We have the best trade wars: US investigating French tech tax plan over fears it unfairly targets American biz

The US has declared that it is investigating French plans to impose a 3 per cent tax on tech firms' top line, not the bottom. "The United States is very concerned that the digital services tax which is expected to pass the French Senate tomorrow unfairly targets American companies," said US trade representative Robert …

[Anonymous Coward]

Qu'ils mangent de la brioche

[Anonymous Coward]

vive la France!!!

[Anonymous Coward]

Trop de politesse.

La France: "Vous vous pensez grande merde? Vous avez la tête dans le cul? Savez ce que vous pouvez faire?

[Anonymous Coward]

Voulez-vous coucher avec moi (ce soir)?

[Boris the Cockroach]

Its not

just you average man or woman in the street getting annoyed at the 'tax efficency' deals, its a lot of small business owners based and trading in one country that are getting annoyed because they end up having to pay full wack on profit earned, where as the multi-national based in Ireland, buying its IP from a cayman island shell company and routing all profits via a wholly owned dutch company ends up paying less in tax per year on 5 billion UK sales alone that I just did last week on my wages.

Mind you the previous french solution to the uber rich of putting them to the national razor does have a certain appeal......

[Warm Braw]

Re: Its not

I would have thought it would make sense to tax royalties on IP with something like stamp duty -cash in on some of Hollywood's creative loss-making at the same time...

[Jellied Eel]

Re: Its not

I would have thought it would make sense to tax royalties on IP with something like stamp duty -cash in on some of Hollywood's creative loss-making at the same time...

AFAIK, that's already the case. So IPCo is your licence engine charging royalties to all your sales units. Royalties would be income for IPCo, so make sure it's in the lowest tax jurisdiction, and load it up with expenses and/or debt to minimise profits/tax there. Multinationals are well versed in that trick.

An alternative might be to look at intercompany transfers and valuations, and apply some market or fair-value test. So there was a case of a well-known coffee shop paying something like $30/lb for it's roast beans.. Which is arguably waaay over a fair price for that product, even if you have a straw-purchaser also buying those beans to argue it's a market-based price. OK, so that would be more complex for IP, but that's what accountants are for.

As a simple person, though legal, much of this stuff has the appearence of a contrived structure, which tax authorities theoretically can jump on. But generally don't seem to and prefer to focus their efforts on smaller businesses who can't afford lobbyists & lawyers. I've also been curious why some consistently loss-making entities aren't just wound up for being insolvent. I'm assuming that's because although they're consistently loss-making, their owners are very much ok with propping them up for the tax benefits. Again that would appear to be a contrived structure, and one of the key anti-competitive aspects.

[Headley_Grange]

Re: Its not

But the men and women on the street aren't annoyed enough to stop spending their money with these companies, are they?

[Rich 11]

Re: Its not

Take a look at your local high street and you might find there's not quite the choice there that there was ten years ago. It's a vicious circle, although it's not one that's been vicious to Jeff Bezos and his ilk.

[werdsmith]

Re: Its not

I try to avoid them as much as possible, I never set foot in a Starbucks (not missing anything anyway with the bilge water they sell). Amazon is always a last resort. It’s getting more and more difficult though, I’m glad France is taking a stand, the world has been bending over for long enough.

[Anonymous Coward]

Re: Its not

Amazon.com is the new Wal~Mart (aka China~Mart). While I buy from Amazon.com, I am noticing the same tendencies toward cheap crap that made me walk away from China~Mart really fast. And honestly, NewEgg.com for tech is not as good as it used to be (it seems).

When it comes to a high value purchase, I will gladly walk into a store and make the purchase than try my luck at Amazon.com Roulette.

[Chris G]

Let's join the sanctions club

The way it's going, any country that does something the jaffa or US corporations don't like he imposes sanctions. The rest of Europe is also looking at ways to gain revenue from tax avoiding megacorps so they are likely to be in the line of fire too.

The sooner the entire world is under sanction the better then we can get on trading between us and ignore the protectionism from the yanks.

They can sit behind their wall or pay some tax and do reasonable business.

Added: The US has this notion that a world free market economy is where they are free to have the market they want anywhere in the world.

[phuzz]

Re: Let's join the sanctions club

"The US has this notion that a world free market economy is where they are free to have the market they want anywhere in the world."

I was going to make a comment about how they'd happily go to war to keep those markets, but then I remembered that the British Empire went to war against China just because those perfidious Chinese wanted the British to stop selling opium into China.

[Anonymous Coward]

Re: Let's join the sanctions club

The Opium Wars--history's original gangland drive-by shooting!

[Anonymous Coward]

Re: Let's join the sanctions club

>Added: The US has this notion that a world free market economy is where they are free to have the market they want anywhere in the world.

By US you mean US 1%ers right? I sure as shit aren't for this late capitalism farce here in Murica. I wish other countries would stand up to our garbage leadership. Given up on the proles here to do the right thing until the Boomers die off (going to go to their grave thinking dirt poor brown people cause all their problems, can't teach an old dog and all that). Everyone else is too busy Netflix and chilling to do much to keep the evil empire in check. A Brave New World of distraction and misdirection. Fat, stupid and happy with material shit keeps the scary outside world at bay. Bread and circuses (NFL season starts soon).

[JohnFen]

Re: Let's join the sanctions club

I assume that he meant the US government (which includes the major corporations), not us regular folk.

[Anonymous Coward]

Re: Let's join the sanctions club

People get the government they deserve sadly.

[ecofeco]

Re: Let's join the sanctions club

Don't count on Millennials or Xers to save America. Those generations have had more voters than boomers, for years.

[ecofeco]

Re: Let's join the sanctions club

"Free market" has always meant free to fuck you up the arse without lube and without consequences.

Fascists are funny that way. Lot of buzzwords and propaganda to hide the fact of profiting from real and deadly oppression.

[Phil O'Sophical]

Taking a cut?

if our citizens are spending their money with you then we get to take a cut to pay the costs to look after them.

On top of the 20% VAT they already take from those citizens on their purchase, that is?

[Headley_Grange]

Re: Taking a cut?

'On top of the 20% VAT they already take from those citizens on their purchase, that is?"

@Phil - you're assuming that all those Chinese sellers on eBay and Amazon are VAT registered.

[Chris G]

Re: Taking a cut?

A lot of the Chinese sellers on eBay, AliExpress and Amazon ship from HongKong, Dutch or Other warehouses out side of mainland China so they are paying local taxes to some degree.

Whether or not it is full whack I don't know. I know many of them also maintain stock within the US so are paying some kind of local tax there too.

Presumably some states offer better options than others.

[baud]

Re: Taking a cut?

VAT is paid by the customer, this new tax is supposed to be paid by the company

[codejunky]

Re: Taking a cut?

@baud

"VAT is paid by the customer, this new tax is supposed to be paid by the company"

'Supposed to be' might be the words used after implementation. I wouldnt be shocked if France finds their prices just that bit higher to compensate for the tax. In the end it always comes out of someones wallet not a company.

[baud]

Re: Taking a cut?

> France finds their prices just that bit higher to compensate for the tax

Yes, the companies can react in whichever way they want, but I wanted to distinguish this new tax, which would impact the companies, with the VAT, which don't.

[codejunky]

Re: Taking a cut?

@baud

Sorry if you took my comment as a criticism. It really wasnt

[Chris Miller]

Re: Taking a cut?

VAT is paid by the customer, this new tax is supposed to be paid by the company

Companies, being a very convenient legal fiction, cannot pay a tax, only people pay tax. If you increase company taxation, the only thing that can happen is that they charge their customers more, pay their suppliers (which includes staff) less, or reduce profits (which affects their owners, mainly pensions funds and other investment vehicles). To state this is not to make a political point - it follows directly from the definitions of these terms and the associativity of arithmetic.

Sorry to break it to you, but there is no magic money tree.

Amazon's primary 'accounting trick' to reduce their profits is to reinvest them into their business. This is usually considered a good thing, which is one reason why corporate taxes are levied on profit.

[Anonymous Coward]

Re: Taking a cut?

>Sorry to break it to you, but there is no magic money tree.

Jeff how's your new mega yacht treating you what with your new bachelor life? Privatize the gains, socialize the losses baby.

[Anonymous Coward]

Would it really make a difference to their budget

At last count the French annual budget was 1383.9 billion Euros per year. Even 2% of Amazon's 232 billion USD would equate to about 3.5 billion euros, which is just a rounding error on the French budget and wouldn't help them in the long run since it looks like they haven't balanced a budget in 30 odd years and their debt is approaching 2.5 trillion : https://commodity.com/debt-clock/france/

[Will Godfrey]

Re: Would it really make a difference to their budget

The amount is comparatively unimportant. It's the principle of telling the bully it can't dictate to, and cheat on the rest of the world that matters most.

[Charlie Clark]

Re: Would it really make a difference to their budget

It's not really a revenue-raising exercise. It's as much about levelling the playing field as anything else. Multiniationals can be considiered to have an unfair advantage over local companies because of their tax efficiency. This has already been noticed in the US, which is why the State of New York started hitting Amazon with a sales tax. Add to this the much lower cost of funding and they have pretty significant advantages.

Then there is the irony that the companies have for years been taxed in the US on income earned elsewhere.

[vtcodger]

Re: Would it really make a difference to their budget

"A billion here. A billion there. Pretty soon you're talking real money." misattributed to US senator Everett Dirksen

[mark l 2]

Isn't Jeremy Hunts solution to leaving the EU a proposition the the UK drops its corporation tax to the same level as Ireland to attract exactly the sort of multi-nationals like Facebook and Google to the UK?

[LDS]

Ireland attracts those companies because its low taxes AND being in EU so EU "freedoms" apply.

Once UK is out of EU, it can lower its corporation tax - but for example storing EU citizen data in UK won't be that easy.... nor probably moving money around.

Unless UK obtains the "eat the cake and have it" deal - but I doubt that...

[ratfox]

It's absolutely clear to me that the UK was hoping their low corporation tax would attract all the multinationals, who would then sell all over Europe and pay tax in UK. They just never saw Ireland coming.

[werdsmith]

Low corporation tax is no incentive to companies that don’t pay it anyway.

But any attempt to make conditions attractive to large US or Chinese corporations will affect trade deals with our closest large tracking bloc.

UK has no aces in its hand,

[Chris Miller]

What makes the UK attractive to multinationals is the rule of law. Set up in France, and the government can take it away from you on a whim - as we now see. Flexible employment rules help as well, but that's secondary.

[Doctor Syntax]

"Isn't Jeremy Hunts solution to leaving the EU ... the UK drops its corporation tax to the same level as Ireland to attract ... multi-nationals"

The prerequisite to this is that the national economy* is relatively small compared to the size of the revenue that the multinationals put through that facility, otherwise the fall in revenue from native businesses exceeds the gains. Up to now that's ot been met. Leaving the EU might achieve that, however but I'm not sure it's a good achievement to make.

* Normally the consequence of being a smallish country with a smallish population.

[JohnFen]

That's rich

Given that the US is shamelessly doing the same thing to a lot of nations, it's a bit rich to complain when it's on the receiving end of it.

[Mark 85]

Re: That's rich

Add to that our deal leader in the States also manipulates the tax laws. Pot-Kettle...

[Anonymous Coward]

I thnk we can rest assured that once Boris is in #10 he'll scrap the proposed tax so fast Trump wont have finished telling him all the other things he has to do, such as make Farage US ambassador ( although Trump's list will have to come after that from Bannon and Boris' other backers-of-interest ).

[J.G.Harston]

Well, if Frenchies want to charge Frenchies for buying stuff online, that's their business.

Though I thought that EU laws made sales tax illegal, if you wanted a transaction tax it had to be VAT.

[Starace]

Stupid idea

Taxing on revenue rather than profit is a stupid regressive idea for all sorts of reasons and should be stomped on before it spreads to everyone else.

The better solution would be to simplify the tax system and either block or render unnecessary all the miriad ways of hiding or moving profits that are open to those who can afford the teams of lawyers and accountants.

But why go to the effort of fixing the real cause when something simplistic will give you a warm feeling so much more easily?

[Anonymous Coward]

Re: Stupid idea

The "better solution" requires every country in the world to cooperate, or businesses can play shell games using the ones who don't play ball in exchange for extracting a small amount from them (like Ireland did for Apple, and Caribbean countries do for everyone) I guess you don't recognize the truth of the statement 'perfect is the enemy of good' and will wait until the heat death of the universe for 'perfect' to arrive.

Taxing on revenue is basically sales tax, and so long as they limit it to only revenue earned in the country in question I can't see a reason why this is a bad thing, especially since they have limited it to ephemeral goods like advertising or software intermediaries so it is a level playing field.

If you think a 3% tax on sales is a bad thing in France, what about the much higher VAT EU countries all charge for all goods and services? What about the sales tax that most states in the US charge?

[MonkeyCee]

Why is the UK not on the list

"The (perfectly legal) gig is this. You set up headquarters in a low-tax country – looking at you Ireland and the Netherlands – then licence your product out to other EU countries at very high cost so that you barely make a profit."

That's rather a simplification of things. Without a suitable British Overseas Territory (Bermuda, Caymans, BVI, Turks and Caicos) to act as a final (tax free) repository for the profits, none of the schemes would work. Double Irish and Dutch sandwich only work if profit ends up outside the EU.

The UK and the US control the majority of the tax havens, both in number and volume of cash. If they wanted too, 90% of the tax evasion in the world and 99% of stolen loot could be recovered. But it turns out that the great and good who run the place need the plebs to keep paying taxes, but wouldn't dream of doing it themselves.

In my opinion the only way to deal with this is to make it accessible to everyone. If every business ran it's tax affairs like Apple* or Amazon, if every worker had 100% of their wage go to a BVI investment company, which then loans them the money, then forgives the loan = no tax.

I wonder how long it would take for comprehensive tax reform if poor people stopped picking up rich people's tab.

I also feel income tax is one of the more unfair forms of tax. And before the hate rolls in, I do get taxed on my assets (4% of their value gets added to my income). An asset tax would solve some real issues of inequality. 1% on everything over 10 million is a good bag of fag packet system.

* I think they managed to have their profits being paid to a company that wasn't in ANY country for the best part of a decade.

[Doctor Syntax]

"As a revenue tax targeted on a narrowly defined set of companies, the Digital Services Tax is not one of those smart measures. It risks making investing in the UK less attractive"

Investing? I think he means "selling in". The tax gets charged irrespective of whether they invest or not. In fact the whole thing could be structured so that real investments are offset against income.