's a simplified version of what your favourite fanboy device company does.

      2. jmch Silver badge

        Re: why not

        In reality what happens is....

        Company G develops software in US. This software cost a lot to develop and the IP is clearly very valuable. Company G then transfers it's extremely valuable IP to it's subsidiary B in a favourable tax jurisdiction eg Bermuda. In spite of the value, this is done at a nominal price or at cost. Company G can claim zero profit on the IP (and not get taxed) or even a loss (and get tax credits)

        Company U, another subsidiary of company G in the UK, sells services based on the IP now registered with B. It makes a buttload of money from these services. Company B charges company U a buttload of money for IP use. Company U can claim zero or nominal profit on the services it provides, and pays little or no tax.

        Company B makes buttloads of money, and, being registered in a tax haven, pays little or no tax.

        So company G through it's subsidiary B now gets buttloads of profits while companies G, B, U collectively pay next to no tax, with an effective rate for the group of fractions of a percent.

        1. codejunky Silver badge

          Re: why not

          @jmch

          "So company G through it's subsidiary B now gets buttloads of profits while companies G, B, U collectively pay next to no tax, with an effective rate for the group of fractions of a percent."

          Which is a solid argument for reducing taxation. Increased taxation only drives those with money to leave as they dont want to be fleeced of their hard work and earnings which is why the tax's always fall to the rest who cant escape. The higher the tax the more find value in escaping until there are only the poor left.

          1. jmch Silver badge

            Re: why not

            "Which is a solid argument for reducing taxation. Increased taxation only drives those with money to leave as they dont want to be fleeced of their hard work and earnings"

            That's the theory. The practice is, it doesn't matter how much UK / US reduce their tax because as long as Bermuda etc are effectively zero-tax, Google etc will still arrange their affairs to pay as little as possible in US and UK. It becomes a race to the bottom which is what Google etc want - they play nations against each other and reap the benefits.

            Since it's impossible for all nations to reach tax consensus, the solution is to disallow transfer pricing or other mechanisms that are being abused. So for example in the case of Google, the transfer of their IP from US to Bermuda has to be valued based on the revenue being made by that IP, with Google Bermuda obliged to pay that amount to Google US, and on which Google US could be taxed.

            1. codejunky Silver badge

              Re: why not

              @jmch

              "The practice is, it doesn't matter how much UK / US reduce their tax because as long as Bermuda etc are effectively zero-tax"

              Of course it does. if the tax rate is high enough to pay an accountant to move the money and leave a healthy profit then it is worth the cost of the accountant to do it. The value to zero tax places is the money goes there. They get the benefits of the money we dont want because we push it out of the country.

              "they play nations against each other and reap the benefits."

              This is terrible behaviour. As bad as those horrible people who dont shop at harrods or waitrose etc because they prefer to pay less for their tin of beans. Those selfish people not thinking of the profits of their betters but instead looking to reap the benefits of not being ripped off.

              "Since it's impossible for all nations to reach tax consensus"

              That would be a cartel. Except we are talking about governments doing it so its the same thing but we dont call it that.

              Tax is not a good thing. There are necessities which require taxation but tax is not a good thing. Tax removes productive resources from the economy. So it must be used carefully.

    2. LucreLout Silver badge

      Re: why not

      just ban multi-nationals from setting up local companies , then using IP transfer pricing to shift all the profits out of the country....

      Unfortunately that simply won't work.

      There are many legal jurisdictions where beneficial owner does not need to be declared so you couldn't say who ultimately owns the company.

      The majority of transfer pricing doesn't relate to IP. JackassTaxFreeSunSpot sells its product or services to JackassUK which sells them to you at a 10% markup. Less tax paid here, more tax paid in the sun. StarryDucks Toffee do this.

      The only proven way to raise the number of units gained through taxation is to lower the rate payable, thus making avoidance more expensive than it's worth. I realise its anathema to those who think taking taxes is a social good in itself rather than to fund essential services, but it does work, if you're honest about the aims.

  6. steviebuk Silver badge

    So...

    ...we, the end users will be paying the tax instead. The companies that earn that much money, Google, Facebook etc have the funds to hire accountants who'll do whatever they can to make it look like the company doesn't make the profit required for the tax. Just like Starbucks, Amazon etc have been doing for years already.

    1. DavCrav Silver badge

      Re: So...

      "The companies that earn that much money, Google, Facebook etc have the funds to hire accountants who'll do whatever they can to make it look like the company doesn't make the profit required for the tax. "

      That will be much harder under these proposals. For example, Google's sales are in Ireland even though customer is in UK schtick would be illegal. And this is turnover rather than profit, which is much harder to hide.

      1. LucreLout Silver badge

        Re: So...

        That will be much harder under these proposals.

        No it won't. It's already very easy to avoid them, but in doing so will result in even less tax being paid. Sorry, but this will cost money, not make money.

    2. jmch Silver badge

      Re: So...

      Couple of things to note....

      Yes, any tax on a company is in the end paid for through revenues derived from their clients. BUT...

      - Company owners currently pay much reduced tax since dividends and capital gains are taxed less than earned income. Taxing the company levels this out a bit.

      - Companies are legally treated as persons with much the same rights. Yet on the other hand, companies (legal persons) have certain advantages over natural persons eg they do not have a naturally limited lifespan, can own / be owned by other companies, cannot be punished for criminal liability in the same way as a natural person etc. These advantages can be used to accumulate wealth in a way that a natural person cannot, so it's only fair that they are taxed for those privileges. (and one can argue that being taxed on profit rather than income is another rather large benefit)

      The current status quo is very simple - the playing field is heavily tilted in the direction of whoever already owns the capital and against those who have little capital and provide labour. That's why it's called a capitalist society. These little tweaks are sticking plasters over a gaping wound, it's no surprise that in the last 50 or so years the rich have gotten richer and the poor poorer, a trend that has been accelerating in recent years.

      Any solution needs to radically change underlying tax assumptions.

      Step 1, all income should be considered equal and equally taxed. Then if you have income from capital gains, dividends, earned income, royalties, whatever, it all goes into 1 'income' pool that is taxed at the same rate.

      Step 2, make the tax free threshold as high as the 'living wage', then proportionally increase to no more than 25% for a middle-class salary and 40% for a well-paid professional. Put a 70% tax on the seriously rich (say income of about a million/year or more), and a 90% tax on the eye-wateringly rich (say income of about 10 million/year or more)*

      Step 3, get rid of VAT on essentials. Rather than a tax on all consumption (including essentials that everyone must buy), make it a tax on consumerism (buying shit just because you can).

      *If you think this is excessive, consider this... anyone with a 10M income would still take home more than 2.5M after tax, more than 200k a month. And if anyone thinks that's hardship, well, they don't live in the real world.

      1. Anonymous Coward
        Anonymous Coward

        Re: So...

        the cumulative effect of your three steps indicates that you assume that tax is there to redistribute wealth - hardly a radical change.

        1. jmch Silver badge

          Re: So...

          "you assume that tax is there to redistribute wealth"

          I don't assume that. Based on empirical facts I KNOW that tax (ie the current effect of worldwide tax laws and related company, trade etc laws) is indeed to redistribute wealth... to the richest fraction of people and companies from everyone else. That is unquestionably what has been happening in the last 35-40 years.

          What I do assume is that this state of affairs is mostly on purpose - I think that's a reasonable assumption since all the richest people and companies are those who own most media and who spend the most on lobbying, election campaigns etc.

          I would like to see tax as simply a method for governments to raise money to spend on 'common good' projects. But given that currently the tax playing field is by design tilted towards the ultra-rich, I would like to see that playing field tilt the opposite way for a while before settling into a neutral balance.

          1. LucreLout Silver badge

            Re: So...

            That is unquestionably what has been happening in the last 35-40 years.

            That isn't remotely what has been happening. Not at all.

            Person A creates somethign and sells it for profit. Person B buys that thing and so makes no profit. Wealth accrues to those creating it by offering services or goods with which other people buy it. The value add is the new wealth, whether that value was in digging it out of the ground or in making something someone else dug up into somethign useful. Or just singing a song.

            Wealth accrues to those that value it and that create it. Those that spend whatever they earn will accrue no wealth. How could it be otherwise?

            And lets just shoot the "can't afford it breadline" fox before anyone sets it running. Everyone earning more than minimum wage is earning more than is required to live on and so has disposable income available that they coudl invest for profit rather thans pend for fun. It's a choice. Nothing more.

            I KNOW that tax... is indeed to redistribute

            No. Tax is to pay for essential services, facilities, and equipment. Nothing more. Redistribution is neither helpful to anyone nor is it desireable. The envious may think they want it, but they won;t when they realise it means giving away what they have to someone that has less. There's always soemone with less.

            But given that currently the tax playing field is by design tilted towards the ultra-rich, I would like to see that playing field tilt the opposite way for a while before settling into a neutral balance.

            Good luck.

            1. jmch Silver badge

              Re: So...

              "Person A creates something and sells it for profit.,,, etc"

              A very overly-simplistic view of economics. Entrepreneurs certainly bring ideas of value to the table and should be rewarded for that, as do the people who put up any capital investment, and those employees whose execution allows the entrepreneur to realise their vision and the capitalist to realise a return on investment. But tax-wise the employee is taxed more than the employer or the shareholder, which is clearly not fair.

              "Tax is to pay for essential services, facilities, and equipment. Nothing more. "

              I agree that's what taxes SHOULD be for.

              "Redistribution is neither helpful to anyone nor is it desireable. "

              No, but a level playing field IS desirable, and the playing field has been tilted the way of the richest for a long time. Redistribution is certainly not desirable to them, nor apparently to you, but it might be desirable to those who are clinging on by their fingernails to the other end of the playing field. As to whether it is helpful, again, to whom? If you mean to society in general, all the nordic countries are shining examples that redistribution IS indeed helpful.

      2. evilhippo

        Re: So...

        "it's no surprise that in the last 50 or so years the rich have gotten richer and the poor poorer, a trend that has been accelerating in recent years."

        Manifestly untrue, indeed mankind has seen an unprecedented increase in prosperity almost everywhere over the last 50 years. Many of the 'rich' have indeed have got richer, and most of the 'poor' have got richer too. Moreover, someone else getting richer does not make someone else poorer as economies is not zero-sum games, which is why socialist 'economics' are such arrant nonsense.

        1. Lars Silver badge
          Happy

          Re: So...

          @evilhippo

          Don't fool yourself, it's about an ever increasing inequality and a diminishing middle class. Being poor is a comparison, a poor Brit may be richer than a poor African, but, and it has nothing to do with socialist 'economics', rather with a social fair society.

  7. DougS Silver badge

    Companies will do the math

    And might decide it is better to simply not do business in France than be subject to such a tax, or simply as a way of discouraging other countries from doing the same thing. I suppose the French government thinks that home grown alternatives to Google and Facebook will just appear to fill that market vacuum?

    Any tax scheme based on global revenue is doomed to failure for this reason. Imagine if every country did this, and a company was taxed at 101% of global revenue when you added them all up? That's obviously impossible to pay (if they raise their prices their taxes also go up by 101% of that price increase) so it is clearly ridiculous.

  8. jmch Silver badge

    "And might decide it is better to simply not do business in France than be subject to such a tax"

    As long as their revenue from that country is considerably greater than the fine, why would they? In any case it's almost certain that the cost of legally challenging the ruling would be considerably less than either, so that would be the first route taken. If the legal challenge fails, it would also almost certainly be cheaper to change their business practices to comply with the law.

    If changing their business practices to comply with the law means their business is no longer profitable at all, it's likely that you wouldn't want that type of company to be operating in your country anyway.

  9. RobertLongshaft

    "The European Commission had suggested a 3 per cent levy on firms with a global annual turnover of €750m and annual EU revenue of at least €50m – but the measures were branded fundamentally flawed by some nations"

    Those nations need to read the fine print. Your opinion is worthless. You have no voice, there is no democracy within the EU. Just lobbyists and politicians with large expense accounts which need servicing.

    €32,000 a month for Jean Claude Junker. A MONTH.

  10. Jtom Bronze badge

    It doesn’t matter how you tax corporations or the people who run them. All their money come from their customers and subscribers. Taxes are an expense item for all companies. Competition, therefore, cannot offset tax increases and maintan a price. Prices will go up. If the price exceeds the perceived value, the goods or services will no longer be offered.

    If you think the taxes will be paid by companies by reducing their profits, you do not understand margins and opportunity costs. If your return on investment is not substantially more than interest on government bonds, you do not bother with the risk, work, and problems of running a business. You just buy bonds. If you think taxes will be paid by reducing executive salairies, you do not appreciate the magnitude of the numbers involved. Only a fraction of a penny per dollar of revenue goes to those salaries, not nearly enough to pay these taxes.

    If you think people will pay still more for things because of highet taxes, you haven’t been paying attention to what is happening in France.

    1. jmch Silver badge

      @JTOM - I broadly agree with your analysis. On this part, however:

      "If you think the taxes will be paid by companies by reducing their profits, you do not understand margins and opportunity costs. If your return on investment is not substantially more than interest on government bonds, you do not bother with the risk, work, and problems of running a business. "

      ...you are right for 'normal' businesses, but not for the businesses this law is targeting. The latest data I can find for Google for example is 9.4bn$ profit on 31.1bn$ turnover, which is close to 30% margin. It might vary year to year, and is probably less for whoever sells physical stuff like Amazon... but when you have that kind of margin, you're not going to walk away from a country because they tax you a fraction of a percent of your profit.

      Of course yes it's likely that some or all of that expense will be passed on to customers, but in the case of Google, FB etc the customers are ad agencies and marketing departments. I think it would actually be a good thing if these people took a closer look at how they're spending, because pretty sure they will find out they are being fleeced.

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