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United Kingdom Businesses Government The Almighty Buck Technology

UK Announces Digital Services Tax on Tech Giants (itproportal.com) 90

Technology giants will have to pay more tax in the UK under new regulations unveiled by the local government today. From a report: In his budget statement this afternoon, Chancellor Phillip Hammond revealed a two percent "digital services tax" on large tech firms such as Amazon, Facebook and Google. From April 2020, large social media platforms, search engines and online marketplaces will pay a 2 percent tax on the revenues they earn which are linked to UK users. The tax follows increasing pressure from both the public and politicians to take action against multi-billion dollar firms paying low rates of tax in the UK. Both Google and Facebook have been criticised for paying little taxes in previous years, largely by centering their UK operations in Ireland to avoid higher charges. Revealing the tax in Parliament, Hammond said that it will be, "carefully designed to ensure it is established tech giants -- rather than our tech start-ups - that shoulder the burden of this new tax."
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UK Announces Digital Services Tax on Tech Giants

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  • Shell games (Score:5, Informative)

    by Tablizer ( 95088 ) on Monday October 29, 2018 @01:13PM (#57556513) Journal

    It's becoming increasingly difficult to compute taxes for multinational corporations. Country B may not allow Country A to see enough info to compute a fair tax. It may be just easier to tax revenues instead of "profits", because money coming in and out of your own country is easier to monitor than trying to figure out what companies do and spend in other countries.

    • by Anonymous Coward

      It will endup like hollywood, where the movie earns 900 Million Dollars, but somehow lost money and is in the red... mostly to avoid paying contracts that give actors or anyone 1% of profits. Plus they write it off as a loss.

      • by Mashiki ( 184564 )

        Well there's an easy answer for that one. Obviously they're paying the key actors $100m each, the rest is spent on hookers and blow. And when it crashes in the theaters and is out on the 4th week for something else, the answer is to blame the fan base.

    • Re: (Score:2, Insightful)

      by CastrTroy ( 595695 )

      You could just not tax businesses at all. Every dollar that businesses pay in taxes is a dollar that they could be paying their employees, or being used to lower their prices, or investing in growing.

      • Re: (Score:3, Insightful)

        by youngone ( 975102 )

        You could just not tax businesses at all

        That's been tried before. It ended in almost every country in Europe having a revolution, governments fell and people died.
        Have a good read about the revolutions of 1848. You will find that one of the triggers was the fact that in many countries the upper class (landowners and business owners) paid no tax. The costs of running the nations fell on everyone else.
        Did they spend their massive profits on more staff? Hilarious. Of course they didn't.

        • ...in many countries the upper class (landowners and business owners) paid no tax. The costs of running the nations fell on everyone else.

          Not taxing businesses and not taxing business owners are different things. I don't think anyone is saying someone who earns money from a business (i.e. receives a dividend) shouldn't pay tax on that income. What people (including me) are proposing is you only tax dividends when paid out. If I sell a stock share at a profit, that's because I expect futuredividends to be higher than when I bought. But I haven't actually received those dividends so don't tax them yet.

          Theory aside, I like the idea because taxe

          • Not taxing businesses and not taxing business owners are different things.

            You are technically correct. The best kind of correct.
            Here in the real world however, the two will wind up being exactly the same thing, and business owners will pay no tax.

            • You are technically correct. The best kind of correct.

              What's the difference between theory and practice? In theory, nothing. Yuk, yuk, yuk.

              Here in the real world however, the two will wind up being exactly the same thing, and business owners will pay no tax.

              And this is where we differ. If you tax a company, it must react in one of a few ways. It can raise prices. It can cut wages or benefits. It can try to make it's suppliers accept lower prices for inputs. It can cut its profit margin. It can lower quality. What exactly it does will depend on the specifics of the markets it's operating in. For example, if labor is tight, cutting wages is very hard. If they sell products in a

              • by jezwel ( 2451108 )

                If you tax the business owners, you know exactly who will bear the burden, the people who make a profit from the business.

                Great! Let's tax Sergey Brin and Larry Page on their share of Google income.
                Oh wait they paid their income tax to the IRS? What about all those other countries where they sucked in all their revenue? No tax back for them huh? What happens when shareholders are shell companies in countries that don't report on their shareholders? Oh the company paid that countries income tax of 0%, how nice.

                There must be better ways for companies to help pay for the infrastructure that supports their business, but cann

                • Great! Let's tax Sergey Brin and Larry Page on their share of Google income.

                  I know you're being sarcastic but we do. When Google pays a dividend (if they do), Sergey and Larry get a huge chunk of that and pay income tax. What people don't like is that if Google keeps the money (to pay future dividends, to have an acquisition war chest, whatever), I'm proposing they don't get taxed on that. Current policy is that income gets taxed now, not when it's paid out as dividends.

                  What about all those other countries where they sucked in all their revenue?

                  I don't have a solid answer for that, other than companies tend to sell their shares world wide so their income w

                  • by jezwel ( 2451108 )

                    Great! Let's tax Sergey Brin and Larry Page on their share of Google income.

                    I know you're being sarcastic but we do. When Google pays a dividend (if they do), Sergey and Larry get a huge chunk of that and pay income tax. What people don't like is that if Google keeps the money (to pay future dividends, to have an acquisition war chest, whatever), I'm proposing they don't get taxed on that. Current policy is that income gets taxed now, not when it's paid out as dividends.

                    I wasn't being sarcastic - my country doesn't tax either of these 2 gents as they are not citizens nor taxpayers. All their dividends are untaxed, and a % of those divdends are made in my country, where the local subsidiary pays little to no tax via legal loopholes.

                    What about all those other countries where they sucked in all their revenue?

                    I don't have a solid answer for that, other than companies tend to sell their shares world wide so their income will get somewhat distributed. They'll also hire workers all over the world. It won't exactly match where their income comes from and where their customers are. At some point, I kinda give up trying to get everything to match perfectly.

                    Right now the vast majority of revenue made in a country is unavailable for taxing by that country - this needs to be wound back so that companies help pay for the infrastructure that supports their paying customers.

                    • I was thinking about this a little more. This issue exists whenever you have multiple tax jurisdictions. I don't know if there's a good way to resolve it that's fair to everyone in all cases.

                      For example, in the US, Washington state has no sales tax and Oregon (it's neighbor) has no income tax. This if you work in Oregon and live in Washington, you pay very little tax. There will always be ways to game the system like that.

                      The trick, of course, is to figure out who made what money where. As we've seen, compa

        • The subject was taxing businesses, not taxing business owners. When you tax a business (e.g. via corporate income taxes) the tax becomes just another business expense and the burden falls mainly on the customers in the form of higher prices or less selection, or most typically both. If your goal is to levy the burden of government on the upper class then corporate income taxes are not a productive approach.

          The costs of running the nations fell on everyone else.

          Even if you taxed the rich at 100% of income (all else being equal, which it wouldn't be) the majority

          • in order to funnel resources to a few powerful individuals, however, then the stage is set for revolution...

            Have a read of the Wisconsin/ Foxconn story on Slashdot today. That's what you wind up with.
            To be fair, my country is no better. We have agreed to pay James Cameron 25% of the cost of his Avatar movies, with no cap. You can bet your bottom dollar (well, James can bet mine) that he won't pay a single cent of tax here, and the taxpayers funding his hobby will never see any of the billions in profit either.
            Apparently paying massively profitable companies to come and do business is a good "investment".

      • Re: (Score:3, Insightful)

        by Tablizer ( 95088 )

        They tried that theory in Kansas a few years ago with terrible results: it blew the budget to heck. True, KS could go without roads, cops, and schools to balance the shrinking budget; but the people I know actually like civilization. If YOUR group wants to go back to the tax-free cave days, that's find by me; just don't do it where I live.

        One problem is that the USA no longer has many capital-intensive industries. Investments often don't return enough to justify them in the owners' minds, so the owners fin

        • by Tablizer ( 95088 )

          that's find by me

          Correction: "that's fine by me".

          Modnays.

        • They tried that theory in Kansas a few years ago with terrible results: it blew the budget to heck.

          I assume by "this" you mean remove the Kansas corporate income tax. Did they increase their property or income taxes at the same time? If you cut taxes without cutting spending, of course your budget will be shredded (at least in the short term). In the longer term, perhaps the Laffer curve will save you but that will take time.

          • by Tablizer ( 95088 )

            If you cut taxes without cutting spending, of course your budget will be shredded (at least in the short term)

            The proponents used the Laffer argument that cuts would pay for themselves.

            perhaps the Laffer curve will save you but that will take time.

            Please test that theory on another country first. I don't want to be a guinea pig for Fox Labs.

            • Please test that theory on another country first. I don't want to be a guinea pig for Fox Labs.

              Don't get me wrong. I have no idea where on the Laffer curve we are. Maybe raising rates will raise tax revenue, maybe it will lower it.

              I do know that a tax rate of 0% yields zero revenue, a tax rate of 100% will also raise zero revenue. Any tax rate in between will raise some revenue so there must be at least one maxima somewhere. Where it is is anyone's guess and don't find the theory useful to determining tax policy.

              • by Tablizer ( 95088 )

                Keep in mind that the maxima for the 1%'s income may be different than the maxima for the rest. And sometimes having a safety net is better than more average cash in pocket.

                • Keep in mind that the maxima for the 1%'s income may be different than the maxima for the rest.

                  Yes! Very good point, you can extract the most tax revenue by having different rates for different people. I don't know if maximizing tax revenue is a good policy goal but the argument seems sound. The other way to spin it is the progressive tax argument, that it normalizes the pain of paying taxes because the rich can afford to pay more because the marginal utility of each dollar they earn is less.

                  And sometimes having a safety net is better than more average cash in pocket.

                  Yup, that's also a good argument against having national policies. Different people will have different prefer

                  • by Tablizer ( 95088 )

                    Most people think short term and dump their problems onto others, sometimes turning to crime, when down and out.

      • While that is a nice sentiment it is rather naive.

        Reality: CEO gets paid millions while the grunt workers doing, you know, the ACTUAL work get paid peanuts.

        e.g. Case in point Bezos and Amazon workers.

      • There is a sense to this, but you'd probably need to redo a lot of other laws or you're going to get a lot of people personally incorporating for tax reasons. Essentially, you'd end up with a lot of people trying to like sovereign citizens where they're claiming that it's not CastrTroy who works for a company, but CastrTroy, LLC. that works for the company and receives the pay check, and being a business itself owes no taxes. There's probably whole layers of tax code fuckery that people would get up to.
      • by fazig ( 2909523 )
        True. Trickle down works to some degree. But you know, that requires having enough employees that can put their money back into the economy, being interested in offering lower prices and invested in growth.
        Let's start with the first requirement. I wonder how many employees these companies have in the UK or Europe by extension to whom they could possibly pass down those 'dollars'?
  • by presidenteloco ( 659168 ) on Monday October 29, 2018 @01:15PM (#57556531)
    So Google makes corporate net income from ad revenue based on UK users. Presumeably pays corporate income tax on that, yes? To which country? Ireland currently?

    Is this going to be double taxation?
    • by Hognoxious ( 631665 ) on Monday October 29, 2018 @01:18PM (#57556543) Homepage Journal

      To which country? Ireland currently?

      They tell Ireland that they pay it in the US. They tell the US that they pay it in the Netherlands. They tell the Netherlands they pay it on the moon.

    • by Anonymous Coward on Monday October 29, 2018 @01:23PM (#57556563)

      So Google makes corporate net income from ad revenue based on UK users. Presumeably pays corporate income tax on that, yes?

      Doubtful they are paying at the moment.

      Multinational corporations have gotten really good at finding places that have friendly tax laws, and having the corporation from one country pay another for the privilege of selling the product.

      It's like Hollywood accounting. Somehow, it's all very expensive and losing money hand over fist, and the profits have been laundered through several layers of corporate shells where with enough accounting bullshit none of them are profitable.

      Countries are now just starting to say "no, you made revenues in this country, you're going to pay taxes on that".

      About time I say.

    • Its a tax aimed at corporations that engage in tax avoidance using a Double Irish With A Dutch Sandwich kind of scheme. Governments frequently complain about corporations doing this but never usually do much about these loopholes because their bigger donors also use them. This is just taking a weak shot at looking like they're doing something about it by targetting some of the most visible corporations doing it. The loopholes close in 2020 anyway so this is mostly for image and really little more than piss

    • by DRJlaw ( 946416 )

      So Google makes corporate net income from ad revenue based on UK users. Presumeably pays corporate income tax on that, yes? To which country? Ireland currently?

      Is this going to be double taxation?

      I dunno. Is it double taxation to tax my income when I earn it, then tax my income when I spend it, and by the way here's a tariff on that thing that you spent the income on? I'm mean, you're immediately equating an income tax with a services tax, so I'm merely drawing the same analogy with sales taxes and tariff

  • by presidenteloco ( 659168 ) on Monday October 29, 2018 @01:17PM (#57556537)
    I guess the UK government is looking for emergency revenue sources now that the rest of the economy is going to be going away.
  • by CanadianMacFan ( 1900244 ) on Monday October 29, 2018 @02:01PM (#57556797)

    Why are just some of the tech companies being targeted? I notice that Apple wasn't included in this list and they are one of the biggest users of these tax dodges. Starbucks is another. If you are going to go after companies that are playing loose with the rules then why not go after all of them?

  • Technology giants will have to pay more tax in the UK under new regulations unveiled by the local government today.

    It is a bit odd to call local a nation state's government. Is there a global government that oversees UK "local" government?

  • Many years ago the UK introduced Insurance Premium Tax at 2.5% in 1993 as insurance premiums were exempt from VAT. It now has a standard rate of 12% and a higher rate of 20%. The VAT rate is 20%. This measure at 2% of revenue is not the end. Future governments will see how effective collection is and how the public responds to it. I would not be surprised to see it rise to near Corporation Tax levels but without the neat tax offsets. The companies that appear to have avoided being affected ? Watch next ye
    • This is a standard trick in the government revenue generation handbook - utilize voter ignorance. New taxes need voter support, so target a small group of targets for a small tax, while making sure nothing in the bill says anything about caps, or voters having to approve any increases or changes. It works even better if the targets are somewhat unsympathetic, like "big evil tech companies". Vote it in. Change at will. I recently watched a similar move pulled in Washington state - vote in $10 tax on electric

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