180 points by adventured 6 days ago
As a french, seing french government officials trying to impose their knee-jerk « let’s tax it » reaction to any kind of problem makes me absolutely sick. They’re just a bunch of jealous incompetent insufferable pompous politicians than don’t understand a thing about the private sector and so instead of trying to fix the numerous reason why we don’t have any competitor to google / facebook etc ( such as our best engineers fleeing to silicon for the last 30 years) , and how come all those companies HQ in europe are in ireland, prefer to add tax.
That will solve absolutely NOT A SINGLE ISSUE , but it’s just another income to feed the bureaucracy.
Thanks to the three countries that stopped this madness.
PS : i also find it outrageous that gafa don’t pay taxes, but let’s fix the tax heavens in Europe then. Don’t start making special taxes on revenue ffs.
EDIT : changed "income" to revenue.
I mean this is a tax problem first and foremost isn't it? The problem being that it's hard for countries to enforce regulations in a virtualized, globalized economy. It's true that it's not just about tax, you also have issues regarding what is and isn't legal in a given country (nazi apology is illegal in France for instance, but good luck enforcing that on the web. Similarly the super harsh "no nudity" rule on american websites is often seen as abusive over here for instance). I mean you seem to agree on that point yourself so it seems that they're not completely wrong to try and fix that.
>They’re just a bunch of jealous incompetent insufferable pompous politicians than don’t understand a thing about the private sector
Talking about knee-jerk reactions.
I strongly dislike this type of empty populist diatribe, that's how we give up on democracy and end up with incompetent fools at the government, just out of spite. Screaming "tous pourris" is not improving anything and is frankly insulting for the many elected officials who are genuinely trying to improve things. Regardless of what they did or didn't do there would be people like you who scream bloody outrage because they're obviously stupid people who understand nothing about nothing. Meanwhile you're not the one trying to balance the budget of a country within the EU.
>let’s fix the tax heavens in Europe then
And how do you propose we do that? Have Le Maire go to the various tax heavens (which in this particular instance would have to include Ireland) and tell them to tax more? How many bottles of Bordeaux would he have to bring to seal the deal?
Having a uniform tax code across the EU would be awesome but it's not like we're anywhere close to something like that.
I’m pro europe, but let’s face it, if we can’t get any kind of cooperation between state members regarding taxes, then maybe it’s time to rethink the inside mechanicsm of the union ( which may include restart from scratch with fewer countries).
This revenue tax won’t change anything. It’s just ransom, and i hate feeling like my representatives make me look like a lazy thief.
I’d even prefer something like what china is doing : since google is a monopoly in europe, which makes it impossible for competitor to compete, let’s impose tarifs or prevent them from doing business in europe as long as they haven’t split, or a true local competitor has emerged. At least this would be very specific to one very particular case. Not the kind of gigantic tax on a whole economy.
> if we can’t get any kind of cooperation between state members regarding taxes, then maybe it’s time to rethink the inside mechanicsm of the union ( which may include restart from scratch with fewer countries).
The problem is when things require unanimity. It's very hard to get all 28 countries to agree to something.
28 cultures is quite a lot of diversity to suddenly and forcibly slam onto a single party-line. Have you considered that maybe this collection of cultures might have values and methods that are sufficiently mutually different, that there often isn't a single policy that will satisfy all of them?
Here in the USA we have an analogous situation, but it is maintained - for at least a century and a half - with enough top-down brute force to keep the resulting tensions simmered-down such that they are only expressed via things like the "culture wars" phenomenon.
What does Google have a monopoly on? Do you not have access to iOS? Do you not have access to DuckDuckGo and Bing?
I don't think "monopoly" is best judged by "current market share", but by whether a) it's easy for users to switch, and b) whether having that market share is self-reinforcing in a way that prevents competitors from entering.
The parent's point was that a) is not true for Google as a search engine.
b) doesn't seem to be true either; while money and experience can make you provide better search results, you don't get an advantage just from a high current percentage of searches.
In a trivial sense you can "SilasX has a monopoly on SilasX's labor" or "Joe Schmoe has a monopoly on hot dogs sold at Elm & Main St". That's not the monopoly anyone cares about. What matters is whether it's difficult to bring online the alternatives to employing my labor or buying a hot dog in that vicinity. In that respect, Google's monopoly on search is not the worrisome kind of thing we associate with monopolies.
b) whether having that market share is self-reinforcing in a way that prevents competitors from entering.
The argument is that large market share cause user capture. It is relative trivial to bring online an alterative youtube, but video creators can't switch unless the audience also switch and the audience can't switch unless the creators also switch. A subpar job by youtube won't automatically mean that competitor can disrupt, and a lot of users, content creator, advertisers, basically every type of users has been cited as disliking youtube but being locked in with no realistic alternative.
a) it's easy for users to switch
For google search, online stores that use google for advertisement and getting new customers can't easily switch as that would result in abandon 90% of new customer. They can't just buy their hot dog elsewhere. Online stores have to deal with google, unless their customer base is located elsewhere.
I was addressing search, not advertising or video hosting.
So what you're saying is it's easy to compete with Google and get some market share in that space?
I'm trying to outline a useful definition of "[bad-]monopoly" that captures the stuff we generally care about when we worry about them.
It's important to have a definition that excludes "they're just unusually good and so people happen to be currently buying from them, purely as an issue of merit". (If Joe happens to be the best hot dog vendor on some intersection, that's different than if he can prevent others who want to from opening shop nearby.)
I said Google doesn't count as the kind of bad-monopoly because they're easy to switch away from, and the market share isn't self-reinforcing.
It doesn't follow that Google is easy to take market share from. That could be the case of "legitimately good at what they do", and is not how you should define a worrisome monopoly.
A company being so good that others can't gain market share isn't (necessarily) a bad-monopoly. Only if that difficulty came from the factors above, would it count as a bad-monopoly.
(Those factors being the vendor lock-in and the self-reinforcing aspect.)
He's saying that (1) they have a horizontal monopoly, but not a vertical one. And (2) the monopoly is due to Google's quality. Should they do a subpar job, they would be disrupted.
You are a lot more economical with words than me :-)
having a uniform tax code would pretty much doom the small economies to not having opportunity to grown unless it was "granted to them" as a favor by the same union government.
the ability of member states to set their own taxes is about the only protection they have handling down turns and getting new industry. their currency was given up and without the ability to print money they need other means to mitigate adverse changes to their economies. it is one reason Greece was trapped so long in their misery, bound up by EU laws and stuck with a currency they had no control over.
In the US it works by forcing states to compete on regulation and taxes which benefits everyone. because onerous taxation on one group will certainly follow with others because once that line is crossed it becomes to easy to keep doing so. Indirect taxes are a politicians best friend because you have ready bogeymen and no apparent affect on the public though in reality they are paying the end result
I agree that "uniform" wasn't the right word, I was thinking more about cooperating and managing taxes as a whole (in order to find a compromise that would benefit everybody). It doesn't mean that everybody would have the same taxes but at least there would be some level of coherency.
>In the US it works by forcing states to compete on regulation and taxes which benefits everyone.
Everyone except the environment at least, it's often the first regulation to go. This kind of competition gives an edge to rich people and big companies who can afford to relocate if they dislike the way they're taxed or regulated somewhere, meanwhile low-skilled workers and small companies can't generally move a thousand of km away on a whim.
In Europe this is even worse because we have cultural and language barriers. Even for an educated worker moving from London to Berlin to Paris to Prague is not a simple thing at all. The only ones who benefit from this infighting are large companies and rich people who can more easily relocate their income in order to get the best deal possible.
See the whole Amazon HQ2 thing for an example of that in the US, you end up with a huge company getting great benefits that no small player could ever dream of. How is that fair and how does that benefit everyone? How does tech giants moving to Ireland to pay less taxes benefit everyone? It benefits Ireland arguably, but overall the EU gets less money than we otherwise would.
I mean just for the sake of the argument we could imagine that the EU as a whole would agree to tax these tech giants a certain amount, bigger than what Ireland makes them pay now. Then we give the Irish exactly the same amount they're currently receiving and we redistribute the rest within the EU. Wouldn't we be objectively better off in this scenario?
Now of course that would be a weird arrangement but you see my point, the real winners here are Google and Facebook, not Ireland, Germany or Poland.
> Then we give the Irish exactly the same amount they're currently receiving
Please don't take this the wrong way but: There's a whole body of tax-literature and tax-philosophy that renders such a statement naive.
How do you figure e.g., how the current money Ireland makes is linked to the increase or decrease of tax-rates? How is it linked to other factors making Ireland worthwhile to invest? How much was Ireland accumulating on those other factors, because it has been a tech tax haven so long? How much future growth of these factors is taken from Ireland because of your proposed regime? And how do you deal with a decrease in overall EU tech tax income (per country) because of your proposed regime? Would you e.g. go so far as to pay Ireland its current income even if the overall EU tech tax income would be lower? Would you otherwise grow Ireland's pay with an increased overall EU tech tax income, beyond Ireland's current income, and if so what would be Ireland's fair share?
And while those questions can have multiple correct answers, those questions have to be answered in a consistent way, because rule of law. And that consistency alone is often enough a problem, because other countries have other consistencies their taxing has to apply to, again because rule of law. And those laws are usually not just paper, but codifications of hundreds of years of cultural norms and customs.
I acknowledge that my thought experiment was very simplistic and ignores many factors but my point was that I can't really imagine how we'd end up worse off negotiating as a whole union instead of competing with each other internally and trying to undercut your partners at any occasion. I mean, that's the whole principle behind unions (as in syndicate of workers for instance), as a whole you have more bargaining power, as individuals you're as weak as your weakest link (whoever is willing to concede the biggest tax breaks, cut down on environmental regulations etc...).
I mean the EU, the free market, the euro, all that doesn't have "hundreds of years of cultural norms and customs" behind it. Why couldn't we go further? The only thing that we've had consistently over hundreds (or even thousand) of years in Europe is warfare and royal inbreeding. If we could avoid having to invade Ireland or having our finance ministers wed each-other in order to settle this tax dispute I think it would be grand.
> The only thing that we've had consistently over hundreds (or even thousand) of years in Europe is warfare and royal inbreeding
While I used to say exactly that for most of my life, trust me this is a gross oversimplification. With an emphasis on gross. Law traditions date back to the Romans, Celts, Germanics and others at least. And of course no sovereign country on the onset of the EU would have accepted the new EU norms if they were to contradict with their own. That the EU nowadays tries to impose rules that contradict those norms is reason for the ever rising resentment of Brussels around Europe.
> If we could avoid having to invade Ireland
You say it yourself: How can we declare moral superiority if we are openly discussing invading Ireland because we've abandoned pillar principles like national sovereignty?
How can you lament "over hundreds (or even thousand) of years in Europe [of] warfare" while simultaneously abandon the core lesson of those wars (sovereignty)?
I'm not sure that blaming Greece problems on the EU instead of unsustainable social policies and populist and/or corrupt politicians is fair. After all, a populist with more knobs to their country's economy is still a populist and, if anything, will bury the country's economy even faster.
Spoken like a true German. Read Varoufakis Adults in the Room, and then maybe you'll be less likely to parrot banking sector propaganda.
As a French, I totally support this tax. It's easier and more expedient to do it this way than to reform the taxation policies of every European countries.
Also, why is it wrong to tax the income of corporations?
I support it too. Big corporations pay almost no taxes in our country; instead it is individual and small and medium entreprises that are heavily taxed. This makes it very hard to start and run a business in the long term.
They pay VAT for sells in your country. It doesn't matter if it's consumer or a company paying the tax, the amount is added to the price. If you want them tax then increase that. Why do you feel entitled to profits of the company that isn't based in your country?
It's like thinking the company should pay 5m in tax in Ireland based on sells in France while being ok with them deducting expenses from unrelated business in Ireland which you shouldn't care at all. If they paid that rate you should be happy even not even one dollar more made it to your country.
The whole idea doesn't make any sense at all. You want companies to pay more in your country? Tax exactly that - consumption of their goods in your country. It's not your business to decide how other countries choose to organize their tax code. Seriously fuck you for trying to force them. Ideas like that make EU much less popular idea that it was in the past.
> They pay VAT for sells in your country. It doesn't matter if it's consumer or a company paying the tax, the amount is added to the price. If you want them tax then increase that.
VAT is tax for consumers, not corporations.
> Why do you feel entitled to profits of the company that isn't based in your country?
Because those profits are made from sales in that country, and every physical company selling in that country pays their taxes, just because Internet-based companies can avoid having a physical presence to perform their sales (Amazon still has warehouses), doesn't make them exempt from the same logic.
>VAT is tax for consumers, not corporations.
at the end of the day does it really matter? It's totally a tax on the corporations ability to do business. If we taxed the companies causing them to increase prices by 10%, the consumer still ends up having to pay 10% more on the products. Or if we taxed the companies at the point of sale for 10%, it's the same outcome for consumers.
> VAT is tax for consumers, not corporations
Sorry, but where does this misconception come from that companies don't pay VAT? It's not true, I see it on my company's tax statement every month ;-)
The answer is that company is the tax collector, not the tax payer. IMHO it's mainly a semantic distinction, the result is practically the same.
it’s absolutely not the same. If the VAT goes up 10%, your benefits after taxes won’t change one bit.
VAT is indeed not paid by corporations.
If price is already fixed in a contract it's not the same, indeed. For new client, it's basically equivalent as the price will adjust. (For example, higher TVA => client pay more => less demand => you have to reduce margin to keep some clients. In this case even if you don't technically pay the tax, you lose money if the tax become higher).
>>VAT is tax for consumers, not corporations.
It doesn't matter. It gets added to the price. All the money paid in taxes comes from consumers - be it VAT, sales tax, tax on profit, tarrifs - you name it. It doesn't matter which side you tax, it matters what kind of activity taxing is focused on.
>>Because those profits are made from sales in that country
Sales in that country is one element. Another is being efficient and well organized which another country allows. If you want to tax sells in your country - do it, I think it's great idea.
>>just because Internet-based companies can avoid having a physical presence to perform their sales (Amazon still has warehouses), doesn't make them exempt from the same logic.
Physical goods companies can avoid presence as well. A lot of them ship products to other countries but don't have offices there. They pay VAT.
It's easy to see why taxing profits is a very bad idea by considering situations where that tax differs from consumption tax. Here are few showing ridiculousness of taxing corporate profits:
1)Company A makes and sells tires, Company B makes and sells electronic chips. Company C does both. They don't differ much in efficiency or quality and C does the same volume as A and B in their respective industries. Now let's say 2020 is a bad year for tires due to increasing prices of materials and a very good year for chips due to AI advancement (everyone wants new AI equipped vacuum cleaner or w/e). Company A losses money, company B makes money. Company C makes as much money as company B on chips but losses same as company A on tires. Company C pays less tax than A and B combined. I hope it's obvious why this is bad. This alone makes tax on profits ridiculous idea. We just need something different.
2)Company A and B do the same thing. The difference is that management of company A likes buying high level employees exotic super cars and expensive trips. In 2020 companies A and B have the same product, same sells. The difference is that company's B employees drive 5 years old Volskwagens to clients and organize most of its meetings online while company's B employees drive and service super cars and go to Maldives 2 times a year. Company B pays more taxes.
3)In a small country there are only 2 companies and all the taxes come from them and their employees. They do the same thing - produce cars because that's what the citizens are good at. company A breaks even, company B has better management and produce same cars but more efficiently thus showing profits. Company A is happy with functioning as it is. Only company B pays taxes and funds schools, roads, hospitals. Socialists come to power and they want increase corporate taxes (as they are economically ignorant). Now Company B pays even higher taxes while Company's A tax burden doesn't change. Company's B employees lose motivation to work smarter because they see new taxes just tax their ingenuity and there is little incentive to make processes efficient. Maybe it's better to buy super cars and expensive exotic trips.
4)Two companies A and B in country X do software business. A buys licenses for components from a company in Switzerland (high labor costs thus higher prices), B develops them domestically for 50% of cost. Both companies have 10M in sells. B pays 9M for software, A pays 4.5M for development. Corporate tax rate is 20%. Citizens of the country V get 5.5M * 0.2 = 1.1M for roads and schools from company B and only 0.2M from company A, the difference goes to Swiss people. Even if tax rate in Switzerland is 30% it doesn't make any sense for country X to adopt this policy. No amount of forcing Switzerland to extract "fair share" is going to change that, their rate is already higher (of course Switzerland doesn't have 30% rate as that would be idiotic, I am just making a hypothetical).
There are more of this. It's easy to see. Focusing on taxing corporate profits is a sign of being short-sighted and petty thinking. It's not what you want even if equality is your major goal. Taxing profits defends lazy incumbents and makes things we don't want tax advantaged strategy this includes combining various activities under one umbrella, buying pointless shit because of tax deductions and temporary price gauging to kill upcoming companies.
AFAIK Vat is a tax which insist on consumers, not on companies.
Usually companies collect it and pay it but it really doesn't matter. At the end of the day all the money the corporation has comes from consumers and chunk of it goes to taxes. The question is what you are allowed to deduct and how tax burden is distributed among various companies.
Every company will try to sell goods for as much as the customers are willing to pay. The consumer doesn't care if there is VAT, environmental tax or whatever else included. They just look at the final price.
So an oil company that buys steel pipe to make an oil well doesn't pay VAT on the pipe? Not a European, so just asking.
Either it pays the VAT and gets an equal tax credit, or it doesn't pay it at all (when applying reverse charge).
Result is the same, VAT is not a cost for enteprises.
Obviously the fact that end consumers pay VAT might disincentivise them to buy stuff, so companies still suffer the effects of high VAT rates.
>>Result is the same, VAT is not a cost for enteprises.
It's not a cost when transacting with other companies but it's obviously a cost when selling to end customers. If people are willing to buy a car for 20 000 Euro you will be forced to sell for 16 666 Euro + 20% VAT, you can't magically sell for 20 000 + 20% VAT because "consumers pay VAT". If materials + labor cost of a car is 10 000 Euro you make 6 666 Euro per car if there is 20% VAT and 10 000 Euro per car if there is no VAT.
> Result is the same, VAT is not a cost for enteprises.
That's just partly true. Depending on the taxing agreements between two countries involved you can apply reverse charge, yes. But within one company's country, the VAT is not something that you can "just refund" from the government. Instead you can set off the VAT you've paid against the VAT your customers paid.
In other words: The only way for you pay zero VAT is if your earnings (income minus expenditures) are zero too (something that despite the tax-evasion clichés is something that companies usually try to avoid).
That's not how VAT works. As a simple example for a EU company:
- buy something nationally (you pay VAT to the company)
- export it to another EU company (reverse charge, so no VAT received or paid)
- get the VAT refunded from your local tax agency.
Even nationally, you get VAT refunded if you've paid more to others than you've collected. At least for NL, but I'm pretty sure these rules should be the same in all EU countries.
There are exceptions (e.g. in Italy you only get refunded for 50% of the VAT you pay when buying phones, or 40% the VAT you pay when buying cars), but they are pretty much that, exceptions.
If operating domestically you will usually get more VAT money from customers than you will give to suppliers, so you will pay the difference to the state. If for any reason you pay more to suppliers than you get from customers, the difference becomes a tax credit that you can carry to the following accounting period or deduce from some other tax.
>> If for any reason you pay more to suppliers than you get from customers, the difference becomes a tax credit that you can carry to the following accounting period or deduce from some other tax.
In Poland it is even possible to get that difference in cash - Tax office wire transfers it to your bank account. This gave birth to a countless scams, where the shell companies forge invoices, ask for VAT tax refund and then disappear with the money.
How is that any different to what I've said?
> Even nationally, you get VAT refunded if you've paid more to others than you've collected.
You do realize that this implies you're operating at a loss? Thus my statement about companies usually being run to make profits.
But if you get more VAT from your customers than you give to your suppliers, when you're "paying" the difference to the state you're just forwarding part of the VAT which your customers paid, you're not paying it yourself.
You see the error here? You write an amount in an invoice, the customer pays you. From that, the taxman demands his percentage later on from you. The only way to reduce the amount you have to pay is by buying stuff. Nowhere in the process is the customer paying two parties.
It's just lexical. Would you say 'oh the company is just routing its income tax to the taxman' if companies had to put their income tax percantages on invoices too?
The client however pays you 10 bucks in gross regardless whether the VAT you have to pay afterwards is 7, 15 or 25%
Would you say employers pay income taxes for employees if they retain part of their wage and forward it to the state as a down payment for the employee income tax? I wouldn't say so; income tax is paid by the employee, even if the employer is forwarding the money to the state.
It doesn't matter who puts the money in an envelope and goes to the tax office; it matters who is subject to the tax.
Non-EU turists traveling in Europe will pay VAT on souvenirs that they're bringing back to their countries, and upon exiting from EU they will actually will get the VAT back, since they paid for it, but they were not supposed to since the goods are in the end going to be used outside EU.
This would just not make sense if VAT was paid by the seller.
Sorry, but I think you didn't read my comment.
No tax is paid by the customer. He always pays gross.
For example: you run a barber shop, mens haircut 10 €, womens 10€. You charge mens from your VAT-exempt company, women from your non-VAT-exempt company. Regardless of what you get in net, the customers hand you 10€ each. However the government takes 2€ from your womens hair cutting business, after you've filed your tax statement. The customer doesn't care whether you have to pay VAT or not.
If I may ask: Do you run a business where you have to deal with filing VAT on a regular basis? I'm asking because this misconception that businesses don't have to pay VAT is something that I've held myself, obviously because I didn't knew back then what I was talking about.
> If I may ask: Do you run a business where you have to deal with filing VAT on a regular basis? I'm asking because this misconception that businesses don't have to pay VAT is something that I've held myself, obviously because I didn't knew back then what I was talking about.
I very much do, I file quarterly and deal both domestically, intra-EU with reverse charge and extra-EU which is VAT exempt.
You're conflating the fact that you're filing VAT reports and forwarding VAT money to the state with the fact that you're paying VAT. These are two different things.
Again, do you pay employees? Do you retain some money from their wages and forward that to the state as a down payment on their income taxes? Would you say that personal income tax is a tax on companies?
 I think this is usual in Europe; it surely is how it works in Italy
Okay I see this is getting nowhere ;-) Let me quote another user on this thread:
> "it’s absolutely not the same. If the VAT goes up 10%, your benefits after taxes won’t change one bit.
VAT is indeed not paid by corporations."
but if you insist that somehow the customer is paying VAT to the government, then fine with me. I'm not here to be other people's tax-attorney.
Wow, you really don't know what you're talking about... Stop reading Ayn Rand, it won't help.
i meant revenue (which i think you'll understand why it's a problem if you've ever had to pay any corporate tax in your life).
I don't like income taxes either, but to be fair, all employees are paying taxes out of their 'revenues'.
People don’t produce goods to sell ( so profits and revenue are actually not really relevant concepts). They’re the endpoint of the economy so they’re a very special item. Same reason something called VAT only apply to them.
I have food, water, shelter, and healthcare inputs to maintain my body and keep producing services. Why would my income minus those costs not map to the ideas of revenue and profit?
Because those corporate profits are owned by people, shareholders. What remains after the corporate income tax usually winds up taxed just as your income is; ie generally those profits are not just taxed once. They also get taxed again after distribution. Or if the company later spends it to eg hire someone to try to expand, that also generates income taxation. Or if they buy something with it (new equipment) to bolster their business, somewhere in that chain it's generating further income taxation related to employees (the people that manufactured the equipment, whose salaries are being paid for by the equipment sale).
Consider Apple. They'll return hundreds of billions of dollars in profit to shareholders over time. Not only was the original profit taxed via a corporate income tax, the remaining profit that is distributed will then get taxed further as personal income. The owners of that profit ultimately see that profit taxed twice before it's freely in their bank account. They don't get to skip on the personal income taxes.
If you perceive that corporate profits are under taxed, it's because you're not following the taxation chain all the way to its conclusion. Ireland for example does not have low personal income taxes, that's in part how they've paid for the very low corporate income taxes.
Simplistically, fictional company Smithfield Inc produces $100m of taxable income, they pay a 20% rate on that. They have $80m remaining, after tax profit. That later gets distributed to the owners of the corporation. That $80m will now get taxed again.
The $100m in profit Smithfield generated will see a likely minimum of a total 40% tax rate - in pretty much all developed nations - before all the income taxation is performed on the profit and finally rests with the owners of the business free & clear.
Denmark has a 22% corporate tax rate. Their personal tax rate is high. That means the owners of the corporate profits will see that profit uber taxed, as much as 60% to 70% before the government is done with it.
The point is that the net taxation by the government on corporate profit is much larger than just the corporate income tax rate. That's merely the beginning.
Honest question, why if I want to give some money to another person it's going to be taxed again although it was already taxed (except close family etc.) in context to that double taxation you wrote about.
>What remains after the corporate income tax usually winds up taxed just as your income is
In the US at least, capital gains are taxed at a different, and lower, rate than individual income.
Secondly, how do the rest of your points not apply to individuals as well. Yes the company makes money and it's taxed, and then it's paid out to shareholders and they are taxed. When I buy food at the grocery it's not some special type of dollar that can't be taxed because I'm not a corporation.
Everyone I pay out money to gets taxed as well, including banks who I pay out for loans I was given, the same way investors are taxed on a corporations income.
The only difference is that companies get to pay less because they get to write off all their expenses, while individuals have a much smaller subset of items they can expense
Depends on how many deductions they get ;)
I get in the USA:
1. Mortgage interest deduction (controversial)
2. Property tax deduction (now limited with trump)
3. Transit & parking deduction
4. Retirement account 'deduction'
5. Medical plan deductions (controversial vs single payer)
6. Tax free company snacks, cafeteria food, t-shirts / swag and morale events. I think on site electric car charging is tax free too?
7. Reduced sales tax rates on essentials such as food, clothing depending on the state.
As a fellow french having lots of tax lawyer friends, let me just say that you are naive.
Google & al earn money in France, they should pay taxes.
Right now those tech giants are using dubious tactics to avoid paying their fair share.
What is needed is simply justice and fairness.
Its actually favouring big companys, who push and punnish little companys and startups who all have to pay their taxes.
Please help me understand why is it okay to tax people on income but not corporations?
Sorry, the project is actually about taxing "revenue", i fixed it, thanks.
Taxing on revenue means a corporation that actually loose money because its expenses (salaries, investmenst, etc) are larger than its sales would still have to pay taxes, making it loose even more money. It doesn't make any kind of sense unless you're targeting a very particular set of companies that you know are making money. In which case you're taxing those companies, but you're also creating a law that makes it almost impossible for new companies to start competing.
The sad part is everyone would prefer taxing profits, but that just doesn't work with multinational firms. Since, you know, they will restructure their company to on paper generate all profit in a tax haven. For example their algorithms are owned there, even though it was probably developed by you local citizens, is deployed on you local server and the sale to the tax haven happened for a symbolic dollar and for sure not an open market.
It is also almost impossible for new companies to start competing if existing big players can easily avoid paying taxes while you cannot. And no, we cannot simply allow everyone to not pay taxes.
You realize it's possible to adjust the taxes required on revenue so that it doesn't dwarf profit. It doesn't automatically follow that taxing revenue means that the taxes will be insanely, unpayably high. It's a strawman argument.
It does make tons of sense. What doesn't make sense is running a business that doesn't bring profits. Taxing revenue is one idea end accounting shenanigans and unfair practices like price gauging
to eliminate competition which is now tax advantages strategy.
Iam not a fan of it for other reasons but it does way more sense taxing profits which is just non workable idea.
EDIT: replying to child (not possible to reply directly): your argument about high cost industries is bogus. A system without tax on profits would just make those services more expensive as they should be (they are mostly high cost because they are very environmently unfriendly). It would also make higher margin services cheaper (cause they can afford it and there is less spending power). Once you actually think about it and analyze various scenarios you will realize that taxin profits from the very beginning was based on intellectual laziness and lack of ability to predict outcomes of such policies.
You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ?
Also, some companies like industries have huge revenues but make few profits because of the enormous cost to produce what they sell.
Try thinking about the various cases and you’ll soon realize there’s actually a very good reason why corporates taxes have always been on profits, since the very beginning.
> You do realize the whole concept of a startup is about raising money because you know you can’t both grow fast enough to conquer a new market while at the same time making profits ?
But undoubtedly a start-up during that phase also benefits from public education and roads, from state-subsidized internet and transport, from security provided by the police force etc and hence should also pay its fair share towards those costs?
i suppose you're french, because it's the one argument people keep repeating again and again whenever someone speaks about tax reduction: but what about the roads then ?
The problem (beside the fact that corporate tax on revenues is just one tax corporations are paying among others) is :
1/ every single developed country has roads and hospitals and schools. Look at how much they ask for tax and the service they offer (and no, don't believe what people in france tell you. We don't have the best hospitals by far, and we don't have the best schools).
2/ at which point do you think we should stop adding taxes ? Is there a limit, or will you always be able to say "but then, what about the schools and the roads" ?
> you can’t both grow fast enough to conquer a new market while at the same time making profits
Maybe it would be a good thing if "grow fast...conquer market" were less of a goal for new companies than building one of a number of stable and sustainable businesses serving a market?
Perhaps we'd get markets where a variety of products and services compete on their features and merits, each having an appropriate place within the overall market, instead of an unhealthy winner-takes-all situation where the startup that gets the most money thrown at it can spend its way to world domination.
The best analogy is that taxing corporations on revenue would be like taxing you based on the # of hours you work, irrespective of your wage rate.
Folks that work low-wage or volunteer jobs would suddenly have negative income. The only viable jobs left would be bankers and software developers.
I am, essentially, taxed based on my revenue, because my taxes don't let me deduct my rent, my car payments, my gasoline, or my groceries  - all of which are essential expenses that I need in order to continue working.
Corporations, for some reason, only get taxed on revenue - expenses.
 Whoop-dee-doo, I can claim a $3,800/year deduction. As if anyone in the United States can live on $3,800/year.
Particularly the rent - without stable jobs and actual career paths that are rewarding it doesn't make sense to actually buy a house in an area. As if it's possible to afford one near jobs in the first place.
Even if I were to buy a house, most of my mortgage would not be deductible. Only the interest portion of it. None of my home maintenance expenses would be deductible, either. Neither are the ridiculous fees that get paid to the mortgage underwriter, the realtor, etc.
I'd love to only be taxed on 'profit' - the money that goes into my savings account, after deducting living and transportation expenses. 
 Actually, if everyone were taxed on profit, my tax burden would proportionately go up. It would be a fairer system of taxation, though.
Corporations aren't consumers, so corporation tax is passed on: to customers, employees, or shareholders. Levying taxes via corporations disguises the true level of taxation.
Depends, when the corporation is a multinational, then they can evade local taxes by various tricks and send all the profits outside the country. Thus it is necessary to close this loophole, to keep the tax money in the source country.
In that case the economic efficient form of taxation is an expatriation tax.
How would that work in practice? The subsidiary in country A buys all their services from HQ with the price just so happening to consume the profits. How do you tax that without essentially stopping international collaboration?
That is the core of the problem. This is the only thing that people working on gafa tax evasion schemes should be working on day and night, and i’m pretty sure they’d get some help from the US tax department.
I can’t believe there aren’t ways to detect when a subsidiary buys services from HQ at abnormal prices.
Tax agencies argue about the fair value of assets and services all the time. Companies are already forced to do this when estimating VAT among subsidiaries.
So while it is a problem, its not a new one - nor an unsolvable one.
At some extreme point (like Starbucks for example) you can just declare it fraud and calculate an appropriate amount of tax they should pay and make them pay. Finance is the only legal area I know where we apply everything by the letter of the law and not the spirit of it, that concept did apply for torrent sites for example, if you only base it on technicality, they are legal.
If US corporations hike their prices up to cover the tax, that would increase the competitiveness of local companies who have already been paying their fair share of tax. Perhaps that's the encouragement governments need to stimulate the local economy further.
Sounds like tariffs. If you want that - fine it makes sense. Just don't bully others to apply tax rate of your choosing on terms you want on business outside your country.
Just about everything the EU does these days is blatant protectionism. This short sighted focus on punishing successful foreign competitors vs growing strong local companies just weakens Europe in the long run and exacerbates the very problem they are trying to solve.
European union doesn’t let members decide on tarifs on their own borders.
Corporations absolutely are consumers, they buy stuff just like everyone else.
Sales tax and income tax covers everything more efficiently in the right location. Sales tax takes place in the country where the products are sold, then that income to the company is distributed between staff and shareholders who pay income tax where they live and work. Corporation tax is some kind of tax on efficiency and usually in not in an optimal location for the benefit of society, either by accident or on purpose.
I agree with OP. I am French as well. I can confirm that for a French politician, any issue can be solved by adding a new tax. Tax for this, tax for that and whatever else.
They just have no clue about what to do so they try to tax it.
Well, guess what, people who actually want to achieve something productive, who want to make a good living, who want to start a company and not see our profits taxed again and again to feed a bunch of bureaucrats who have never even run a business before, those people they have already left and they are not coming back.
> how come all those companies HQ in europe are in ireland
Ireland has been busted (among others) for secretly passing sweet taxation deals with Google, Facebook, Amazon & co. According to you, that's the way to do it, right ? Tax race to the bottom, give deals to big player that no small company has hope to ever negociate, that's sure to bolster competitors. Any kind of attemp to level the playing field by applying tax uniformly on the European level is "sick".
> Ireland has been busted (among others) for secretly passing sweet taxation deals with Google, Facebook, Amazon & co.
That is 100% uninformed nonsense.
If you are conflating it with Apple vs EU, you can read this primer: https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
Nothing to do with a country offering a multinational a deal which results in a lower effective tax rate, and is something _EVERY_ country in Europe offers.
Why should Ireland be able to determine the taxation policies of Ireland? The EU doesn’t set immigration law for Ireland does it? Why should it be allowed to dictate tax law? Low taxes can be a competitive advantage to fiscally responsible countries, why must the EU try to “fix” that?
Because Ireland has signed treaties that restrict its actions? If they don't like the rules they can leave the EU. Sadly for them leaving the EU would also make them less interesting as a tax haven. Choices choices.
Also this is not just about 'taxation policies'. They are pretty free in their policies, except that they can't make exceptions for particular companies because such special deals give a company a competitive advantage, distorting the market.
For sure the EU sets at least parts of the immigration law of Ireland. Every EU citizen is free to settle there. Even more, Ireland is a Schengen party, so any visa or legal immigrant of a Schengen member must be accepted to Ireland as well.
> so any visa or legal immigrant of a Schengen member must be accepted to Ireland as well.
This is not true. Only those with a EU country citizenship are fully covered by the free movement rules.
You can read more about it here:
https://ec.europa.eu/immigration/general-information/already... but I will give you a quote: "To move from one EU country to another for more than 90 days, you will need a long-stay visa or a residence permit for that country. If you wish to work, study or join your family in the second country, you may have to fulfil more conditions."
An exception to this are so called Blue card holders, but only those with certain education/ professional experience plus job offer with a salary above a certain level are eligible for such a card.
I'm from the US. You could just replace France with the name of my state in your comment and it would hold. We don't even have scooters yet and they're talking about passing regulation in case it becomes a thing. Some places are really used to using regulation to (attempt to) solve problems and when you've been swinging a hammer for the past several centuries it doesn't really matter whether the nails you think you're hitting are bolts because you forgot how to turn a wrench long ago.
> We don't even have scooters yet and they're talking about passing regulation in case it becomes a thing.
That's a good thing, not a bad thing. It means your regulators are paying attention to events elsewhere and are trying to proactively prepare for them, rather than flailing about in reaction to complaints and problems. When the scooters come, your jurisdiction will be ready for them, rather than having to ban them just so they can catch up.
making new laws to solve problems that don't actually exist yet is the opposite of what I would call a good thing. maybe this is a cultural difference between the US and Europe, but over here we tend prefer for the government not to swing its weight around until there is clear evidence of a problem.
> making new laws to solve problems that don't actually exist yet
> but over here we tend prefer for the government not to swing its weight around until there is clear evidence of a problem.
There is clear evidence of a problem: SF banned scooters to give itself time to figure out how to regulate them: http://www.sfexaminer.com/companies-pull-scooters-off-sf-str.... There is no reason to think SF is particularly unique and that other municipalities won't have similar experience.
And even before SF banned scooters, there was clear evidence of problems with dockless rentals in China: sidewalks became bike parking lots with little room left for actual walking.
This idea that governments should only regulate if there's a manifested problem in their particular jurisdiction is pretty stupid, frankly. It's like saying you shouldn't make up your mind about crack cocaine before you've actually tried it and experience the problems it causes.
So what you're saying is, we shouldn't use laws to fix things?
I don't think that's what's being said. (Perhaps I'm wrong.) The gist I'm getting is, just because you have a hammer doesn't mean everything is a nail. And that yesterday's nail might not be today's nail.
The prevailing issue being, politicians - under the false pretense that they paid to be "leaders" (read: look at me! look at what I can do!!) instead of problem solvers - grab their hammer and do what they already do...pound away.
How's that working out for us?
Note: I'm not suggesting a solution per se. Simply acknowledging that we have a problem, and the general nature of that problem.
I don't think that's as unreasonable as you make it sound. Laws should not be the knee-jerk reaction to every problem; there are many who think they should be effectively be a last-resort measure (when there truly is no other alternative). Obviously, there is large political disagreement on this issue (viz: conservatives vs. liberals, to use American jargon).
I wouldn't qualify this as a knee-jerk reaction. I'm not saying it's not misguided in its current form. What I mean is that tax evasion in the EU is a well-known problem, and a fix is looooong overdue.
> Obviously, there is large political disagreement on this issue (viz: conservatives vs. liberals, to use American jargon).
There is not as much disagreement as it can sometimes seem, between those particular groups, as ID'ed using that jargon.
The American Conservatives and the American Liberals both think that laws should be the knee-jerk reaction to certain sets of problems. Their differences lie in which problems those are: by and large, the Conservatives say that those are the social problems, and the Liberals say that those are the economic problems.
But you are right, there are many who think they should be a last-resort measure in all-but-every case: the American jargon calls them Libertarians, and the American first-past-the-post voting system calls them personae non gratae.
As a European I think this is a smart move on the contrary.
Google cannot get rid of the EU market, if it does, EU competitors might have a chance.
So the EU can just tax Google as much as it wants. What are we to be afraid of ? Google leaving EU ? Please do ! This will only gives us a chance to come we our own solution to the web Google&FB think they invented.
I don't get how we could not be glad that we tax more those dystopian companies. Google, FB, etc... don't respect any values of privacy and freedom, they should not have even the right to do what they do in EU and GDPR is step in the right direction for that.
The only problem is that we have no weight if we don't act together, so if some European countries are too short-sighted and put their self little short term interest above the rest and prefer offer encourage Google's development, then yes we will fail.
You totally underestimate the governement ability to understand things.
They have a background, a history. They’ve spent the last 40 years adding layer upon layer of tax and subvention mechanism to try to regulate the economy while solving zero fundamental issues ( unemployment, industry, global private sector attractivness, education and recently even healthcare).
The only thing they’ve managed to do is to increase the cost of the public sector. So yes, indeed i don’t have any kind of trust in their ability to understand pretty much anything.
Are you aware that "the government" changes every ~5 years and the majority of recent French Presidents and their parliaments have been on different political spectrums? There is no "they". So what Sarkozy's government was doing was radically different than what Hollande tried to do in the first part of his mandate (he rolled back quickly when he saw it's not making anything better), and it's also different than what Macron is doing. At least the last one is actively trying to improve on tons of things, including what you're bitching about - regulations.
Are you aware that every single high ranking french administration officer and policy maker for the last 50 years came from the same school ( including bruno lemaire), and that this school recruits almost nobody coming from the private sector ( although this is starting to change, but only very recently).
That’s the « they ». Everybody in the fifth republic believes that the state should regulate the economy, while having absolutely no personnal experience in the private sector. The only differences they have are on society issues, but from the economical point of view i have yet to witness one government that actually lowered the tax ratio ( just look at the CSG which was supposed to be temporary and 3% 25 years ago, and is now still alive and reaches more than 10%)
As for the efficiency of the public sector and the tax system look at france’s tax vs gdp ratio compared to other european country, as well as our ranking in education performance ( both young children school and university). Also have a look at unemployment rates, compared to other european countries.
Edit : to be fair, macron did come from the private sector ( just a few years though), and he did in fact remove a huge chunk of the ISF last year. That was a glimmer of hope. Also another reason why seeing France go back to its old habits makes me mad.
1 - You seem to imply that for one to be a good "bureaucrat", one needs to have roots in the private sector. Can I just say that this is far from obvious for everybody? If anything, I'd be wary of those people as they pose a far greater risk of conflict of interests. I don't want to be run by lobbies, thank you. The recent story of M. Kohler, Macron's closest ally, makes me very wary. I won't say that all private bankers, CEOs and whatnot are the devil, because I am not a popullist know-it-all, but I do not trust them more just because they've worked in the private sector, as if it were some kind of holy virtue.
2 - I know a capitalist system that notoriously fails to redistribute wealth even though it's the richest economy in the world. Its ruling class seems to be keen on implementing those ultraliberal taxation ideas of yours. Sub-par healthcare and expensive education is the result. Then again, that is not a system that I think is worth emulating.
3 - As much as I appreciate politicians in general, I wouldn't be so immodest as to pretend that they're a bunch of stupid bureaucrats, meaning by that that I know how things work better than they do.
Wow, so now not accepting taxes on revenue as something sound makes you « ultra liberal » ?
how fast things evolve...
This is the textbook definition, yes. At least in France's political jargon.
This is idiotic. No one gets educated in France? You have no roads? No police? Nothing? It might not be optimal, but to decry the public service for achieving nothing is really wrong headed.
> The only thing they’ve managed to do is to increase the cost of the public sector
The cost of the public sector has increased because of the large wave of privatizations, it's called the cost of capital.
This is just getting into an ideological rant now.
Why shouldn't the bureaucracy be fed? These companies make money off of it.
I don't see any justification for your position besides a nebulous wish for Europe to have an equivalent of google/facebook, and to be honest, besides adding an extra line on all those "european unicorn" blog posts, i don't see much advantage to it either. There's obviously positives to more profitable businesses - but why another google/facebook?
> There's obviously positives to more profitable businesses - but why another google/facebook?
Some Europeans want in on the industrial surveillance tech complex profit machine.
France has a competitor to Google and that's called Criteo, one of the biggest ad business in this continent.
It's not a search engine, it's only an ad business.
Criteo is « just an ad business » ( which is going to take a huge hit from all the privacy measures, btw). It’s extremely vulnerable compared to the company that own the content platform, aka the search engine, or the social network. Calling them a competitor to google is true, but it’s also a very narrow point of view.
Just look at how well it’s doing on the stock exchange and you’ll see what i mean,
Google is an ad businesses. At this point their other products; search, Gmail, Android are all just loss-leaders.
How do you feel about having to pay more tax because the big Amarican companies move profits of shore to avoid paying tax?
Whether this policy is good or bad will depend on the details. But generally, in Europe, this kind of priposal is a populism magnet and a dancefloor for cheap politics.
"Standing up to multinational corporations and making them pay their fair share (ra! ra!)" is exactly the type of rhetoric our most generic politicians love.
An American equivalent might be some "government out of your hair" initiative to reduce professional liscencing.. or somesuch.
Once you've got something like that on the table, all the cheapest politicians come out of the woodwork.
On a serious not though, I think it's a good idea if (and only if) this names and addresses the problem which this actually intends to fix: company tax.
Companies have always been difficult to tax properly for 2 reasons. (1) "profit" is whatever your accountant says it is, and this is a manipulatable figure. (2) companies operate in multiple tax jurisdictions. Between these two things, these companies don't pay tax. Besides denying the taxman her due, this gives bigger piles of money and advantage over smaller ones. Not fair. Sad.
I just don't see how modern democracies can address something like this. It's at the nexus of all the things we suck at (politically) at the moment. Cheap idealogy, corporate interest groups, and complicated systems.
This is because taxing profit is a very bad idea. It leads to situations where two companies doing exactly the same thing pay different taxes because one uses less efficient (and often more polluting) technology or just chooses to buy luxury cars for the employees instead of showing profits. The tax on profits is a tax on honesty in accounting and even if accountats are honest it's still impossible to determine fair value of things like offshore licensing.
Once you accept taxing corporate profit is a very bad idea the solutions magically appear: tax consumption and things we don't want (pollution, land usage etc.) It's very easy to make consumption tax progressive if you want that (higher rates for luxury goods, refunds up to X amount per month, funding social services with it etc.).
There is no reason to debate what a company based in country at the end of the world should pay or how your neighbors choose to tax their companies. If they do business in your country the revenue is collected by consumption tax. If your country is nice to live in people will move and pay tax there. The incentives are right for the politicians: make your country businesses friendly and a nice place to live and for the companies who move to places which are more business friendly and better to operate in as tax rate isn't an issue anymore - everyone sets their consumption tax rates and everyone who sells there must oblige.
The countries setting their corporate tax to near 0% have the right idea. I hope they won't be bullied of their position.
> If your country is nice to live in people will move and pay tax there.
Many countries apparently nice to live in are doing their best to keep people out.
>or just chooses to buy luxury cars for the employees instead of showing profits.
those purchases are taxed as income
I meant buying them as company cars. I hoped it's obvious. It's the reason there are so many nice things bought by companies and why they organize expensive symposiums and meetings in nice locations - there is a rebate on that.
> This is because taxing profit is a very bad idea.
Wouldn't the same argument hold for income tax then?
I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc.
He can't, if he buys it as company expense then it's not your property.
But yeah same is true for income tax, my country has a really high wage income tax at top bracket (close to 50% with health&benefits) that kicks in really fast, but profit income tax caps at 20% because people would just take profits out of the country if it was higher. so a lot of people work around it by invoicing their salary as self owned company pay min wage and take the rest as profit.
It makes some sense because wages come with a lot of benefits guaranteed by labor law while self employed people take a lot of risks but in general I see progressive taxes as a bad idea inviting scams. It's better to tax consumption of luxury goods at higher rate and/or use more tax revenue to fund social services mainly poorer people use.
That is absolutely true. The reason why it's not discussed on the same level is the scale.
The profit out of salary (for most people) is just not big enough to justify an accountant to optimize.
There is a lot to be said about replacing income tax with a pure consumption tax (it is one possible financial model for the universal basic income).
Company cars are a benefit in kind and are taxed in the US
> I mean, I can evade income tax to a certain extent by making my boss buy me a nice car, computer, bicycle etc.
Most systems tax these at a higher rate. See e.g. https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia...
Income tax is more like a tax on revenue, not a tax on profit. And your boss would have to pay taxes on gifts, so while you might not have to pay for it, the government is still getting its due.
It really depends on the tax jurisdiction. In some jurisdictions, those perk are taxable benefits.
Private use of corporate assets is considered income-equivalent for tax purposes.
Can you have a progressive consumption tax though? Because otherwise the average corporation would have to pay a lot more in consumption taxes vs corporate taxes to keep things revenue neutral.
Except we're not talking about a far country in a galaxy far, far away, but a close ally that actively benefits from the advantages of being a close ally, while pulling bad tax tricks that are detrimental to the countries that allow it to thrive.
It's not about fixing the Bahamas here.
I do agree with your first sentence though, whether this is good or bad depends on the particulars.
Apple and Facebook are currently building massive datacentres in Denmark, and Google has bought two plots for future datacentres.
They have definitely been wooed to denmark, labour and consumer electricity prices are some of the highest in the world.
I doubt that some data centers make much of a difference. Those tend to be employ maybe two cleaners, one depressed robot and one or two jaded administrators, plus their pot dealer.
They also don't buy anything locally, except electricity at negotiated prices close to or below the costs of production. Maybe they lead to some earnings/profits to be at their location? Considering the issue discussed here, I doubt that.
> Those tend to be employ maybe two cleaners, one depressed robot and one or two jaded administrators, plus their pot dealer.
You just wrote the plot to The New IT Crowd..
>one depressed robot
Eh, I've always seen them more as Kryten than Marvin.
> consumer electricity prices
due to taxes which companies don't pay, so that doesn't matter.
Look at the following graph (you need to expand it). Denmark has the lowest prices.
Price of electricity in Denmark is less than 51% of the price in Ireland!
Well pointed out, consumer prices are irrelevant here.
Having said that, EU law is supposed to prevent governments from propping up local industry.
Can anyone expand on which knobs an EU country is allowed to fiddle in order to attract these types of projects? I believe tax breaks and direct subsidies are not allowed.
I didn't even need to click the link to know that Ireland was gonna be one of the three.
It's like they have a vested interest, or something.
Good for them. France and Germany take endless steps to protect their domestic economic interests regardless of what any EU legislation or sense of fairness says, Ireland is well within their rights to do the same.
> France and Germany take endless steps to protect their domestic economic interests
It's not even that in this case, because it's not like there are serious European competitors to these companies (except maybe the odd Samwer clone here and there) that could even be protected. This is purely an attempt to rip these companies off, because the governments can.
The flip side of this argument is that the companies are ripping the countries off by using myriad tax loopholes, because they can.
I find it interesting that the companies are often portrayed as smart for doing this, but politicians are jealous and incompetent. Almost like we worship businesses and malign government. I wonder whose interests that viewpoint supports.
>I find it interesting that the companies are often portrayed as smart for doing this, but politicians are jealous and incompetent. Almost like we worship businesses and malign government. I wonder whose interests that viewpoint supports.
Megacorps have been systematically screwing people for several hundred years. By comparison, most of the book of Exodus is a story about government systematically screwing people. People seem to prefer the devil they don't know right now. The arc of progress is long.
The anecdote is funny, but what does it have to do with anything?
One could argue that the statist systems in Scandinavia work quite okay... don't you agree?
I think many people here believe the correct thing for politicians to do would be focusing on making their own countries more competitive when it comes to having tech giants of their own, and they view regulations or taxes like this as being partially the result of 'sour grapes' that their own countries are less successful in this arena.
More competitive, OK. Who doesn't want their country to be more competitive anyway, whatever that means? Certainly no one in their right mind would argue to make it more diverse, more educated while we're at it?
How about you share how you think this could work? While I agree for more competitiveness for my country, history has shown me repeatedly that low taxes isn't actually working out that great.
Equating low taxes with increased competitiveness is to me dishonest as a generality. I'm certainly not opposed to admitting that it can work in some cases, but I can't agree to this as a general rule.
Why would it be lower taxes? All the major tech hubs in the US are in higher tax areas (by US standards). If lower taxes were the solution, you'd see Silicon Valley in Texas or Oklahoma or somewhere like that.
The fact that you commented against a proposal made by a parent made me believe that you were in agreement with it. Sorry!
The rub is what “more competitive” actually means. I get the feeling lots of people think it means lower taxes, but limited government also hurts a company’s ability to hire educated employees if lack of funding hurts education.
If being more competitive meant lower taxes, Silicon Valley wouldn't be in California, it'd be in Oklahoma or Kansas or Utah, or some other GOP state that pushes lower taxes.
>but politicians are jealous and incompetent
...well they did create these tax loopholes in the first place. That’s pretty much the definition of incompetence.
So are you arguing that corporations should pay more tax than they are legally required as a gift of charity to countries? If so, how much? What if a competitor decides to pay less?
The politicians in the US, Germany and France didn’t create the loopholes tech companies use in Ireland. The globalization of business is what allows maneuvers like the “Dutch Sandwich”. Taxation hasn’t really adjusted to this type of international tax avoidance. It will likely be a prominent discussion over the next 20 years based on the Panama Papers.
Corporates likely helped shape those loopholes, and viciously fought the legislation the entire way. Let's not pretend these corps are innocent victims here.
Ireland have already been given some lucky charms by the EU. For example, they were given permission to set their corporate taxes to a ridiculously low 12.5%.
It's an increasingly low corporate tax rate world. Ireland's rate is no longer as unusually low relative to other EU nations as it used to. The average EU corporate tax rate is getting close to being in the teens.
Hungary 9%, Bulgaria 10%, Lithuania 15%, Romania 16%, Croatia 18%, Poland 19%, Czech 19%, Slovenia 19%, UK 19%, Estonia 20%, Finland 20%, Latvia 20%
Even Denmark is at 22% and Norway is at 23%, traditionally high tax countries.
Outside the EU in Europe you have Montenegro 9%, Macedonia 10%, Bosnia 10%, Serbia 15%, Georgia 15%, Albania 15%, Belarus 18%, Russia 20%, Armenia 20%.
Another decade of rate competition and the EU average might be down to something close to 18%.
The real unusual stand-outs these days are the high total rate nations, like France, Belgium, Greece and Germany, rather than the low rate nations.
I don't think the popularity of these low rates is a justification. It just highlights how it has become a race to the bottom.
Regarding multinationals which might place their EU "tax address" in any of 28 countries, those countries which choose to set low taxation rates have (logically) decided they would rather attempt to have a low percentage of something than get a higher percentage of nothing at all.
Q: How many companies would site a corporate office in Luxembourg if there were no tax advantage?
Spoken like somebody who knows very little about the topic.
The effective tax rate is far lower than this, but also, most countries have an effective tax rate for megacorps far lower than what they advertise once exemptions, subsidies and tax-breaks come into play.
The difference is, that the Irish rate applies to any business taxing its income in Ireland. It doesn't have to be a megacorp, they do not have to have special relations to get subsidies or tax breaks. It may be your company, if your registered and operate it there.
That's not the case in other EU countries.
The difference is, that the Irish rate applies
Speaking as an Irish resident, I can tell you that this is effectively untrue. Indigenous businesses, or even businesses small enough to not get the sweetheart treatment of the relevant authorities definitely do not get equal treatment. The difference is vast.
Are you suggesting that indigenous and/or small businesses are taxed at a higher rate than the published standard 12.5%, or that they don't qualify for even better exemptions and thus lower effective rates than 12.5%?
GP was indicating that Ireland has one of the lowest standard corporation taxes at 12.5% available to everyone, not that there aren't even better effective rates offered to larger corps & multinationals.
Yes I’m stating that as an absolute fact.
Can you provide any evidence, as everything I can see shows 12.5% on trading income, and 25% on non-trading income.
Are you referring to the non-trading income corporation tax rate, or is there something else going on? If something else, that sounds an awful lot like corruption
That's not to mention the impact that the US tax system has allowing megacorps defer and arbitrate their tax obligations, which effectively lets them pay even less than that
Yes but a lot of that is done by allowing large companies to offshore their profits.
No, that's not completely true. It's a part of the picture but there's plenty more strokes going on than that.
Hence "a lot" which allows for other processes. We agree.
To me “a lot” signifies “most of” which I think understated the amount of other skullduggery going on.
Why would a sovereign state even need permission from others about purely internal matters such as corporate income tax rates?
Because it's not just internal.
The EU allows for free cross boarder trade and movement of assets within the EU. Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there. It's an automatic incentive.
There are rules here because otherwise it would be a race to the bottom. Each country wants Amazon, Google, etc for their employees' income tax.
The whole EU loses out from one state giving multinationals preferential treatment.
>> Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there
I'm not sure this is true any more, at least not everywhere
"Amazon has become the first technology company to abandon controversial corporate structures that divert sales and profits away from UK in the face of a clampdown imposed by George Osborne.
From the start of [May 2015] the online retailer has started booking its sales through the UK, meaning resulting profits will be taxed by HMRC [the UK tax authority]. The group made $8.3bn (£5.3bn) of worldwide sales from British online shoppers but for 11 years all these internet transactions have been booked in Luxembourg."
Amazon and Apple have both been bitten by EU states offering illegally disproportionate "deals" to individual companies. These were deemed to be state aid by the EU and each member state (Luxembourg and Ireland respectively) were required to charge back-tax to correct the tax situations.
But there are still lower tax areas. This is still an issue that is not simple to unravel because flat tax was not a founding part of the EU, something we figured out after the fact.
Amazon, Ebay, and Google all put the vast majority of their earnings through secondary states within the EU, not the main markets. I'm not sure what Apple do these days, but they've just paid a couple of ~£200m in extra tax found from an audit. The others "claim" they are going to rectify this, but it's all face-saving. They're all lying tax cheats.
I meant to also point out that they said this in 2015 but from my reading of my invoices, and their various Companies House filings, Amazon EU Sarl is still the entity trading in the UK.
Their UK businesses are tiny. Warehousing and marketing.
Then let's have a race to the bottom.
Some people seem to assume that high corporate income tax rates are a good thing, but there's really no proof of that. We would all be better off if every country eliminated corporate income taxes entirely, and made the change revenue neutral by increasing taxes on high income investors and employees. This would encourage economic growth by eliminating resources wasted on tax accounting and avoidance.
Zero Corporation Tax allows multinationals to make huge profits and just chuck the money back home, even if that's outside the Union. Yeah, they're probably paying tax on it somewhere, but it's not taxed in the place it was earned. That's the problem here. Countries are losing cash and tax revenue to this.
Your trickle-down economics is similarly unproven.
I think the idea is that governments should tax things which aren’t as mobile (personal incomes, land, consumption etc) in order to minimise the distorting effects on the market tax can otherwise have. There are positives and negatives to that but it’s not totally obviously bad.
When most of your income comes from being an owner, as opposed to a worker, your 'personal income' is incredibly mobile.
They don't. What Ireland has signed on, is that, just as in any EU country, the corporate tax must be equal for all. National or local governments cannot negotiate deals with specific companies. This is a promise they have broken, and the cause of all the noise about Irish tax.
Seeing so many people discussing this under wrong assumptions, even on HN, makes me sad and makes me think there's a very low ceiling on tax complexity, above which people lose track completely. This means we'll never be able to fix tax. Only tax lawyers will ever even begin to grasp it. It's also a pretty good argument against direct democracy as well as an argument for abolishing the corporate tax completely.
These conclusions are only yours. One could argue that although the ceiling could be pretty low, it's not something that is set in stone.
Besides, it's not like your alternative is any more appealing anyway. I'm not so sure about the absolutism of saying "oh, it's not perfect, so let's just abolish it completely to make sure countries get even less to subsidize healthcare and education".
Before implicitly calling other people braindead next time, maybe consider that none of us are 100% right and we are all just having a discussion.
Because it's not a purely internal matter when you have the Single Market. You know, the one they have willingly and knowingly signed up to?
Ireland's corporation tax rate is purely an internal matter, even in the single market. In fact, Ireland rejected by referendum the Lisbon Treaty in 2008, and only voted for it the following year after a series of clauses known as the Irish Guarantees were added. One of those guarantees is:
> Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or
operation of the competence of the European Union in relation to taxation.
It's legally binding, and ensures that Ireland retained the right to set our its corporation tax rate.
All the other EU nations at the time (some have joined since) unanimously ratified the Irish Guarantees, so if anything, it's rich of them to now complain about an agreement that they willingly and knowingly signed up to.
Because it's in all these countries interest to avoid a race-to-the-bottom and being played against each other by companies that only need to move a mailbox to change jurisdictions.
For examples of the same mechanism: Amazon's HQ2 farce aptly shows what happens when jurisdictions cannot effectively coordinate and are forced undercut each other. Is there any doubt that Amazon would settle in some city and hire people and pay taxes without their little version of Hunger Games? So the net effect is simply some city being marginally better of but forgoing the jackpot that would usually come with being chosen, and therefore those citizens having to pay instead.
Plus the harm that comes from Amazon making decisions based on money alone, to the detriment of other factors such as quality-of-life for its employees.
That's why any trade deal includes provisions prohibiting subsidies not covered by a few narrow exemptions: they distort the competition and simply lead to losses in a zero-sum game between nations and private corporations.
This should help explain Brexit a little better. The EU is about giving up sovereignty. It may or may not be a fair trade depending on your POV. But people talk about it like the EU is a no brainer by looking only at economic grounds.
For me, the whole aspect on which the EU is a no-brainer is peace, and leverage against powerful lunatics and maniacs, like Trump and Putin. Which is precisely why the latter is hell-bent on dismantling it.
Not from the economical standpoint.
I don't think the the people who value their ideology more than pragmatism are concerned with peace to be honest.
Was it wrong for the parliamentarians to fight the royalists in the first English civil war? Many lives were lost but the foundations of democracy were set and the monarchy weakened. The pragmatic view would have been to maintain the status quo that had worked for hundreds of years rather than the uncertainty of war.
Every person has their breaking point where mere pragmatism no longer holds sway. Peace, but at what cost?
To be honest, it's not about what people value. It's about what we have in practice. There hasn't been a war between EU countries for a while now, and that's something that I appreciate, given our history. Sure, you could argue that nuclear dissuasion is the reason why, but we don't even have any kind of cold war going on either, and I think the EU is to thank for that.
The leverage against foreign countries is a real pragmatic thing, though, not some ideology. Why else do you think Trump celebrated Brexit, and actively tries to break up different unions that we've spent years building, like NATO? I'm not saying that he's the devil, even though I'm not a big fan, but I understand that he's doing it to have his way with less opposition. Divide and conquer?
because that sovereign state agreed to an economic union with other nations.
That's a non sequitur. One matter has nothing to do with the other.
It does if that Union determines how some tax laws are applied union-wide.
Because they are a member of the EU, a trade union that evolved into much more. They can choose to leave and also lose all their tech HQs that are only located there because Ireland is part of the EU.
That's simply false. The current EU membership terms don't grant it oversight of member state corporate tax rates.
But it does provide for rather strict limits on subsidies, and a subsidy is indistinguishable (or, actually, defined as, among other things) making one-off tax deals with individual companies.
Not given but negotiated, as a part of EU treaties. Similarly to the subsidies for French farmers or the access to Irish waters for Spanish fishermen.
All nationalistic jingoism aside, it's pretty hard to deny that Ireland reaped huge profits from EU membership. Considering it started as one of the poorest countries of Europe when it joined in the 1970s, subsequently received billions in direct transfers plus favorable conditions as outlined above, and today is among the richest countries in the world.
That's not to diminish Ireland's accomplishments in the least. The combination of a well-educated population and speaking (something akin to) the English language alone made them predestined to catch up eventually. Being able to engage with their former enemies in the Good Friday Agreement was also exemplary and undoubtedly returned fantastic dividends, both economically as well as morally.
But to deny that being part of the world's largest free trade block was an essential part, or to insist that when Ireland joined 40 years ago the EU was expecting, and motivated by, any short-term financial interests just seems...unnecessary petty?
Because there's nothing dishonorable in that story. Nor are those two aspects contradictory.
Germany does pretty well with an origin story far darker: not only to have started far lower than Ireland has ever been, and receiving far more support at a time where the idea of short-term returns were laughable (the Marshall Plan). But to have caused that same miserable situation pretty much single-handedly, and being the recipient of gratuitous support by essentially the same countries they had devastated in that mad crusade less than a decade prior.
Permission? Lucky them having to ask permission to set their own tax policy.
- "p̶e̶r̶m̶i̶s̶s̶i̶o̶n̶ ̶t̶o̶ ̶s̶e̶t̶ ̶t̶h̶e̶i̶r̶ ̶o̶w̶n̶ ̶t̶a̶x̶ ̶p̶o̶l̶i̶c̶y̶"
+ "permission to screw over the other countries they're in economic union with by acting as a tax haven for transactions that occur in those other countries"
The way to go Ireland. A ridiculously stereotypical statement from the French finance minister:
“It just remains for me to offer Paschal a beer in a Dublin pub, and then I think we’ll be able to move toward a decision,” he said, referring to his Irish counterpart, Paschal Donohoe
I don't really see it that way, to me it sounds like he's trying to sound like he wants to have a friendly discussion with the Irish finance minister (and not sound too coercive or aggressive). People routinely drink beer in Parisian bars and pubs as well, if he's playing on an Irish stereotype it's a very mild one.
Yes they're an obvious one. I was surprised though that Luxembourg wasn't listed whist Sweden and Denmark are.
I'd be interested to here their objects if anyone can point at a fuller article or discussion of the issues.
This is from earlier this year, so the debate may have progressed since then, but Sweden and Denmarks' concerns seem to stem from the way in which the EU aims to apply the tax.
>“A digital services tax deviates from fundamental principles of income taxation by applying the tax on gross income, i.e. without regard to whether the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena Andersson, and her counterparts from Denmark and Finland, Kristian Jensen and Petteri Orpo, said in a joint statement on Friday.
I guess the reason for applying the tax this way is that tech giants (and non-tech corporations) use creative accounting tricks to avoid making a profit and thus paying taxes to the countries they operate in.
It's either disguised as loan interest repayment or licensing fees, but the goal is tax avoidance.
It's an intriguing concept.
What effect would a tax purely on size (income rather than profit) have on the world economy, if everyone were to adopt such policies? It would discourage large companies and encourage small ones.
It seems like employees do better when there is a bigger and more diverse marketplace for work, ie, many smaller companies. So they would win out, hopefully.
Customers may or may not do better. It would encourage companies to keep prices low to reduce gross income, and give an advantage to incumbents in the same marketplace. But one Amazon with it's fulfillment centers, delivery networks, etc, is more efficient than two overlapping half-sized Amazons. Twice the delivery trucks means twice the delivery costs and pollution.
Overall I'd be for such a system, provided it were not too onerous and didn't target specific companies.
It would not select against size. It would select against low margins.
Google and Apple would be fine. Amazon would be toast. Your local supermarket would be toast (avg grocery store margins are 1%). Any startups that are just scraping by, no matter how small, would be toast.
You would basically crank up the difficulty level of business across the board. This would generally help successful incumbents by making life punishingly difficult for challengers, who have to climb up through a period of unprofitability.
It is a terrible idea.
Supermarkets would just raise the prices though. It is not as if people can choose not to buy food.
>What effect would a tax purely on size (income rather than profit) have on the world economy, if everyone were to adopt such policies? It would discourage large companies and encourage small ones.
How so? Your argument makes 0 sense because the tax is proportional regardless of size. What it will encourage is high margin business and it will discourage low margin business. Larger businesses are able to increase their margins because of increased efficiencies.
No, taxes are based on profits. I work for Amazon, which notoriously has nearly zero profit most years. The company pours money into investments instead. That's how it's gotten so big.
What I'm saying is that if there were a small additional tax on giants based purely on their company value or gross sales, it would 'level the playing field' for incumbents who don't have the efficiencies of scale that the big companies have, which I think is beneficial to society.
The opposite: It would encourage larger companies, because trade between companies is taxed but not "trade" within a company.
It seems more like companies would have stronger incentives to keep the profit margin high..
I would be concerned if low profit margins is a problem.. companies with a low profit margin is the reason we can afford so much stuff.
The way tech companies are reducing income to zero by shifting around IP and IP license costs it's sadly impossible to tax income. So either tax revenue (or at VAT to digital goods delivered in a country like ads) or close IP license loopholes.
"Yet the Nordic countries, which are home to several large digital companies like Sweden-based music streaming service Spotify (SPOT.N) [...]"
Why should we care whether they are making a profit or not?
There are so many ways a company can legally and artificially lower its profit numbers.
>Why should we care whether they are making a profit or not?
Because it is generally in everyone's best interest for companies to invest in themselves rather than increase margin at all costs. Growth is good. Many companies would simply go under if you tax them on revenue.
>There are so many ways a company can legally and artificially lower its profit numbers
Then you try to cut those off as much as possible. Like most things in the real world, there's no perfect solution, but we weigh the pros and cons and make a decision.
> Growth is good
Given our current economic situation and our effect on our environment I'm not convinced that it is that simple.
Well it's not of course, and you're right in a way. It's also not good for a whole host of low margin / capital heavy businesses to tank.
I'm so happy the people of Sweden are sane, my biggest problem with these taxes is that they are on revenue which essentially makes all low margin internet businesses unprofitable. How does that benefit consumers?
The margins of businesses like Amazon are largely a matter of fiction, since the subsidiaries can make arbitary charges among themselves: https://www.theguardian.com/technology/2012/apr/04/amazon-fu...
A better solution would be to implement stricter accounting standards across the EU so that such tax dodges wouldn't be possible. This would solve the actual problem.
So they setup a business outside of the EU's jurisdiction and move the profit their? So all of the business in the EU is done at net no revenue (sales - costs - 'licensing fees' == 0).
What accounting standard means that business is making a profit in the EU?
You could apply a tarrif on the licensing fees? This might upset the WTO.
Loophole free tax law is like bug free code: much harder than it sounds. Especially since the EU countries are actually independent and can have their own tax law.
Actually, it's not that hard. It only becomes hard when you try to use taxes to induce the set of behaviours you want. And then, completely suddenly Goodhart's law kicks in.
Honest question: why should I as a person be taxed on income (the closest I guess I can get to the concept of revenue) but a business should be taxed on profit? Can anyone explain to me the basis for such a distinction?
Let's say you operate a low margin business, such as a gas station. All numbers are before tax.
For the year, you spend $1,000,000 paying for fuel, convenience store supplies, electricity, wages, etc. You get $1,050,000 in revenue from your customers, for a fairly realistic margin of 5%.
Now let's say you run a software business. You pay $500,000 in electric bills, computers, wages, etc, and collect $1,000,000 in revenue for a margin of 50%.
Would you rather live in a society where the gas station pays MORE tax than the software business? This would be the case if you taxed revenue instead of profit. If the revenue-tax rate were 4%, the owner of the gas station would be left with $10,000 at the end of the year, and the owner of the software business would be left with $460,000. Bringing these numbers back into normal, profit-based terms, the gas station owner would be paying an effective tax rate of 80%, with the software business owner paying an effective tax rate of 8%.
If businesses were taxed on revenue instead of profit, low margin businesses and capital intensive businesses would be punished disproportionately. Businesses often face unplanned expenses or loss of revenue. This would have the effect of forcing businesses to raise prices to compensate for the increased risk, and would force lots out of business. This reduced economic activity would be bad for consumers, producers, the government, and society as a whole.
Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties.
> Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties.
You are being a little bit funny here. This paragraph basically proves the OP's point.
Because companies would never abuse the taxation rules, of course. They would never cheat by shifting money around in opaque ways so as to lower the profits they have to report for taxation purposes. Clearly, that's why they can be trusted to be taxed on profits rather than revenue, but mere mortals cannot.
I think in your gas station example, the net effect of a 4% tax on revenue would naturally be a 4% increase in the sales price of goods. Or, the gas station would go out of business...
I actually don't think a flat revenue tax would necessarily overall be better than the current system where taxes are based solely on profits, precisely because of examples like the one you give. It seems like some sort of combined model of a revenue tax and profit tax may be the way to go. Which is incidentally where the EU was going with this particular proposal.
Your argument advocating that the gas station increase its prices 4% does not fully consider the fact that businesses are risky, and it does not consider how unfair the situation remains for the owner. If this 4% increase did occur, the new revenue figure is $1,092,000. With $92,000 of profit before tax, the owner is now paying $43,680 of taxes, leaving $48,320 of profit after tax (much better than before). They are still paying 47% taxes on their profit before tax.
The degree to which businesses generate expenses is the majority of the degree to which they take on risk. It's pretty well understood that most economies are already too risk-averse. We should not further punish those willing to take risk.
The thrust of my argument is focused around the fact that low margin businesses would have an EXTREMELY high sensitivity to variable cash flows. I should have focused more on how unfair this is to small businesses, which already are a risky proposition. It is strange to me that multiple people have replied without having any acknowledgement of this.
The benefits of taxation must be balanced against the potential for abuse and the damage it does to the businesses that are taxed.
Taxing revenue would likely have less potential for abuse, but I would argue the damage it would do to the economy would be much larger than the benefit this may provide.
By this reasoning I should only be taxed on income once food, fuel and housing costs are taken into account, or am I missing something? I end up paying VAT on a lot of these things as well ...
I do get tax credits for some essentials but it's relatively speaking a miniscule amount.
There's an interesting formula for a progressive tax regime if anybody wants to take it up ...
That's kind of the purpose of deductions; it's common for housing (particularly mortgage), education and health costs to be deductible on one's income tax, much like a business deducts its expenses to calculate profit.
Taxing only your disposable income would mean that a person living in a mansion would pay much less than someone living in a small home, which is weird; arguably, the extra niceness of the house is "profit", whereas the shareholders don't usually benefit from paying more for their inputs (some exceptions notwithstanding).
> Taxing only your disposable income would mean that a person living in a mansion would pay much less than someone living in a small home, which is weird;
Just as weird as a corporation with billions in revenue paying a zero or negative tax rate? Or weirder?
Not as weird :)
>it's common for housing (particularly mortgage), education and health costs to be deductible on one's income tax
Oh! What's the name of this country?
In my country all taxes are applied before you get to see the actual money.
Tax credits == Deductions
I think his argument was that, as you said, it would be highly gameable. But it's also the case for companies and they're (ab)using it to the point of paying little to no taxes in some countries.
>Individual people's income taxes cannot be treated this way, because the closest analogy to "business expenses" for a person's lifestyle is their cost of living. If cost of living were deductible it would be highly gameable and ripe for abuse by numerous parties.
That is the thing. Maybe a person could do that if the rules let them, but businesses are already doing it, at scale. I think that either businesses should not be able to do it, or normal people should be able to do it. As for the "low margin business" example, I see no reason for the government to support any particular kind of business over another under a capitalist system.
Net income is the same thing as profit. The parent comment confused income with revenue. Taxing revenue is obviously a terrible idea because it would have a disproportionate impact on low-margin business.
As an individual taxpayer you can deduct certain expenses from your revenue when calculating your taxable income, just like a business. But businesses do generally have a broader set of deductible expenses.
(The following based on US income taxes)
You as a person don't have a clear "profit" to tax. I would argue that the system of deductions is the nearest equivalent to taxing your individual income on your profits.
because in the age of paper receipts, it was an undue burden on taxpayers to impose the detailed accounting needed to figure out your legitimate cost of living as an individual or family.
with our lives now largely tracked electronically, that’s becoming less true (but is still at least an undue burden for the ~40% of the population who are poor or near poor).
>the closest I guess I can get to the concept of revenue
I don't think that is actually the closest you could get, even ignoring that you're asserting two wildly different things should necessary be equivalent. But even so: Do you literally never take any deductions at all? Never expense anything? No mortgage or whatever? Have zero capital gains income of any kind an in turn never have any losses of any kind there? You just add up all income sources and simply pay the top rate off the sticker price and ignore all the rest? I mean, it's not impossible or illegal to do such a thing and pay more if you want to, but I think you'd be somewhat in the minority there. Even personal income taxes at least haltingly, imperfectly and politically try to take somewhat into account that there are certain expenses necessary for humans to live or that further societal goals and that if after paying those someone has little left over then the tax system should take that into account.
>why should I as a person be taxed...[differently from business]
Humans and businesses aren't the same thing, businesses (like government) are a tool composed of and serving humans. It is a structure for dealing with and directing flows of capital towards human decided ends, and all money that goes through it ultimately ends up in the hands of humans as income upon which it is taxed there too anyway. A "business" has direct societal costs in terms of corporate law and such, but it does not need to ever use an ambulance or get housing or food support or whatever. Taxes on business, separate from the humans that compose said business, should be for dealing with business specific requirements, cost internalization, and so on. It makes absolutely no sense to simply tax a business the same as a human, not even if you are simultaneously proposing not taxing any of the humans involved. If it's done be prepared for perverse consequences. If a business has high revenue with genuinely 3% margins that still represents a huge amount of money flowing from and too various humans (including all the employees, all suppliers and contractors, their employees, and on), "revenue" is still taxed somewhere. But if you then simply slap a tax on the revenue again and make the margin go negative now the business dies, simple as that, and all the flows cease. Is that actually your intention? Why not just seize it then and take it all for the government directly?
If you want to argue that the income flows going to humans are themselves ultimately not taxed fairly, that is not merely doable but I think fairly widely agreed at this point. And if you want to argue that specifically and properly assessed business income taxes should not be possible to evade as so many do sure, that too happily seems to be inching forward. But you seem to be going a lot more radical and just throwing out everything.
> Do you literally never take any deductions at all? Never expense anything? No mortgage or whatever? Have zero capital gains income of any kind an in turn never have any losses of any kind there?
Well, welcome to a part of the world were software development doesn't necessarily mean big money. I don't own a house (I share a room with my SO in an apartment with other two people and a dog), and I don't have anything invested because I don't have money to invest, so no capital gains of any kind. The only expenses I could deduct are for prescriptions and my glasses, which I don't do because the burden is too high for the kind of money I would get (think <100€ per year) and I don't buy drugs often anyway.
> if you then simply slap a tax on the revenue again and make the margin go negative now the business dies, simple as that, and all the flows cease. Is that actually your intention?
No, I was just asking why am I not taxed based on what I earn minus rent, food and transportation.
> Why not just seize it then and take it all for the government directly?
Why not, indeed? I mean, I get that a lot of people in here are libertarian, but that doesn't mean it's the only way. I'm not actually advocating for State ownership, I'm just saying it's not necessarily impossible to have such a system.
Income taxes are a badly implemented tax so you wont get an argument from me there. We shouldn't be extending bad policy.
Facebook, Amazon and co. are "low margin internet businesses"?
Facebook no, Amazon started as one yes.
Both Apple and Facebook have announced that they are opening datacenters in Denmark, so that might be part of the equation.
"Country looks out for its interest, more on page 2"
The article doesn't say why Denmark, Ireland and Sweden opposed, but from a referenced article :
> Spearheaded by France, the plan has met resistance from countries such as Ireland and Sweden, which question the wisdom of the EU going it alone given the global nature of digital services.
First, not all services are digital, especially not Amazon packages.
Second, the "global nature" is a technological aspect. The corporations themselves are local to some jurisdiction, as are their clients.
This argument is similar to computing in the "Cloud": Technologically, the service is perhaps global, but the physical manifestation of it certainly isn't. That data center is located somewhere, and when it goes down, one is reminded of the limitations of the "global" aspect.
>> The corporations themselves are local to some jurisdiction, as are their clients
My latest invoice from AMZN says "Sold by Amazon EU S.à r.l., UK Branch". Amazon EU S.à.r.l. is based in Luxembourg.
My order was one (single) LTO cleaning cartridge. Does anyone here think that cartridge even went anywhere near Luxembourg at any point between manufacture and reaching me?
I doubt it.
Please correct me if I’m wrong, but isn’t the sole reason multinational corporations can avoid paying taxes, that they “have to” pay surprisingly large royalties to some sister company in a tax haven that “owns” all the rights to the mother company’s trademarks and other IP? Isn’t this the reason that a company like Google mysteriously isn’t able to turn a profit in most European countries? And if I’m right, couldn’t we make that illegal? Couldn’t we for instance require a company to prove that the IP it licenses is owned by someone who is not controlled by the same entity that it is itself controlled by?
But they should be able to pay something to sister or parent company because they actually use the software developed there. The question is how much. Probably not all of the profits. I guess it's really hard to determine and define strict and fair rules in this area.
It is rather likely that the intellectual property for the google or Starbucks brand or the work that led to Pfizer patents etc were not developed in Bermuda, Bahamas or Panama. It’s hard to exactly apportion where but rather easy to point out that near-zero IP work was done where it was declared to be taxable.
If we were talking about something that had a non-zero marginal cost such as tangible goods or services, I would tend to agree. The problem with (or benefit of, depending on your perspective I guess) IP is that apart from a fixed upfront investment (which granted can be substantial), it costs nothing to "produce" or transfer. Allowing a company to in effect pay licenses to itself, is therefore IMHO nothing but an invitation to the company to choose where it wants to get taxed.
I wonder if those sales could be force to an open market. A bit like anti trust laws.
I'm sure they would pay a lot more for their trademarks if other companies could otherwise snitch it for like a year.
Or why not having to accept or at the least pay taxes on the best offer you get, when you want to sell to some IP and later lease it from some other company?
Yes, that seems unrealistic. It might at least be possible to use this in e.g. the court of law to test for abuse.
I feel that if that law was to pass, the affected companies would simply add that 3% tax to the prices European consumers pay, especially since this is a tax on the revenue and not on profit.
It's not like US tech giants have much competition to fear from European companies anyway. A 3% price increase isn't going to get anyone to switch to another service (except maybe in the case of Amazon's physical sales).
In the end, consumers would pay and this would add to the already large price difference between the EU and the US, due to the much higher applicable VAT in the EU, as well as other similar taxes applied in some EU countries (private copying levy , eco-participation ...).
But what is this price we pay for FB and Google services ? 3% increase on 0€ is still 0€.
We don't pay for Google with money but with our privacy. I'm perfectly fine with making my privacy more expensive to buy for Google.
It‘s interesting to note, albeit probably being irrelevant here, that both Sweden and Denmark are not in the monetary union (Euro) and have certain priviliges in certain areas of EU law (like the UK has).
To save some of us outsiders from researching, can someone give a brief overview of the proposal? Specifically why new taxes are needed and how the targeting is specified (i.e. who is affected).
Its relatively easy. All the big tech crops are paying effectively below 1% of their profits in Europe and are moving almost all of their profits to tax havens. As these companies are very creative when measuring their localized profits, its easier and more fair to impose a tax at the revenue level.
I don't understand all the negative comments here. Look at the big profit margins of all big tech companies (maybe with the exception of Amazon retail) and ask yourself whether a moderate, unavoidable tax is really unjustified or will have negative effects on anyone (except maybe the shareholders). I don't think so and in my opinion tech workers should be a bit more mindful when thinking about these taxation topics. I prefer paying high taxes strongly to further social segregation, which will lead to the development of civil unrest and lower quality of life for everyone sooner or later...
I was trying to avoid giving my opinion. My curiosity was specifically around what conditions make a company subject to this new tax and its purpose.
Aside from my opinion on corporate taxing and government approaches towards it in general, I will give an opinion on new taxation policy in general developed as a counter to avoidance. More and more frequently, legislation is drafted to combat the lack of enforcement of existing statutes. And that same legislation is similarly unenforced like its predecessors. Most watch this history repeat and cheer it on with incredulity towards disagreement. Some believe this time will be different, others believe the same institutions that are failing at their obligations shouldn't be given a mandate to fail using the same approaches. It adds more codified word and less substantive meaning. Replace tax structures (only if you must), enforce, move on. Don't pile on, leave unenforced, and keep giving pitchforks to the citizenry while ignoring the responsibility of the collectors.
Can we change the title to "Denmark, Ireland and Sweden block Tax on tech giants" ?
I didn't follow this particular solution to taxing tech companies as much as I probably should have, but I feel like it's not addressing the root problem. Wouldn't it make more sense to tax the revenue where it was earned (as oppose to the physical location of the european HQ)?
Denmark is a taxhaven in its own sense for holding companies which might be surprising to many. The country primarily tax income not companies and have a high (deductible for companies) sales tax.
The Danish corporate tax rate is within the EU average.
Yes but it's not where Denmark make their money. I am talking about holdning companies.
1. I knew Ireland was on the list without reading the article
2. Sweden is lobbied by Spotify
3. Denmark tries to attract Google.
Sweden has a successful tech economy and doesn't want to be held back by lumbering continental countries and their fears.
Yes, every other country would do the same, but it does explain Sweden on list which was my intention.
"lumbering continental countries"
wasn't called for though. Could we be civilized here without insults and hate?
I wonder if the placement of data centres has much to do with it?
There's a bunch being built or in the pipeline at least in Denmark.
There are 2 Apple data centers being built in Denmark, and rumors of Google and Facebook ones as well.
As for the rejection of the tax, i honestly think it has more to do with avoiding double taxation.
Company taxes are at 22% in Denmark.
Denmark already collects 25% VAT on everything sold. If a 3% tax was to be imposed on "tech giants", it would ultimately end up being passed on to the consumer, effectively increasing retail price by 3% or more (depending if it's calculated as cost+28% or cost+3%+25%)
In the end it fails to accomplish the goal of forcing companies to pay local taxes instead of transferring them to wherever they can pay the least taxes, and instead drives up sale price and ultimately inflation.
Its a revenue tax not a sales tax - easier to enforce and less problematic legally than forcing profits to be booked locally.
and its not clear how paying taxes on local profit would have any more effect on consumers than taxing revenue
every country is using this as a populism election marketing ploy to look like they will come out of brexit on top, being the new "london" for tech company jobs.
all while getting elected on the empty flawed promise and getting money under the table to lower companies data center and telemarketing center costs.
You're never gonna implement an income based tax system which would be fair to both corporations and employees.
Corporations are currently taxed on profit, while employees on 'revenues'. So to make it fair you would:
1. tax corporations on revenue too. Which this thread is about
2. tax employees on profit. Food, gas, utilities, ... - these are basically cost of operation of a human being, aren't they?
Income taxes will never work. Monopoly taxes are a solution though. Monopolies behave as money sinks in economy. Their prices are not competed down, so you can't talk about monopolized system as capitalistic. The more monopolies and wealth concentration you get the more you approach something like feudalism. Which is where we are heading as a civilization right now.
Monopolies are usually created and maintained by heavy regulation, because you don't allow small projects to challenge them. Also monopolies influence regulation in such a way to make it so.
So why not embrace monopolies, but tax them for the service of letting them be monopolies? You can then even not call it tax, but a pay-per-use license granting certain social privileges. Perfectly progressive tax. The more you use, the more you pay.
If generalize that a bit you’ve basically got geoism. An ideology that unfortunately lost steam a century ago. Would be nice with a come back though.
If any given org is a monopoly, I'd fully expect that org to pass any new costs on directly to their captive consumers. Monopolies ought to be actively broken, not worked around.
Good point, but it is wrong. That applies to sales taxes. Not to monopoly taxes.
In well functioning market with many competitors, the price of good would be determined as costs + margin. Over time given enough competition the price should converge to that sustainable minimum basically. If you introduce sales taxes into the equation, then obviously you hike up the cost, therefore you shift this minimum.
Monopoly goods prices are not determined by cost, because there is no competition which would make it go lower over time. Monopoly prices on the other hand have opposite tendency - ie. to maximize to the point where almost all disposable income of its customers gets eaten up.
That's why you get the phenomenon of rents being ever so higher. They just catch up to increases in wages and eat it all away. There is no sufficient competition to compete the price away, simply because there is not enough land to house the people, especially in cities.
House rents are the biggest of the monopolies, because everyone has to pay it and often it is significant portion of a paycheck.
Back to the point. Introducing monopoly taxes has the exact opposite effect - it lowers the prices for consumers.
Explained further here http://blog.lvrg.org.au/2011/08/why-land-tax-cant-be-shifted...
I think people forget this cuts both ways there is trade imbalance between US and France in France's favor so if both sides apply similar measures it will be net loss for France.
I am sure this is something politicians forget to mention.
This is one of the reasons EU is never gonna fly. Countries like Ireland are allowed to offer lower corporate taxation but still benefiting of the EU common market. No wonder why most companies have/move their tax domicile in these countries (like Nederland). This is unfair competition and EU should stop this s*t show. Businesses should be taxed based on where the revenue is generated and not where their tax domicile is placed.
> This is one of the reasons EU is never gonna fly.
You mean a single market???
> Businesses should be taxed based on where the revenue is generated and not where their tax domicile is placed.
How would that make sense? If a product is built & sold in country X to a person in country Y, then only sales tax is paid to country Y. Revenue goes back to country Y to cover the costs and then tax is paid on what remains.
That's like one of the fundamental things tying EU together.
The EU was strongly against any trade tariffs.
What differentiates this 'tax' from a tariff?
Everybody pays tax. The issue is that some companies avoid paying it in the EU, basically stealing from the EU citizens.
The difference between the taxes and tariffs is that the tariffs target a specific country while the tax is same for everyone (working in a specific industry).
Tech companies seems to be the most notorious tax evaders so this was just a push to make them pay a fair share of tax in the EU.
>> Traditional tax systems have so far failed to capture revenue from companies with global reach but limited physical presence
Correction. You believe everybody pays tax.
> Traditional tax systems have so far failed to capture revenue from companies with global reach but limited physical presence, fueling anger from voters disgruntled after years of austerity and meager wage growth.
I agree that tech companies do not pay their fair share of tax.
But this is an EU tariff against US companies. Will any EU company be affected?
In order to get tax breaks from a country you must be incorporated in that country. So, tautologically, any company that would pay these EU taxes must be an EU company. In the most pedantic sense, this cannot affect US companies.
However US (and other multinational) companies set up subsidiaries and then funnel money through them to get tax breaks thanks to bilateral double-taxation-avoidance agreements. These would be affected, but they've structured themselves this way intentionally so that their profits are collected in a company headquartered in the EU. (Though it should be noted that headquartering EU operations in an EU country is generally a requirement for dealing with EU consumers without tarrifs and so on, but many multinationals funnel their international money through the EU company).
You can't have it both ways. Either you're an EU company which gives you certain tax breaks, or you're a US company that has no tax benefits in the EU for global revenue.
If they are making similar use of tax evasion techniques then, yes .
Too many people here act like this is something specifically aimed at US companies, when in reality it's not. US companies just happen to be affected the most by it due to their dominance in this particular business sector.
But this is something that has been long overdue and was bound to happen regardless of who was dominating that sector.
It's aimed at companies incorporated in the EU. If a US company decided to incorporate a subsidiary in the EU to get tax breaks and other benefits, then it makes little sense (to me, at least) to complain about US companies being targeted. Some US companies specifically decided to structure themselves to be EU companies in name (and tax status) -- so from a practical perspective they are EU companies. You can't have it both ways.
(Not to mention this will affect companies like SAP and Spotify, which are real EU companies.)
What makes you think that EU companies are not "affected"? The tax is not on foreign companies thus is not a tariff. It's just a way to make the tax avoidance companies pay some tax.
spotify, SAP, etc?
I wonder what are the reasons opposing countries gave.
A smart move would be a corporate tax at the European Union level
A company that leverages the favourable infrastructure and institutions of a country without paying its fair share is quite simply siphoning money from the taxpayers of that country into the pockets of its shareholders, the money that maintains that infra and those institutions. Politicians need to take a step back and realize that whatever jobs these companies bring, they are still a net loss to the country as a whole, the country would literally be better off if those people were unemployed!
> whatever jobs these companies bring, they are still a net loss to the country as a whole, the country would literally be better off if those people were unemployed!
That’s quite the claim. Got anything to back it up?
That comment is obviously wrong, proven easily by taking the extreme case of the policy applying to all employers: none of them paying taxes would quickly ruin any country, yes. But everyone being unemployed would get you to the same miserable state even faster.
But the argument doesn't have to be as extreme as that to support enforcement of some sort of equitable taxation: Take, again, the extreme case of the policy applying to all employers. That's broadly equivalent to abolishing corporate taxation PLUS that corporate windfall accumulating not in the countries they operate in, but whatever happens to be the go-to tax haven.
This being taxes on profits, there's zero effect on the company's activity (i. e. investment, hiring etc.) in the country. That's because Facebook will let someone in, say, Brasil, spend $5000 on ads irregardless of them having to give half of that to the local government. It's either $2500 or $5000 in profits, produced with 0 marginal costs.
Net result therefore is a zero-sum game between that government, and Facebook's shareholders. Even ignoring the geographic aspect (very little of Facebook's shareholders being likely to spend that money in Brasil), it seems rather intuitive that the public is better served by the money taking another lap paying for some school, rather than allowing some retired VC to improve the decorations on his next yacht.
That’s quite the claim. Got anything to back it up?
Pretty easy really. Multiply the cost of unemployment benefits * number of company employees in that country. Then look at the tax evaded by the company. "You do the math".
JSA in the UK is £73/week, or £3796/year. Let's say a company dodges £1Bn/year in taxes. How many people would they need to employ before the country breaks even?
nah, replace unemployment benefits with the summed salaries of the employees, since it's probably fair to assume employees spend most of their salaries in the country where they live.
also, you seem to imply a scenario where the company is kicked out of the country. That does not recoup any taxmoney to the state. It also likely doesn't make the infrastructure cheaper to maintain or any less desired, so the correct equation is just that you'd loose whatever taxes they do pay (surely they don't dodge all of them),and the sum of the salaries of their employees, plus whatever service the company provides, and you gain nothing.
"you do the math"
edit: missing "don't"
Where does the tax paid by the company come in to play? And the tax paid by their employees? The real math is total company paid tax + total employee tax - societal costs of presence. That's rarely less than 0 and surely not less than the negative societal costs of unemployment if they, as you mention, are better off unemployed.
The folly so many keep making is they think every tax dollar is necessary to support every company present. That type of thinking makes even one cent of avoidance appear to be a net negative, when amount paid overall can still be a net positive compared to impact of presence.
Uh, what? Stop being vague and describe exactly what you mean.
Response to edit: Please describe the full calculation (with factual numbers) of "national wealth", and then we'll talk.
LOL if you wish to disprove me do your own research! But I'll give you a hint, if tax evasion was good for a country, why would that country have taxes at all...?
> LOL if you wish to disprove me do your own research!
That's not how burden of proof works. You made the claim that "the country would literally be better off if those people were unemployed!", so prove it.
> But I'll give you a hint, if tax evasion was good for a country, why would that country have taxes at all...?
A "hint" is not what's required here.
It really is that easy folks
"TECH GIANTS HATE HIM."
When one country can hold up the progress of the entire 27 member bloc because of their own self-interests the project looks very weak.
Oh you mean the EU is not an authoritarian nightmare that just imposes their will on unsuspecting member states as some are lead to believe?
Ask the Greeks how it's working out for them
When it comes to taxation, a central sovereign measure, every member has to agree. Although the EU itself is something sui generis (or colloqually supranational), certain areas demand unanimous votes, especially those that are inherent to a nation‘s sovereignty.
Can you elaborate? What kind of progress?
In this case its a tax on US technology companies.
The decision-making process has mostly moved to the so-called "double majority" (half + 1 of member states, comprising 50%(?) of the population).
Only some areas still require unanimous consent. And even those have historically not been insurmountable. What usually happens is a bundling of issues until you get an overall package that's net positive for everyone.
What helped, historically, was a fundamental willingness to act constructively, based on the common understanding of the EU's importance for both economic growth as well as stability and peace. I think it's easy to underestimate how large the horrors of the 20th century still loom in Europe.
That's why even something as controversial as the Greek crisis somehow ended in a compromise (of that singular kind that nobody is entirely happy with).
Of course recent history has shown some cracks in this idealized story, what with Brexit, Italy, Hungary, and Poland all going full Trump-idiocracy, and the EU being a rather excellent proxy for any nationalistic, xenophobic, anti-semitic, or otherwise egocentric jingoistic tribalism that lingered below the surface previously. It's kind of ironic that so many Europeans enthusiastically agree how much they hate each other. Agreeing as in: they have actual pan-european conferences and working groups where they apparently join in complaining about "them" subjugating "us", without ever realizing that Italy's "them" is Germany's "us", and vice versa. Anyway: exciting times!
>> What usually happens is a bundling of issues until you get an overall package that's net positive for everyone.
That sounds too good to be true, can you give examples?
It's just basic horse-trading. A somewhat extreme yet very basic example would "all of the law" (for some specific jurisdiction). Assuming this isn't North Korea, you will probably find an overwhelming majority considering the status quo to be better than completely lawless anarchy, even though every single individual can probably point at some individual law that they would rather abolish.
International trade agreements make good examples: People often decry their incredible size, with thousands of pages and topics ranging from the legal system to GMO to copyright to cheese. Yet the size is the natural result of requiring the package to contain every signing country's pet issues. If Canada is mildly opposed to adopting US standards for turn signal frequency, just add a provision defining minute details for maple syrup classification and they'll be happy again. And on to Japan... etc.
Another example from US law would be the "sequester" that put caps on both military as well as civilian spending. If you want something broader, it's how the budget process used to work, and to some extend still does. Yes, these examples from the US require only majorities (or 60-vote supermajorites in the Senate), not unanimity. But the mechanism is identical.
That mechanism is, by the way, why there have been calls to once again allow "pork", i. e. specific grants of money to projects in individual congressional districts. While those payments had an incredibly bad reputation as being wasteful and borderline corrupt, they allowed for "bundles" of legislation to be tailor-made to get exactly the quorum required. Money happens to be perfect in that context as it is in others: it's fungible, meaning you don't have to start researching each districts' current needs when you want to make an offer. It's divisible, allowing the sum to be just right to get the vote without "overpaying" as often happens if you only have the crude instrument of actual policy.
And there's one advantage of money that's unique to this use: Nobody actually cares that much about spending. While yes, overall spending levels are somewhat significant, giving some 12-term Republican from East Nowhere, MI a million $ for whatever idiotic pet project they care about carries far less of a risk of losing you support on the other side of the spectrum as implementing their favorite policy (slightly exaggerated: vegan-only school lunches; or required heterosexual target practice in preschool) would.
>> It's just basic horse-trading
I understand it's all about horse-trading, it's the meaning of the word "everyone" in the claim "a net positive for everyone" that I question.
My understanding of European Union horse-trading is that it's all about "you scratch my back, I'll scratch yours". This might well be good for most if not all EU politicians and bureaucrats, it's patently not going to be a net positive for every single citizen.
Example: the travelling circus that is the EU Parliament moving back and forth between BRU and SXB.
"The campaign to end the European parliament's expensive monthly commute to Strasbourg received a boost yesterday when a European commissioner criticised it as a sign of "insanity". Margot Wallstrom, a commission vice-president, said: "Something that was once a very positive symbol of the European Union, reuniting France and Germany, has now become a negative symbol - of wasting money, bureaucracy and the insanity of the Brussels institutions."
"though MEPs have voted to scrap a second parliament, the French government has the power to block any such move [..] It is perhaps the most outlandish of the European Union’s excesses; a £130 million travelling circus that once a month sees the European Parliament decamp from Belgium to France.
Over the course of the weekend, some 2,500 plastic trunks will be loaded on to five lorries and driven almost 300 miles from Brussels to Strasbourg.
On Monday, about 1,000 politicians, officials and translators will then make the same journey on two specially chartered trains hired at taxpayers’ expense."
"Everyone" was meant as "every EU member state". Of course no policy will ever truly be net positive for 300M+ people. That's impossible, in that, for example, a magic spell instantly turning North Korea into a free, democratic, peaceful country renown for its humor and abundance of good spots for snorkeling would likely be negative for Kim Jong Un.
For the EU this discussion is basically identical with the tired flame war of "EU is undemocratic cleptocratic fascist/communist (please circle according to preference) monster bureaucracy deciding on banana and keeping brave people of Somecountry down" vs. "Nope, it isn't, and the banana example is no longer just wrong, but also outdated".
>> Of course no policy will ever truly be net positive for 300M+ people.
Never mind all of them, one could ask whether some "horse-traded" policies are even a net positive for a simple majority? I'm thinking of, for instance, the Common Agricultural Policy.
This certainly isn't just an EU issue, or even confined to politics, small groups often seem to wield a disproportionate amount of power.
Taleb has commented on this.
Ever heard of Brexit? Some people are a bit upset about that kind of governance. Me too.
Having voted for Brexit i can almost certainly say I've heard of it yes.