France demands digital services tax from Big Tech on revenue generated in 2020

nanoguy

Posts: 658   +11
Staff member
The big picture: The OECD has been working for years on a way to properly tax tech companies using a standardized set of rules that would apply across the globe. However, slow progress in the negotiations is leading countries like France towards unilaterally implementing their own digital service tax, which has all the markings of a trade war written on it.

Several countries in Europe including Italy, Poland, Turkey, Austria, the UK, and France have implemented or are looking to implement a digital services tax that will be levied upon tech giants that operate a marketplace or an advertising business that generates more than €750 million in revenue globally and €25 million locally during a fiscal year.

This is mostly a symptom of the OECD's struggle to get 137 countries to agree on new international tax rules that would prevent tax avoidance, but it's becoming a serious issue that could complicate things for big companies and even send them down a path where they hike their developer, seller, and advertising fees.

In the case of Apple, Amazon, and Google, that's already happened -- and that means these companies are now passing down those costs to users of their platforms.

Of the aforementioned countries, France in particular has been eager to introduce a digital services tax, which has had the French and US governments sparring over who wields the bigger tax stick.

The Trump Administration last year vowed to impose a 100 percent tariff on $2.4 billion worth of French products, but so far that hasn't happened.

Recently, France started notifying tech giants including Google, Apple, Facebook, and Amazon that it will start imposing a 3 percent digital services tax in 2021. Specifically, officials have told these companies that they need to pay the tax owed on their 2020 revenue, a prospect that will no doubt come as a shock.

Back in January, the French government agreed to suspend the collection of the new tax to allow the OECD ample time to get a preliminary draft for the new international tax legislation. The US, however, withdrew from OECD talks in June, which might have sent the wrong message in the middle of a pandemic that has put enormous stress on the world's economies.

This has coincided with stock upswings for Big Tech that have resulted in record valuations and tech billionaires getting significantly richer. A spokesperson for France's Finance Ministry noted the country is still looking forward to "an international solution so that digital companies pay their fair share of tax just like other companies," but that it doesn't see how it could materialize in the near future.

The spokesperson told the Financial Times that "we can’t wait any longer and tech companies are the big winners from the pandemic. Their turnover is booming and they did not pay fair taxes even before the pandemic."

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candle_86

Posts: 657   +575
They shouldn't be allowed to tax based on global revenue, only what they can prove was earned only from within France. I'd like to see the French try, we'll just tell the German's its time, have fun.
 

mbk34

Posts: 115   +59
Is it really fair that we as individuals, and most companies, do pay taxes while amazon, google etc get away with paying almost nothing? They paid £290m on sales of £14b here in the UK which effectively works out as 0% tax. We end up with bricks and mortar stores closing down, less taxes to pay for local infrastructure and less local employment. I think it's great that Bezos has become the richest guy in the world, his company just needs to play fair and put something back into society rather than into his bank account.
 

Endymio

Posts: 1,340   +1,214
Is it really fair that we as individuals, and most companies, do pay taxes while amazon, google etc get away with paying almost nothing?
What you fail to understand is that corporations never pay tax. Ever. No matter how high the so-called corporate tax rate is, that tax never paid by corporations, but by individuals. Take a million dollars in taxes from a corporation, and it can only respond in one of three possible ways:

1. Reduce the dividend and/or value of the company (meaning the shareholders paid the tax)
2. Raise prices (meaning their customers paid the tax)
3. Pay less for labor or supplies (meaning their employees and/or suppliers paid the tax).

There is no other option. Corporate taxes are a convenient fiction, sold to gullible, weak-minded voters by canny politicians. "Vote for me! I'll stick it to those evil, rich corporations! They aren't paying their fair share!" And so you vote for them, and wind up paying that tax out of your own pocket.
 

Gollum22

Posts: 11   +10
What you fail to understand is that corporations never pay tax. Ever. No matter how high the so-called corporate tax rate is, that tax never paid by corporations, but by individuals. Take a million dollars in taxes from a corporation, and it can only respond in one of three possible ways:

1. Reduce the dividend and/or value of the company (meaning the shareholders paid the tax)
2. Raise prices (meaning their customers paid the tax)
3. Pay less for labor or supplies (meaning their employees and/or suppliers paid the tax).

There is no other option. Corporate taxes are a convenient fiction, sold to gullible, weak-minded voters by canny politicians. "Vote for me! I'll stick it to those evil, rich corporations! They aren't paying their fair share!" And so you vote for them, and wind up paying that tax out of your own pocket.
Not exactly. Especially in the case of #2. Capitalism drives competition. One thing about corporate tax hikes is if it gives smaller businesses a chance to compete. If big corp passes the price to the customer a smaller business who can make the same product or better for less gets a much better chance to get their foot in the door. (simply having a better product is not always enough). If a small to medium business in the same market has to pax taxes and big corp doesn't then it's not even driving capitalism it's just giving big corp more of an advantage over EVERYONE no matter how one tries to cut it. more of a chance to monopolize rather than actually compete period.
 
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Endymio

Posts: 1,340   +1,214
One thing about corporate tax hikes is if it gives smaller businesses a chance to compete. If big corp passes the price to the customer a smaller business [gets] a much better chance to get their foot in the door.
Exactly backwards. As many studies have shown, a high corporate tax rate penalizes smaller startup businesses much more than large established ones. The latter can afford the overhead of high taxes much more easily than the former, and are also better able to afford the services of accountants and tax attorneys that such tax codes require.

Nations with high rates tend to have a significantly smaller percentage of business turnover, with these larger, older firms predominating. Exactly what you don't want to spur innovation and growth.

So if none of us paid taxes, you'd be happy with no schools, no roads, no defence...
Again: corporations do not pay taxes. A high corporate tax rate is simply an indirect tax on individuals: the owners, employees, or customers of those corporations. Usually all three. Reducing the corporate tax rate boosts growth and innovation, and leads to higher overall tax revenues, not less.
 
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mbk34

Posts: 115   +59
If large companies like Amazon pay 0% taxes then that gives them a huge unfair advantage over over competing companies. I'm not blaming Bezos for taking advantage of the system, I would too, but the system needs to change so that a little of his $190b wealth goes back into society.
 

Endymio

Posts: 1,340   +1,214
If large companies like Amazon pay 0% taxes then that gives them a huge unfair advantage over over competing companies.
It might help to read the article before posting. Amazon already pays the same rate as its competitors. This new tax is about charging them a higher rate: an additional "digital services tax". And what happened as a result? They didn't pay the tax themselves, but merely passed it onto their customers.

The system needs to change so that a little of [Bezos] $190b wealth goes back into society.
Many misconceptions here. Firstly, wealth is not taxed -- income is. And the more you tax Amazon's income, the less Bezos pays in personal income tax.
 
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mbk34

Posts: 115   +59
Most companies pay taxes and obviously those taxes affect the prices they charge. I can only speak for my own country but this year Amazon paid £290m taxes on £14b. That's pretty close to zero tax. That obviously means companies like Amazon can charge lower prices but it also means they have an unfair advantage over smaller companies. With less taxes being paid then less money can be spent on schools, defence, roads, paying off national debt etc etc. It honestly doesn't seem complicated to me.
 

Endymio

Posts: 1,340   +1,214
this year Amazon paid £290m taxes on £14b. That's pretty close to zero tax.
Quite frankly, the above statement demonstrates a near-criminal level of misunderstanding and ignorance. The " £14b." figure is not profit, but revenue. Amazon is an online marketplace; they sell goods for other entities, which means they pass the vast majority of revenues on to those individual sellers (who themselves pay their own taxes on those revenues).

Amazon's seller fees average around 20%, meaning of that £14b revenue they actually retain about £2.8b. Even assuming they have a 50% net profit margin on online sales, that would mean they generated £1.4b in profits, of which they paid £290m.(*) In other words, they're paying 10 times the rate you believe they are, and far, far above "zero".

And you're still not addressing the real point here. So you tax Amazon more: does that increase tax revenues? No. As the article itself points out, Amazon merely passes that cost downstream, to sellers who therefore generate less profit themselves, and pass less in tax as a result.

(*took several shortcuts in this calculation, but balanced upwards and downwards deviations so the end result is still reasonably accurate)
 
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mbk34

Posts: 115   +59
As I'm sure you're aware, when you're a global company supplying all your own infrastructure and supplies then it's easy to balance the books however you please. Let say you have a profit in France of $10m (a random number) so you get your computer services section in the Bahamas to charge you $10m more for their services. Now you don't have any profit in France and so no taxes to pay there. You just moved those profits to a different country with much lower taxes.

In the end it doesn't really matter whether you believe I'm right or wrong. The governments of Italy, Poland, Turkey, Austria, the UK, and France all seem to agree with me. I'm fairly sure that once these companies can be made to pay a fair share of their taxes then the other governments will follow.
 

DubiousFishHook

Posts: 31   +2
This is so not fare, why should business that would f your mom for a sandwhich if there was a dime in it have to pay tax? I am republican so I will support tham. get a brain morans!