Reply to post: Re: Beware of False Profits

European nations told to sort out 'digital tax' on tech giants by end of year

LucreLout Silver badge

Re: Beware of False Profits

The point of this digital revenue tax is that it'll be the revenue inside the EU that will be taxable at 3%, *not* profit, regardless of whether it slips into a Double Dutch Irish sandwich or not.

Ok, so lets say I have revenue of £100M. You now take £3M in envy tax.

The other £97M gets taxed at 20% on the profit part. Ok, but if your complaint stems from my not having made enough profit to pay you the Corp Tax you think you deserve, then I'll be making zero profit or less using the new system. Most of the tech giants have an operating profit margin in the UK & EU of close to or less than the proposed envy tax.

Thus, what you have achieved is at best, that I pay you 3% evny tax to operate here, when I'm already probably paying something similar anyway via Corporation Taxes. You've moved the money from one pot, to another, but not increased your £s taken.

However, this is where things take a turn for the worse for you. If your envy tax pushes me into making a loss for Corp Tax, I can roll that over for many years. A little legal entity restructuring and I can spin off the corp tax loss into its own vehicle and sell that vehicle from my offshore parent company to someone else who wants to operate here, thus regaining some of my envy taxes while you then lose out on somone elses CT.

Corporate taxation is an internationally competetive market place. It's not quite winne rtakes all, but its close enough to that to mean that if you want a share of the international CT, you are going to have to compete to get it. That'll not be popular, but then, the real world isn't about being popular.

Me/you being substitiutes for a FAANGM style operation and the tax man respectively.

This is my specialist area of IT, but I'm an IT specialist not a tax specialist, and even I can see mile wide roads down which to travel that don't lead to a cent/penny more in taxes becoming due.

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