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United States Technology

US Drops Digital Tax Demand, Opening Door To Global Deal (bloomberg.com) 115

Posted by msmash from the how-about-that dept.
The U.S. has dropped a key demand in negotiations over digital taxation of technology companies such as Alphabet's Google and Facebook, lifting a barrier that had raised transatlantic trade tensions and prevented an international deal. From a report: Treasury Secretary Janet Yellen told her counterparts at a virtual meeting of Group of 20 finance officials that the U.S. is no longer calling for a so-called safe harbor rule that would allow U.S. companies to opt out of paying such a tax overseas, according to a Treasury spokeswoman. Yellen said the U.S. will now engage robustly in negotiations on both that issue and on a global minimum tax, the spokeswoman said.

The talks between around 140 countries on how to overhaul tax rules stumbled last year when Donald Trump's administration demanded there should be a safe harbor regime. Most other countries said they couldn't accept such optionality on paying tax. "Today we saw a strong tailwind for a fair taxation of the large digital corporations," German Finance Minister Olaf Scholz said. "My U.S. colleague Janet Yellen declared today at the G20 finance ministers that the U.S. will join in." There is still some distance to go to get a global deal on digital tax. Beyond the issue of safe harbor, the U.S. and Europe have long been at odds over the scope of any new rules. There are also outstanding issues over the amount of profit to be reallocated to different jurisdictions and how to ensure and enforce tax certainty.
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US Drops Digital Tax Demand, Opening Door To Global Deal More

US Drops Digital Tax Demand, Opening Door To Global Deal

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  • Let's hope Amazon is next, although they've already put too many small shops out of business.

    After that: Apple and all those other fashion shops.

    It's not difficult: If you sell an item in a country, you pay tax in that country. Period.

    • Re:Next up... (Score:5, Interesting)

      by MachineShedFred ( 621896 ) on Saturday February 27, 2021 @12:05AM (#61104836) Journal

      You say it's not difficult, but in practice it is: if I'm in Germany and buy a piece of software over the Internet, where does that sale take place? My current geolocation in the world, even though I could be driving down the road at the time? The server that hosts the "confirm" button click on the web site? The headquarters of the corporation I'm buying it from? The home office of the sales person who writes the contract?

      All of those places can be on different continents from each other. Who has jurisdiction to tax? All of them, divided equally? Just the purchaser as a sales tax? The publisher, as a revenue tax? Both?

      Boiled down applause lines are great, but they aren't policy. Policy has context. Policy has nuance.

      • Re: (Score:2)

        by khchung ( 462899 )

        You say it's not difficult, but in practice it is: if I'm in Germany and buy a piece of software over the Internet, where does that sale take place?

        Easy, where you downloaded the software to, or where you are located when you clicked "buy" on your browser, i.e. Germany. Just like buying a piece of physical goods use the delivery address to determine taxation. Another alternative is to use where your credit card was issued.

        VPN, you may say. That is no different from using a mail forwarder when buying physical goods. Some people will do that, but most wouldn't bother, and that is good enough. If/when a lot of people skirt the tax using VPN, you can

        • What about when somebody buys from a country that you don't have any presence in whatsoever?

          • The purchaser has a presence to conduct the purchase.

            But crypto-currency! you say.

            You still conduct the purchase form some where... And it's not THAT hard to figure out where... If nothing else, "they" declare all VPN connections to be in a high tax zone.

            For taxing authorities, problem solved. They can and DO solve things that way.

            • I spin up a AWS instance in a region where no sales tax would apply and buy my software using that instance. Then I use it in a high tax location. Worse yet, maybe I really do run the software in the no-tax region. Where do the taxes apply? Where the mouse was clicked to order, where the transaction was requested or where the transaction was performed (e.g. the server I bought from)? Where are the activities taxed? Where the admin setup the software, where the software runs or where the customers who

              • Let's make it as complicated as we can to obscure that EVERY ONE of those "places" has different laws.

                ALL can and ARE presumed to "be" in some particular place, even the jet over the Atlantic.

                While YOU may not think about which "place" you happen to be, it's really fairly easy to determine and declare, for tax purposes, where you are.

                Taxes then follow.

                You may not like it and try to be in some place where the declared tax rate is lower.

                The negotiations are not about making it easier for you to avoid taxes,

                • With all due respect, I did not note the scenario I did completely arbitrarily. There are lots of cases of tax avoidance strategies like the one Microsoft pulled: https://www.propublica.org/art... [propublica.org] . The idea that just using a VPN will change how the big boys taxes are handled doesn't really stop them. They can setup an office with 5 employees and solve the problem or they can spin up AWS instances or whatever it takes to put themselves in ideal locations. Using customer location data like GPS doesn't so

          • Re: (Score:2)

            by khchung ( 462899 )

            What about when somebody buys from a country that you don't have any presence in whatsoever?

            The same thing a company that sells physical goods do -- either handle the tax and ship, or don't accept the purchase.

        • Re:Next up... (Score:4, Interesting)

          by tlhIngan ( 30335 ) <slashdot&worf,net> on Saturday February 27, 2021 @09:02AM (#61105482)

          You say it's not difficult, but in practice it is: if I'm in Germany and buy a piece of software over the Internet, where does that sale take place?

          Easy, where you downloaded the software to, or where you are located when you clicked "buy" on your browser, i.e. Germany. Just like buying a piece of physical goods use the delivery address to determine taxation. Another alternative is to use where your credit card was issued.

          And you're going to put all the small businesses that rely on e-commerce out of business, and keep Amazon etc. in business.

          Because keeping track of thousands of individual tax rates is already difficult enough in the US, where you have city, county and state sales taxes making it so my neighbor down the road can have a different tax rate than I do. And they change so often keeping it up to date is practically impossible.

          It's why a physical store charges the tax based on where they're located - and proposals for taxing based on buyer's location generally go nowhere.

          Sure, someone will set up a simple service that takes an address and spits out a sales tax rate, but that's a a company ripe for a takeover based on the very juicy sales information they can obtain - you'll know the store, the shopping cart (sales tax differ based on the item), the shipping address or billing address of someone. That's extremely valuable analytical information concentrated in the hands of even fewer people. Especially if you need to keep track of sales taxes around the globe.

          Not just impractical, but a privacy nightmare. Google, Facebook would set up their own databases because of the nature - an address, likely residential (which you can tie to a name and person), a shopping cart of items and the store they're buying from. Even nif the shopping cart isn't an exact item like "Microsoft Office" and just says "Software", you can figure it out if you bought it from "Discount Business Software".

          And VPN is an extremely popular option because if a jurisdiction doesn't have sales taxes (like 6 US states) it'll be used. A lot of online shopping is popular simply because they don't have to pay sales taxes on goods. There are people who absolutely do not shop locally because the local company will charge them tax, instead going to the competitor out of state to save the sales tax. There will be big demand for remailers in Oregon that take online purchases and send them to you so you can save the sales tax.

          • Re: (Score:2)

            by khchung ( 462899 )

            You say it's not difficult, but in practice it is: if I'm in Germany and buy a piece of software over the Internet, where does that sale take place?

            Easy, where you downloaded the software to, or where you are located when you clicked "buy" on your browser, i.e. Germany. Just like buying a piece of physical goods use the delivery address to determine taxation. Another alternative is to use where your credit card was issued.

            And you're going to put all the small businesses that rely on e-commerce out of business, and keep Amazon etc. in business.

            Because keeping track of thousands of individual tax rates is already difficult enough in the US, where you have city, county and state sales taxes making it so my neighbor down the road can have a different tax rate than I do. And they change so often keeping it up to date is practically impossible.

            Yet the European small businesses have no problem handling these taxes. Otherwise they would have embraced the US proposal to not tax Amazon to “protect” their small businesses, right? Instead Europe is doing the opposite.

            What’s putting US small businesses out and keeping Amazon in are the legalized corruption called campaign contributions. Small businesses cannot afford to buy lawmakers like big businesses do and thus suffer for it. See regulatory capture. The Byzantine tax laws in the

        • Re: (Score:1)

          by Anonymous Coward

          Easy, where you downloaded the software to

          Not so easy. Think enterprise licensing - software that is installed on tens of thousands of machines in hundreds of countries worldwide, i.e. Microsoft Windows as an easy example. Now let's explore a realistic situation. I live in country A, but I am on long-term travel in country B. I am issued a new laptop for country B. I download a standard corporate ISO image to install. If we didn't have enterprise licensing, how would Microsoft charge for this single Windows license? By...

          Home country of th

      • You say it's not difficult, but in practice it is: if I'm in Germany and buy a piece of software over the Internet, where does that sale take place? My current geolocation in the world, even though I could be driving down the road at the time?

        Simple: In the place that issued your driver's license.

      • What you describe is NOT the problem at all, that has long been acknowledged as the location you are when you make the purchase. The problem is profit shifting and Tax Havens which allow them to say they sold you that $100 piece of software in Germany and it cost them $100 to sell it to you so therefore they owe no tax as they had to pay their Ireland subsidiary $100 for the license.

      • That is literally a *great* bs conversation mike drop ending.

        I can already see how I am going to use this Monday in a meeting...

        "But team we cant do it that way, we must do it my way because... NOUN has context, NOUN has nuance."

        I can literally say that about anything I want to argue and sound smarty-pants while saying nothing.

        Thanks for that.

      • Re: (Score:1)

        by Anonymous Coward

        None of those problems you list are new revelations, and the question already has an answer; wherever the value is realised.

        In the example you gave, tax would be paid in the country listed for the billing address of the customer making the payment

        So yeah, it's that simple. The only complexity in this problem is complexity created by tax giants to try and avoid, and sometimes even evade tax, but that complexity is all artificial when it comes too, and that's what these new laws really just boil down to; sayi

      • Re: (Score:2)

        by AmiMoJo ( 196126 )

        It's very simple. Don't worry about where a sale is made, just look at how much profit the company makes in each country. If say 10% of their global profit comes from Germany then Germany gets to tax 10% of their global profit.

        What they want to stop is companies pretending to be incorporated in some Caribbean country with 0% corporation tax, and their subsidiary in Germany making zero profit due to crippling licencing fees for using the parent's logo.

      • I am not sure what you are speaking about because all those were solved and codified quite a long time ago for normal good. Digital good should be identical , replace address of delivery with address of residence/office (I think local headquarter of the concerned office - the rule for non corporate is very easy).

        Quote :
        https://europa.eu/youreurope/c... [europa.eu]


        "Buying online from another EU country

        Special rules may apply when you buy goods from another EU country for delivery to your country of residenc

      • if I'm in Germany and buy a piece of software over the Internet, where does that sale take place?

        That's never been relevant. Where are you going to use that software? The answer is almost universally where your home address is for you, or where your office address is for the company.

        Your contrived scenario works just as well in the physical world for which we already have rules in place because we know tax is applied in the destination of use country, not in the place of purchase. That's why if you bought a piece of consumer electronics in Germany instead of software and were on the way to fly back to

    • It's not difficult: If you sell an item in a country, you pay tax in that country. Period.

      You are describing a sales tax. That is not what this is about. The Global Minimum Tax is a corporate income tax.

      • It's not difficult: If you sell an item in a country, you pay tax in that country. Period.

        You are describing a sales tax. That is not what this is about. The Global Minimum Tax is a corporate income tax.

        It's both .

        If you sell in a country, you made a profit in that country.

        It's fair: You used the roads in that country to deliver the goods, those roads are paid for by taxes, etc., etc.

        • If you sell in a country, you made a profit in that country.

          Legally, this is not true. If your company gets an order from another country, you can ship to there, but have no relationship to that country other than an address on a package. Sometimes, you don't even have that: Your goods may be distributed to another country by a reseller. Your products may be resold in a country you have never heard of.

          In these situations, you have no obligation to pay any income tax to these countries, nor do they have any way to know what your income is, or even the name or dom

          • Yeah, that's the rule set change being negotiated.

            That shuffle is going to go away soon.

            No one like the current rule set except those not paying.

          • Re: (Score:2)

            by dwywit ( 1109409 )

            Don't most sales agreements (that everyone clicks through without reading), and EULAs have clauses about jurisdiction?

            "This blah blah is subject to the laws of the the USA" (or Ireland, or Germany, or wherever).

            So make *that* the definition of the country of sale.

            And fix the laws that enable tax havens.

            • Don't most sales agreements ...

              No. 99% of sales do not have EULAs or any restrictions on jurisdiction or any clause about enabling law.

              For most sales, you hand them the money, and they hand you the product. .

              And fix the laws that enable tax havens.

              Tax havens are in the eye of the beholder. Much of the world sees the USA as a tax haven, and with good reasons.

            • Meaning all internet commerce will be hosted in a country with no taxes. The problem is our tax rules have too many loopholes to let the rich not pay taxes.
          • One example is Caterpillar heavy earthwork machinery being exported out of Switzerland, where the profits are banked tax fee in Caymans or the like. Unlike the example CAT has arranged an artificial distribution point to undercut sales made direct where they are actually made. You would think the IRS would call it a contrivance, but it is apparently legal. But if you stamp out this practice, the dozers might be made somewhere else - like Mexico. Difficult choices.

          • If the goods are transferred to another country by a reseller, you didn't sell them in that other market. You sold them to the reseller, and the reseller sold them there. So that's quite, quite irrelevant.

            I think the obvious answer is always that the sale was completed wherever the seller is, because they're the one the taxes are collected from.

            • I think the obvious answer is always that the sale was completed wherever the seller is

              The seller is located in a filing cabinet drawer in the Cayman Islands.

            • Unfortunately that is the core of the problem. Often the seller is little more than a subsidiary engineered to transfer profits out of country tax free by paying inflated prices on goods and licenses to the corporate mothership head Quartered in a tax haven.
      • All these problems and avoidance's are known by tax experts and tax planners. Besides non arms length transactions and price transfer tricks, income tax is insignificant. Non-taxable royalty and licensing and sales territory agreements are the new way not to pay fair tax in plain sight. The solution is a whopping withholding tax on everything over and above the cost of production. Not many countries go below 18% income tax, and usually supplemented by land and high VAT taxes. If Europe or USA actually want

    • This is the same howl about the town general stores when Sear and Roebuck rose, followed by Montgomery Ward.

      It will assure the taxes society needs to function properly are paid.

      There are also noises about remote working over state lines having an effect on state taxes... Your office is in New York, but you hopped to Texas? New York is trying to tax people for it. HOWEVER, some are starting to say it's really interstate commerce and federal regulation is the answer.

      In principal, it's not too different from

      • This is the same howl about the town general stores when Sear and Roebuck rose, followed by Montgomery Ward.

        It will assure the taxes society needs to function properly are paid.

        There are also noises about remote working over state lines having an effect on state taxes... Your office is in New York, but you hopped to Texas? New York is trying to tax people for it. HOWEVER, some are starting to say it's really interstate commerce and federal regulation is the answer.

        In principal, it's not too different from the early 19th century when the railroads were jerking farmers around when they sold across state lines.

        Texas and Nevada are gonna howl.

        Texas stopped howling at some point?

    • Let's hope Amazon is next, although they've already put too many small shops out of business.

      After that: Apple and all those other fashion shops.

      It's not difficult: If you sell an item in a country, you pay tax in that country. Period.

      Don't forget Google, ... although ... well ... Google is kind of the Walmart of fashion.

  • At the end of the day all the money these internationals extract are paid through easily taxed transactions by national companies or persons. Either for advertising or services.

    Raise taxes on those transactions, problem solved without this international monstrosity.

  • Not that slashdot is known for its accurate headlines, but this is a pretty egregious example of just plain copy pasta. Describing what Yellen did as "lifting a barrier that had raised tensions" is exactly how The Establishment wants this issue to be framed. That exact phrase is in all the major media summaries.

    10 minutes Google reading, however, reveals that the disagreement the previous Treasury Secretary had with the OECD's new rules is they would unfairly add additional taxes to companies with big digit

  • Your new overloards are happier by the day (Score:3)

    by tiqui ( 1024021 ) on Sunday February 28, 2021 @02:34AM (#61107636)

    When you pay taxes to your local or national government, you at least have some sort of representation and some accountability in that the people setting the rates, running the collections, and allocating the funds are elected by you and your fellow citizens. The self-appointed global elites have never been happy with such situations. The solution for them has always been "global taxes" and usually applied to businesses... and for a very good set of reasons:

    1. ANY TAX APPLIED TO A BUSINESS IS ACTUALLY LEVIED ON THE CUSTOMERS. A tax, to any business, is just like rent, utilities, payroll, etc - it's just an expense. All businesses pass along all expenses to the customers as part of the price for goods or services provided. Elites LOVE this because the average ignorant person blames the BUSINESSES for high prices every time the prices rise in response to such tax hikes. These are the only taxes levied where the people doing it are never blamed by the voters. Only an idiot sees a rich Amazon and says "Tax Amazon!"... if you're into grabbing some of that money, then the appropriate thing is "Tax Bezos!"; Bezos cares if you tax HIM on what he OWNS, not if you tax his customers, or tax the little bits of salary he might occasionally take - he's an example - it's the same for all the globalist rich dudes.

    2. Global taxes bypass local and national governments. If the people paying the taxes do not like what the taxes are spent on, their political leaders have no say in the matter, so neither do the taxpayers. This means global taxes just become big slush funds that the global elites can allocate as they see fit, with no accountability to anyone.

    3. These sorts of taxes are even harder to deal with for mom&pop type brick-and-mortar businesses than for global corporations. Big global businesses will pretend to oppose them for the simple reason that they'd like to never pay any taxes - all that accounting is an annoyance and an expense. Ultimately, however, they'll go along just like they have happily complied with all the COVID rules, and they'll do fine as the little businesses suffer.

    No sane person should ever support new or increased taxes as long as they are unsure that their existing taxes are being spent honestly, wisely, and with accountability - doing otherwise is like giving more drugs to an addict.

    • Re: (Score:1)

      by Anonymous Coward

      " All businesses pass along all expenses to the customers as part of the price for goods or services provided"

      Horseshit. Only spouted by those who have no understanding of economics at all. Repeat after me, then go and learn economics: The cost of an item or service is the price that the market can bear.

      Learn about elasticity of demand.

      Econ101 primer for you: https://www.cs.cmu.edu/~ref/ec... [cmu.edu]

      Increasing taxes may increase costs for consumers in some circumstances, but if I can sell an item for $800, that is

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