back to article It's handbags at dawn: America to hit France with 25% tariffs on luxuries over digital tax on US tech titans

America is moving ahead with massive 25 per cent tariffs on French products in retaliation for the Euro nation approving a new digital tax aimed squarely at tech giants like Google and Facebook. In a notice [PDF] put out by the US Trade Representative this month, the Trump administration said it will add the taxes to 21 …

  1. Anonymous Coward
    Anonymous Coward

    Pay tax where users reside

    Where users reside is where the infrastructure is used, where they have been educated and because useful fodder for the surveillance industry (aka Google Facebook, LinkedIn and all the other US outfits that say "it wasn't me" as soon as you start talking about privacy), so pay tax there.

    The problem is that tax and being taxed has always been a dodgy subject as those who have much would like to keep more than Burt cleaning the streets. I'm no economist (which will probably be clear in the next bit), but I'm wondering what would happen if tax percentages stop increasing from a certain level - the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up.

    Getting 25% of something large versus the barely 1% that's left after all the dodges strikes me as more productive, and less work supervising.

    Yeah, yeah, it's too simple, plus it would kick a lot of accountants out of a job. But I still think it's all made too complicated.

    1. Teiwaz Silver badge

      Re: Pay tax where users reside

      the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up.

      Or maybe very well off people and companies dodge tax like a devil dodges holy water is because they can, and not matter how much they are asked to pay, they'll do their darndest to avoid paying any at all.

      And you can add Coprolations to that too.

      How much of the French population is using US digital services vs. the population of the US buying designer french handbags and cheeses anyway....

      1. Kane Silver badge
        Thumb Up

        Re: Coprolations

        Well played.

      2. Jan 0 Silver badge

        Coprolations

        What? copro- as in shit, crap, turd? -lation as in producing? So where does taking a dump enter into this story?

        I guess the good news is that this might encourage more US dairies to try to make real cheese.

        1. Steve Davies 3 Silver badge
          Pint

          Re: more US dairies to try to make real cheese

          WOT? you mean to say that there are some that don't make USDA approved Rubber Substitute? (Aka what is sold as cheese)

          This must be as rare as finding 'oak smoked back bacon' in the shops over there in Trump land.

          One of these [see icon][virtual] to those who tell us where proper cheese is made and sold in the USA.

          1. Roo
            Windows

            Re: more US dairies to try to make real cheese

            About 20 years ago I found that there were a number of very decent creameries around Stowe in Vermont, even managing to source some cheddar that was firm, didn't leak oil when squeezed and tasted like a good mature Cheddar.

            Discovering that Cheddar was a watershed moment in my life - suddenly the US became a viable place to live. :)

            1. Roland6 Silver badge
              Pint

              Re: more US dairies to try to make real cheese

              There were also some microbreweries in that corner of the US that were producing quite decent beer...

      3. ThatOne Silver badge
        Thumb Up

        Re: Pay tax where users reside

        > people and companies dodge tax [...] because they can

        Exactly!

        Nobody likes paying taxes, and if you are rich enough to be able to do something against it, you usually will.

      4. werdsmith Silver badge

        Re: Pay tax where users reside

        “ How much of the French population is using US digital services vs. the population of the US buying designer french handbags and cheeses anyway....”

        Airbus stopped making planes out of cheese years ago.

      5. LucreLout Silver badge

        Re: Pay tax where users reside

        Or maybe very well off people and companies dodge tax like a devil dodges holy water is because they can, and not matter how much they are asked to pay, they'll do their darndest to avoid paying any at all.

        It doesn't work like that even for the most avaricious clients.

        There is a cost to avoiding tax, and only an idiot would try to evade it because there's usually no need and because jail. If you inverted the tax rates such that earnings over x the tax rate reduced and it reduced again for earnings over 10x then you'd garner a lot more money provided the earnings over 10x was taxed at around 10%.

        I picked 10% because that is a very real world number in terms of fees those that you describe will typically be paying to avoid the taxes. If its not worth avoiding because the tax rate and the fee rate are approximate then it'd put the entire tax avoidance industry out of business.

        I work in a division of a bank specializing in this and I have to say, I'm not in the least bit worried. We've had this conversation with the past 5 chancellors when they've asked us to cease and desist what we do, and none of them have had the mental wherewithal or political cajones to do anything other than tinker around the edges.

        You'll notice I've not made any moral judgement or pleas to better conscience in the plan above, because the proposal I made is simply the most efficient route to garner taxes which are in any case avoided. As long as we persist in taxing greater incomes at a progressively higher rate we as a country will continue to garner regressive amounts of tax from those in that bracket and the tax avoidance industry will continue to flourish.

    2. Headley_Grange Silver badge

      Re: Pay tax where users reside

      "the prime reason I see very well off people and companies dodge tax like a devil dodges holy water is because it just keeps going up"

      Not the case in the UK. Corporation tax has come down from about 28% to 20% over the past 10 years or so. The theory behind the reduction is that companies will be left more of their profit for investment in people, training, automation, growth, etc. In practice what's happened is that many companies have used the money to buy back their own shares which ramps the price and triggers director bonuses and/or they've distributed it to shareholders. Inward investment in the UK is the lowest it's been for years and the gap between director pay and workers is the biggest it's been for years and continues to grow.

      1. LucreLout Silver badge

        Re: Pay tax where users reside

        Corporation tax has come down from about 28% to 20% over the past 10 years or so. The theory behind the reduction is that companies will be left more of their profit for investment in people, training, automation, growth, etc. In practice what's happened is that many companies have used the money to buy back their own shares which ramps the price and triggers director bonuses and/or they've distributed it to shareholders.

        You do understand that in paying the money to shareholders the tax raised is higher than the CGT rate right? Taking capital gains is in almost all cases more tax efficient than taking income.

    3. conel

      Re: Pay tax where users reside

      Funnily enought a flat rate of tax is very popular amongst economists. Redution of adimistration costs and a removal of sweet-heart tax breaks which distort markets (how much tax an industry pays is a function of how effective they are at bribing lobbying politicians).

      1. James 139

        Re: Pay tax where users reside

        Makes you wonder why politicians are always so reluctant to have any sort of record of who lobbies them...

        I mean, it doesn't take a huge leap of imagination to equate fancy dinners or other "gifts" in return for listening to a lobbyist, with finding out said politician is doing something that benefits the lobbyists client.

        1. ThatOne Silver badge
          Devil

          Re: Pay tax where users reside

          > Makes you wonder why politicians are always so reluctant to have any sort of record of who lobbies them...

          Because they protect their clients. Their clients don't want people to know they bought themselves a politician to improve their business conditions, or help sweep some problem under the carpet. Cheating works best if nobody knows for sure you cheated.

      2. LDS Silver badge

        "a flat rate of tax is very popular amongst" SOME "economists"

        Companies have already a flat rate in most places. Income taxes are a different thing and it's quite impossible to keep a welfare state alive with a flat tax unless that's so high low income people won't be left much money. And even with a low flat rate tax most low income people won't be able to afford services a State won't be able to offer anymore - unless it has other sources of income (oil, gas, etc.) - as long as those resources are State-owned.

    4. doublelayer Silver badge

      Re: Pay tax where users reside

      There is something to the very high tax rates driving away places that have a lot of money, but there's a lot more to simple greed. Consider that you can hire a lot of skilled accountants for €1 million per year. Imagine that they can reduce your effective tax rate by 10%. Well, as long as your tax bill is over €10 million, you make money by hiring them. I, and likely you, don't have the resources to do that or a tax situation that would benefit greatly. In addition, most likely both of us wouldn't really have a use for massive quantities of money anyway. A lot of rich people and companies don't think that way and will choose any course of action that means more money stays with them, no matter whether there is an ethical way to get there or if they have any use for the extra money added to their accounts.

      You can fix that in one of three ways:

      1. Make the tax bill hard to circumvent by simplifying it, meaning your accountants can't help you find sneaky ways out.

      2. Make a law like France's which simply targets those viewed as most problematic, which lands you in this situation.

      3. Try other solutions that might work, but history is not on your side.

      1. LucreLout Silver badge

        Re: Pay tax where users reside

        You can fix that in one of three ways:

        1. Make the tax bill hard to circumvent by simplifying it, meaning your accountants can't help you find sneaky ways out.

        2. Make a law like France's which simply targets those viewed as most problematic, which lands you in this situation.

        3. Try other solutions that might work, but history is not on your side.

        1 - doesn't work because going offshore with your assets always works.

        2 - see above or incorporate.

        3 - there's lots of solutions that do work, such as places where the percentage of tax claimed reduces the more tax you pay, which incentivises wealthy people with high incomes to pay there taxes in such jurisdictions. The same trick can be pulled with corporation taxes too, see Ireland for evidence.

        Taxing peoples assets and incomes is drawing to a close as an effective way to finance public spending because as the pandemic closes the way of working is going to change. As home based working takes flight, the idea of working for a company near where you live will fade, and with that, the idea of working for a company in your legal jurisdiction. Once that happens, you may as well incorporate to simplify your taxes and have whoever you work for pay your ltd co - which may be based somewhere other than where you reside. You'll then only be taxed on what you remit for spending rather than what you actually earned. We'll all become contractors in a sense.

    5. DS999

      Rates don't matter

      If a company finds it cheaper to do the things they need to do to avoid paying a tax cost less than paying the tax, they'll do it even if the tax is only 0.1%. On the other hand, if it costs more to avoid a 50% tax than to pay it, they'll pay the 50%. A flat tax makes no difference either.

      The problem isn't the rates, it is the accounting. It is so easy for multinationals to move revenues and costs around, especially in places like the EU where the law explicitly allows it. It is difficult to legislate the accounting practices of a multinational - and what if the laws in France demand something that conflict with the laws in the US? Are they required to keep a set of books for each country and potentially end up paying tax on the same dollar more than once?

      1. A.P. Veening Silver badge

        Re: Rates don't matter

        It is so easy for multinationals to move revenues and costs around, especially in places like the EU where the law explicitly allows it.

        As if it is any more difficult in the USA, check Delaware for an example.

        1. LucreLout Silver badge

          Re: Rates don't matter

          As if it is any more difficult in the USA, check Delaware for an example.

          Delaware is a very very special place for tax arbitrage but its real secret is not the one you describe. Its a magical place that underpins a great amount of fiscal gymnastics all around the world.

  2. beep54
    Devil

    They're tariffs

    France will most certainly not be paying the tariffs. French companies will not be paying them either as they will merely factor them into the cost of things. Tariffs work only as a tax on Americans and our idiot in chief has not figured that out yet.

    1. Aristotles slow and dimwitted horse Silver badge

      Re: They're tariffs

      I think you missed the point. The point is that as these products will now appear more expensive to the average US consumer due to the tariffs, then they will stop purchasing them. This in turn will hit the overall sales figure of the French companies in a punitive manner.

      Trump is a child. I hope the vast silent majority of US people have the sense to vote more sensibly next time.

      1. Joe W Silver badge

        Re: They're tariffs

        Well, it's high-priced handbags and stuff - those who buy them might still be willing to buy them. The main reason for buying them seems to be that they are 1) expensive and 2) some "celebrity" (loosely using that term...) was seen having it. That's not going to change.

        1. Doctor Syntax Silver badge

          Re: They're tariffs

          Veblen goods. A higher price might just sell more products.

          1. Adair Silver badge

            Re: They're tariffs

            Exactly! The price going up will simply add to their scarcity and hence increase their desirability. My bet is that it'll have a short term negative impact on receipts, but after a few months will have no significant impact on sales whatsoever.

      2. Pascal Monett Silver badge
        Thumb Up

        My prayers are with you on that point

      3. LDS Silver badge

        Re: They're tariffs

        If you tax luxury goods you will make only the lower end consumers stop purchasing them, those already barely able to buy them already. Which are a minority.

        Rich enough people will keep on buying bling goods because they show their status. If they become even more exclusive, the better.

        The rest will buy more Chinese-made bags, maybe even "French" fake ones. Xi Jinping says "thank you, Donald".

        1. Michael Habel Silver badge

          Re: They're tariffs

          Yes the nice people who want you to vote for the dottering idiot. So the can sneak their commie cronies in after he suddenly dies (i.e. gets arkencided), just after the election. Yes lets listion to what those Bollywood Bolsovick Pedos have to say....

          1. jason_derp Bronze badge

            Re: They're tariffs

            "So the can sneak their commie cronies in after he suddenly dies (i.e. gets arkencided), just after the election. Yes lets listion to what those Bollywood Bolsovick Pedos have to say...."

            Are you okay, sir? Should we call somebody? Can you feel both sides of your body?

      4. Michael Habel Silver badge

        Re: They're tariffs

        By what? voting for a moron who sadly doensn't have a clue what year it is, which race hes running for, or even manage to finish a damed sentance? Yes by all hell lets entust the Nukes to that clown. Or we can continue to make America greater... By repealing Shumer, Shiff, and Pelosi.

        This to me seems more likely. Considering your aforementiond "majority", have already told Killary to buzz off back to New York.

        1. DS999

          Re: They're tariffs

          Trump is clearly more mentally disabled than Biden. He can barely form complete sentences and is constantly going off on rants casting himself as the victim of vast conspiracies involving everyone but the ever-narrowing sliver of people who give him unconditional love despite his utter failure as president. If he was put before actual unbiased doctors for an evaluation I doubt they'd find him competent to manage his own affairs, let alone those of the country.

        2. X5-332960073452
          Trollface

          Re: They're tariffs

          "By what? voting for a moron who sadly doensn't have a clue what year it is, which race hes running for, or even manage to finish a damed sentance? Yes by all hell lets entust the Nukes to that clown.

          Not a very nice thing to say about The Donald !!!

        3. jason_derp Bronze badge

          Re: They're tariffs

          "...voting for a moron who sadly doensn't have a clue what year it is..."

          A broken clock...

    2. conel

      Re: They're tariffs

      It's reasonable for the US to respond to a country singling out a US dominated industry for special treatment, and as taxes go tariffs on luxury goods from France is quite progressive.

  3. Anonymous Coward
    Anonymous Coward

    The French government puts France and the French people first and sod everybody else. That's a good thing. That's its job.

    Trump does the same for America. I find it hard to see where all the hate in the media comes from. Sure he says some crazy things, but America is prospering relative to other countries, and he hasn't started any illegal wars or carried out any renditions - which makes him a better president than either of Bushes in my book.

    I only wish the British government did the same kind of job.

    1. msknight

      I do believe that a similar tax is on the way in the UK. Here's hoping that they don't blink at the last minute.

    2. RichardEM

      When everybody taxes everbody else

      It looks like we are going back to the good old days. That is the days of the 1930 and the Smoot–Hawley Tariff. This is an act that was passed in 1930 by a Republican congress and signed by Herbert Hoover and is considered by many one of the things that exacerbated the recession started in 1929 into The Great Depression. One of the reason that it is believed to have done that is because everybody just retaliated and it started a destruction of international trade.

      While corporations and others need to pay there Fair Share of Taxes so that governments can supply the services that their people need such as Education, National Security, Health Care and others we need to do this is a rational manner not just throwing tariffs at each other willy-nilly. Or with the current economic fallout from the pandemic we could go into another Great Recession or Depression.

      1. Michael Habel Silver badge

        Re: When everybody taxes everbody else

        How did a Bill signed in 1930 cause the happings of a year prior?

        1. John Brown (no body) Silver badge

          Re: When everybody taxes everbody else

          That's not what he said.

          "exacerbated the recession started in 1929 into The Great Depression. "

    3. macjules Silver badge

      I am sure we could get Boris to start sniffing tonic water and wearing his underwear on his head. The Sarah Cooper impressions might not be so great though.

      1. MJI Silver badge

        Bpris underwear

        He was recently, blue underpants.

    4. Michael Habel Silver badge

      I think you have a decent (enough), leader in Mr. Johnson, and deom where I sitting hes doing a decent enough job. But, I guess we have to wait till next year to see how the French want to get shot out of forgien waters or not. XD

      1. John H Woods Silver badge

        decent enough job

        I'm not sure where you're sitting where it can seem that Mr Johnson is doing a decent enough job.

        1. John Brown (no body) Silver badge

          Re: decent enough job

          If he's sitting within a 1000 miles of Trump, then it would appear Boris is doing a brilliant job ;-)

  4. DavCrav Silver badge

    "carried out any renditions"

    No. He murdered that Iranian guy though, of course.

    1. Qarumba
      Boffin

      Just Your Average Iranian Guy

      Oh well, at least that one Iranian guy won't be murdering as many as he did before his demise. But yes just forget to mention he was Major General Qasem Soleimani and not just some poor innocent Iranian guy doing his best to make the world a better place.

      1. DavCrav Silver badge

        Re: Just Your Average Iranian Guy

        "But yes just forget to mention he was Major General Qasem Soleimani and not just some poor innocent Iranian guy doing his best to make the world a better place."

        Killing a murderer without any legal framework is murder. Oh, and ten people died in the attack, so it's a mass murder.

    2. conel

      Oh yes, and don't forget about the "Austere Religious Scholar" he killed as well.

  5. Marketing Hack Silver badge

    If the French law really is carefully targeted to hit only American tech companies....

    Then I have to say that I am glad that the U.S. government is targeting French exporters in return. If this was a general acknowledgment that digital services in general are hard to tax correctly and are prone to tax avoidance, then I could have supported it. However, if this is effectively "American digital services bad, European digital services good", then the French deserve what they get in return.

    1. Alister Silver badge

      Re: If the French law really is carefully targeted to hit only American tech companies....

      It isn't deliberately targeted though. It's just a fact that most of the major digital services that the world uses are American based. There is no European alternative to Facebook, Google etc.

      1. Marketing Hack Silver badge

        Re: If the French law really is carefully targeted to hit only American tech companies....

        Yes, but the U.S. Department of Commerce investigation does raise some interesting points that digital services that are more likely to be dominated by French or German companies are excluded from the relevant law.

        1. A.P. Veening Silver badge

          Re: If the French law really is carefully targeted to hit only American tech companies....

          Yes, but the U.S. Department of Commerce investigation does raise some interesting points that digital services that are more likely to be dominated by French or German companies are excluded from the relevant law.

          In the case of the French companies, that is because those already pay their taxes as nobody outside of France (and some French colonies) uses them anyway. And about the same goes for the German companies, not many outside the German speaking parts of Europe (or the world for that matter, same area) use them.

        2. DavCrav Silver badge

          Re: If the French law really is carefully targeted to hit only American tech companies....

          "[T]he U.S. Department of Commerce investigation"

          It's not an investigation. It's looking at a law to see how you can make it out to be so unfair on the little guy, where the little guys are trillion-dollar companies.

  6. LDS Silver badge

    Local sellers can't avoid much taxes

    It's no surprise that this tax hits US companies - they are in the best position to avoid the taxes. If your are a French seller selling from France to France you're already paying taxes in France and that's all. If you are a US company you can employ all the tax dodging techniques by selecting one of the EU Tax haven - that's a sore point EU must tackle soon - and then shuffling money around to make them disappear. Actually that's also unfair competition. Sure, there are ways to avoid some taxes in EU too i.e. moving the financial HQ to Netherlands (or UK before Brexit), but not at the scale used by companies which are outside EU, and are thereby enabled to employ dirtier tricks.

    Anyway Melania Trump's bags will become more expensive, and Donald will pay more for them...

    1. Doctor Syntax Silver badge

      Re: Local sellers can't avoid much taxes

      Melania Trump's bags will become more expensive exclusive, and Donald will pay more for more of them

      He should really have asked her how this works.

      1. MJI Silver badge

        Re: Local sellers can't avoid much taxes

        Trying to work out if Stepford wife or Stockhold syndrome.

        1. Sven Coenye
          Coat

          Re: Local sellers can't avoid much taxes

          Well, she redid the prenup, so probably Stockhold. And hopefully she was smart enough to pick those that don't have his name on them...

    2. doublelayer Silver badge

      Re: Local sellers can't avoid much taxes

      There is a good solution to the problem of large multinationals using tax havens, which is to clarify and reenforce national tax laws so it's harder to use the haven to protect taxable income in each country. There is a bad solution, which is to name the people who are avoiding, which of course these companies do, and specifically target them. Both solutions function in as much as getting some money out of the entities concerned, but the first solution means you don't have to readjust your law when a new egregious offender turns up and the second solution makes you look as if you just have some companies you don't like. I am not here to defend the tech companies; we all know very well how they juggle things around to avoid any taxation or accountability. I come here to recommend a legal solution that is more likely to be accepted and more likely to work in an objective manner.

  7. KBeee

    Taxes

    Setting up artificial barriers to trade rarely works.

    After WW2, the US was worried that well made and cheap consumer goods from Japan would cause problems for domestic producers (this was in a time when exchange rates were officially set by govenments - not a mechanism that can be used in these days). So the US overvalued the Yen-$ exchange rate to make Japanese products more expensive in the US. All that happened was Americans still bought the Japanese goods, but now Japan ended up with a lot more $ in their bank accounts than they would have had.

    Tariffs are of course different, a direct tax rise on American consumers, so the extra $'s ends up in US Gov. hands, but these seemingly aimed at luxury goods could well end up adding to the cachet of these imports, maybe even increasing sales.

    Have no doubt that if the maximum tax rate was only 1% anywhere in the world, most of these Corporations would still be trying to avoid paying.

  8. DenTheMan

    You missed a trick there

    Re - risk if larger trade war.

    No problem. I read it as lager trade war anyway.

    And the posh word for lager certainly aint becks.

  9. DenTheMan

    America had a one way system.

    With China they were happy when th4ynslaved away making US goods at 3 or 4 dollars per hour.

    Now that China is a tech giant too they also cry and act foul.

    It is all going a bit tits up.

  10. jason_derp Bronze badge

    Isn't that how they normally work?

    "Revenue thresholds mean that the tax almost exclusively applies only to the largest US companies."

    Isn't that the same concept of a tax bracket, except smaller companies pay zero instead of less? I live in a county where if you make under a certain amount you're basically guaranteed to get money back on tax day. This doesn't seem unusual honestly.

  11. John Savard Silver badge

    California

    A levy on French wine, of course, would benefit California... and California isn't exactly a Republican stronghold. So it's hardly surprising that Trump decided to keep that measure in reserve!

    1. LDS Silver badge

      Re: California

      Or maybe he discovered eventually that Champagne is made in France and not Louisiana, so his hotels and golf courses would have had to pay more for it, and he and his friends don't like to feed the Union coffers with their money - nor they're going to drink less, I bet. Taxing bags, cosmetics and soap affects mostly women so that looks fair to him.

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