It clearly shows how the tax system based on taking a cut from profits is totally leaky and should be abandoned. It only results in endless cat and mouse game of tax consultants (the big 4) finding loopholes in such tax systems against governments trying to plug the holes, just with much smaller budget and efficiency than the tax-evasion consulting armies.
There are other models of tax systems. Some are even not production and consumption based (you want to maximize production and consumption for growth, not stifle it with taxes). For example land taxation proposed by single-tax movement or monopoly based taxation in general. Ie. for providing a company the privilege to be a monopoly on a market, it needs to pay a fee to those guaranteeing such privileges, which is the state.
For example big pharma lobbied for its monopoly and now it is super hard for competitors to enter the market. Let these companies pay a monopoly tax for such privileges.
Other example. Somebody appropriates for himself a valuable piece of land with oil deposits. He prevents others from utilizing that land. Let him pay for having that exclusive rights of use, since clearly the government is providing private property related services (police, courts and army to guarantee his property) for him that others (non-owners) are not getting.
I completely agree, I would love to see a monopoly based tax system. I consider property ownership just a special case of a monopoly, since you have a monopoly on that plot of land. The one question you didn't broach here though is how you set the tax rate. Current systems do this on property by looking at the sale price, but property value can change, so they use an appraisal process. That's no good, it's expensive and prone to political manipulation. I'd prefer to see a market based solution. Imagine this: at any time you can make an offer on a piece of property and submit that offer to the government, the owner of the property can either accept or reject the offer. Offers are binding, so if they accept you're required to pay. But whether or not they accept this offer becomes the new valuation of the property and they must pay taxes accordingly. This should give you a system where the taxes paid on a property are always relative to the value derived from it by the party that values it most. And property should in general wind up being owned by that party.
The same basic structure should work for other monopolies like Pharma and internet infrastructure monopolies.
So you get your buddy to make you a low-ball offer on your property that you'll definitely refuse so you can pay less taxes. Then you do the same for them.
Meanwhile, that person you don't like? Make a ridiculous offer on their property to either force them to move or suddenly have to pay absurd taxes.
You'd value the property based on the max offer the person had gotten, not the minimum.
This gives the person you don't like the option to take your ridiculous offer and stick you with the absurd taxes. Sure they have to move, but they now have the resources to do it.
One interesting idea I came across lately is to abandon taxes altogether and just print money as necessary. The inflation is the tax. This allows companies and people to pursue revenue without limit whilst also allowing for all public good/needs to be met. This approach coupled with a basic income could be a very powerful enabler. The difficulty will be in learning what the limits to and pitfalls of this system are as we don't have any practical experience implementing it.
Just make the state a passive non-voting shareholder, with a stake of, say, 10%. It receives a dividend, just like any other shareholder, so interests are exactly aligned, and there's nothing management can do to avoid paying the state, while also paying shareholders.
The state would benefit from share price rises by existing capital gains tax paid by the individual shareholders when they realize the equity gain. This would prevent avoidance of dividends in favor of share price appreciation through buybacks.
It leaves the problem of cross-border flows, such as fradulent notional payments for intangible assets, such as licensing, which would still be able to move profits and dividends to other countries.
> Somebody appropriates for himself a valuable piece of land with oil deposits. He prevents others from utilizing that land. Let him pay for having that exclusive rights of use, since clearly the government is providing private property related services (police, courts and army to guarantee his property) for him that others (non-owners) are not getting.
If by "appropriates for himself" you actually mean "buy", then your position basically boils down to an "all property is theft" manifesto.
Note that when you "buy" land this is quite limited. For instance anything that happens sufficiently below it (e.g. subway tunnels, mining) or above it (airplanes), you have no say in it.
Similarly a state could say, you license (not buy) land for construction/agriculture etc. use. This license does not include extracting oil, which requires a separate license. The land remains property of the state, but for specific uses (e.g. housing) you have a guarantee that you can keep the license for 100 years and/or can renew it under similar conditions. This is for example what China does: https://en.wikipedia.org/wiki/Chinese_property_law
Is that reducing the personhood of companies? (I consider that a good goal.) Saying that you must be a company to drill oil, and companies can only buy leasehold, not freehold.
IIRC what some states do is that you can not buy or sell directly. Instead it goes seller -> state, state -> buyer. To a large extent the allocation is then still done by the market on the buyer's side, but the state has some leeway for overriding, e.g. highways, natural resources, environmental protection, affordable housing only, zoning.
Same as the society solved allocating humans. Instead of them being bought and sold on slave markets, nowadays we have companies leasing humans in exchange for a salary. You can do the same with land - lease it instead of giving asay infinite time ownership rights.
The flaw in your argument is in definition of land ownership. You own the rights to use some portion of land somewhere. The rights are provided by other people, ie. a community represented by state.
'Buying' land, ie. transfer of rights from previous owner to new owner is a transaction which excludes the actual provider of the service of land rights, which is other people who will respect the new 'ownership'.
Current system is equivalent to giving infinite land leases, or very long like 100 years.
The way to fix this is to either have a yearly 'land tax' system to collect percentage of the land value or simply provide the land leases for like 7 years for commercial and/or longer for residential.
Each 7 years you'd have a land lease auction. Similarly to having a electromagnetic spectrum auctions or how DNS should be organized - periodic auction to prevent domain squatters to hold premium domain name 'real estate' near valuable domains (using levenshtein distance).
Well probably they bought it to, but yeah if you go far enough back there is probably some shenanigans going on with the land much as when you pass money around in America sooner or later somebody gets cocaine on it.
Land means 'land use rights', not the actual soil. Rights are provided by other people. The community agrees that they won't squat on the owner's plot of land. The community is not paid for providing these rights nowadays though. You could expect an uprising of unhappy people soon.
In my humble opinion, this has more to do with the tremendous, ever-growing cost of the EU and its member governments; as well as a lack of protective principles in their legal systems. These rulings seem to show them retroactively interpreting and applying laws which would be too vague to enforce in the U.S.
The EU's courts seem so abusive and vague that there is virtually no way to avoid running afoul of them if you do any profitable business, even completely within a reasonable interpretation of the rules.
I mean, your second sentence is not even remotely true. You’re implying that the chance of being sued by the EU is near 100% for every profitable business in the EU.
> You’re implying that the chance of being sued by the EU is near 100% for every profitable business in the EU.
I mean to say that you can be fully aware of a law, interpret it broadly, and comply with that broad interpretation to the fullest extent, and you still have a reasonably high chance of being liable for damages in a suit related to that law.
At the end of the day, Google probably doesn't differentiate the two very much as they're both costs of doing business. I would expect Google to work in its interest to reduce these impositions (taxes, laws+fines, etc) where they can, but we shouldn't pretend the punitive value of fines is more than a cost calculation to them.
We also shouldn't pretend that the EU justification for fines is purely about citizen protection, they see this as a "tax" as well (though that is of course not their primary motivation). Otherwise, they would work harder on non-punitive approaches towards combating the ills of Google and the like. One would hope education and encouragement of alternatives and other positive-leaning approaches might be prioritized over a gavel.
> We also shouldn't pretend that the EU justification for fines is purely about citizen protection, they see this as a "tax" as well (though that is of course not their primary motivation). Otherwise, they would work harder on non-punitive approaches towards combating the ills of Google and the like. One would hope education and encouragement of alternatives and other positive-leaning approaches might be prioritized over a gavel.
The fine exists to remove the profit gained from the illegal behavior, otherwise performing the illegal actions would have a positive expected value. The company is also required to provide a list of remedies to ensure that the behavior is not repeated.
As for "non-punitive" approaches, the encouragement of alternatives would have to be non-financial since state aid is barred under EU rules [0]. I suppose they could recommend alternatives, but if it were really that simple to avoid a consolidation of power in the tech industry we wouldn't have such monopoly/duopoly issues.
My comment is more of a general comment about lifting society up rather than what has been made illegal or what is barred. Regulations have their place sometimes as do more open competition environments coupled with an educated populace, and it's often a case-by-case situation which to favor more and work towards harder. In this case (big-tech bogeyman), I think the latter should be favored but both can be employed of course.
Works for me. If Google is happy to avoid taxes however they can, we should be extracting as much out of them as we can in other ways, such as fines. Not sure why we should be content with them not giving a shit about anything but themselves. Companies like Google only act out of pure greed. They don't respond to "positive reinforcement" and "education". They know perfectly well how to pay more in taxes, it's the default - they go out of their way to avoid it. They pay millions, tens of millions to lawyers to make sure they do exploit whatever loopholes there are. They aren't passive, innocent actors here.
No. Fines exist to dissuade illegal behavior. The loopholes that Google (and Apple, and many other multinationals) should be abolished, and any tax evasion should be prosecuted. Antitrust fines do not exist to punish tax avoidance. They exist to penalize companies who use their size to prevent competition and distort markets.
I have many issues with Google's business practices, but punishing them is not worth throwing out the rule of law.
How is that different? The behaviour is made illegal, precisely because it's unwanted... that's pretty much the definition. I don't think there is another source of law in healthy cases/systems.
Not all unwanted behaviors are illegal. Some countries tax soda in order to reduce soda consumption. A behavior is not unwanted iff it's illegal. A behavior is illegal iff it's unwanted. It's not necessary for a behavior to be illegal in order to be unwanted. Illegal behavior is just a subset of the other.
But aside from that, and in this case, I feel the barriers to making it illegal are far higher than fining companies in other ways.
What we need is to have this things move faster, if Google, FB or other company does some illegal stuff or abuses the users, reach a decision fast(in a few weeks) not in years.
As much as I hate the painful wait to see action on these fronts, I understand the desire to be careful and cautious before potentially irreparably destroying a business. But the penalties need to affect the decisionmakers personally. If Sundar Pichai was risking jail time to abuse Google's power, you'd better believe it wouldn't happen.
This isn't too far away from how it works for "proper" criminals like Roman Seleznev [0], so one can dream.
Presumably, this would involve the CEO travelling to Europe accidentally while a European arrest warrant was out on them (which would be negligent on someone's part). Since we have yet to see huge fines under the GDPR, let alone arrest warrants for not complying, this seems to be far off though.
I would be fine with the American government actually putting American CEOs in prison too. ;)
But even without the international extradition type problems, there are still a lot of problems, as we consider most of the wrongdoings these corporations are committing to be civil violations, and no matter how many people they harm, as long as they aren't treated as criminal, we can't put someone in jail for them.
I do feel this is a major problem though, as CEOs aren't realistically punished for corporate misdeeds that can cause massive, wide-ranging harm. Even if the CEO screws up badly enough to lose his job, he'll get a job being a CEO somewhere else.
Actually, if Winterkorn is found guilty, he could be thrown into jail for up to 25 years, and he would be personally financially liable to the tune of his entire fortune. So, yeah, he's not getting off easy like most executives do in the US. Let's see the US even try to do the same thing to bank executives. Oh wait, democrats declined to pursue any of them and were happy with a single low-level scapegoat.
The EU doesn’t see fines as taxes no more than the US does.
The fiscal value of fines is not great. The commission can’t budget how may fines it plans on collecting and from whom. It’s completely different agencies that issue fines and do the budgets.
EU fines go into the EU budget, and the member countries accordingly pay less than planned into it so that the overall pot stays the same, meaning the member countries have more money.
Taxes mean the member countries the taxes are paid in have more money.
The EU allows a couple of its countries to act as tax havens. Ireland and the Netherlands are probably pretty pleased that EU citizens seem to direct all their outrage at the companies that do the obvious thing instead of at their tax laws.
I'm not complaining about the EU or comparing with US, I'm just pointing out that if the rage many EU citizens feel about the taxes of large corporations should be addressed by the EU somehow instead of hoping companies start paying some moral amount of taxes.
It's not really that straight forward. With the Euro another dimension is thrown into the mix due to the effects of the extreme export competitiveness disparities that exist within the single monetary areas.
They need to make these fines "per user". It shouldn't be the case that for a company sufficiently large that a few billion in fines is simply another cost of doing business.
I believe the number of users affected is one of the factors considered at the time the fines are levied. The EU seems to be happy to substitute fines for taxes, so companies treating them the same way isn't too surprising. Structure your activities to avoid {fines, taxes} as much as possible, but at some level they are unavoidable.
>The EU seems to be happy to substitute fines for taxes,
When I think at EU fines I think At MS, Intel and Google, in all this cases this companies abused the markets. Can you provide a citation of a company getting a big fine but that did everything legally?
This refrain is so tiring. There exist tax laws. They follow laws and pay the taxes they are supposed to. You can dislike the tax laws on the books but to expect that a company is going to willingly pay more than the law requires is absurd.
It's not half as tiring as the insistence that companies like Google follow the law and pay the taxes they are supposed to even in cases where courts have specifically ruled that they haven't. You can accept that corporations aim for tax efficiency without pretending that creating imaginary entities to pay imaginary royalties to or pretending that sales of UK eyeballs to UK companies by UK-based commissioned sales reps were actually completed in Ireland is simply paying what the law requires rather than actively subverting the relevant law.
They do not evade taxes, that is illegal. They pay what is legally mandated.
Not using tax strategies when you are major corporation with millions of shareholders would not be in the interests of the company and it is silly to expect them to voluntarily pay more, especially for some subjective belief on what the "right" amount is.
If you would like them to pay more then change the law to make them do so.
So if Google paid more taxes than necessary (legal loopholes), there would be no fines (for bad privacy etc.)? That sounds wrong.
I don't support the legal tax loopholes but don't think there should be much relation between legal taxes and fines for bad practices (unless ofcourse the bad practice is illegal tax evasion).
I was merely suggesting the "more fines than taxes" bar in this article was artificially low because of their artificially low tax rate.
Note that I am fully in support of the EU's fines for both Google's antitrust violations and their privacy abuses, and agree that they should have no bearing on taxation.
> So if Google paid more taxes than necessary (legal loopholes), there would be no fines (for bad privacy etc.)? That sounds wrong.
I doubt there would be no fines; but if Google were paying a "fair" amount of taxes then there would be less of an adversarial relationship with governments: huge fines would be like harming the goose that lays golden eggs.
With Google's current tax avoidance/evasion they're just a regular, tasty-looking goose.
I really wonder what will happen if Google/Facebook becomes unprofitable in EU due to regulations? It's clear that these companies work on user data and will not gain enough data/users/money if it is paid, specially social networking sites. Will they block it like China for exactly the opposite reason?
The interesting part about this is both google and facebook rely on network effects to ensure that they offer better services than competitors.
Even running at a loss may be worth them continuing to run in the EU to stop the rise of competitors and to keep the better service that having more users grants them.
The EU has some rules that companies need to follow, same as any other democratic country does. Like it or not, EU regulation usually does a good job at protecting consumers from untamed companies, as happens in other places.
I'm glad this jingoistic talking point is appearing less and less these days. Because I got tired of repeating the following:
If you actually sum up the fines levied by the EU, aggregated by continent, you will find they almost perfectly each region's respective revenue in the EU.
The only exception is that Asia is fined somewhat more than to be expected, and the US less.
This is probably due to the US' strong enforcement catching and/or discouraging behaviour before it gets to the level where the EU would intervene. Conversely, it shows a somewhat less developed corporate culture in some Asian countries.
Completely disingenuous representation. ALL of EU has Value Added Taxation, that takes money from every transaction to/from corps. For instance, buying ads on Google would automatically incur these taxes.
What EU really wants is double/triple taxation where:
1. They tax your transactions as VAT
2. Income post these taxes are counted as revenues, and costs (excluding VAT) are deducted to calculate profits.
3. Profits from #2 are further subject to corp. income taxes.
This article would be half genuine if they listed the VAT dollar amounts Google has raised for the EU
First of all, VAT is collected by the vendor. But the entity actually taxed is the customer. That's why VAT is an explicit line item on any bill.
Second, almost all customers of Google Ads are businesses, with the resultant right get refunds for any VAT paid.
Third, because of [second], most customers likely take a shortcut: if you add your VAT registration number to your account, Google does not even charge VAT.
VAT is collected by the government. Just because VAT appears as a line item on a bill, doesn't mean the vendor gets to book that as revenues.
> Second, almost all customers of Google Ads are businesses, with the resultant right get refunds for any VAT paid.
You mean, the business itself might charge a VAT from it's customer, and deduct the VAT it pays to vendors as "cost" during taxation. There are NO REFUNDS of VAT from the government!!
> if you add your VAT registration number to your account, Google does not even charge VAT.
Doesn't mean the transaction has 0% VAT fee, the EU/government GETS it's VAT on valid transactions, one way or another. If you somehow avoid VAT reaching the government, you're violating the law! AND, Google is NOT the beneficiary of VAT, regulation typically requires a seller to charge VAT and pass it on to the government.
Let's talk VAT numbers the EU gets from Google (as both a seller, buyer), and income taxes paid by GOOG employees before demonizing them
VAT isn't refunded, but since Google's clients are typically directly deducting the VAT paid from their corporation tax bill and not many people buy ads for personal use, the net benefit of VAT paid on Google Ads to governments is pretty minimal.
The case for income taxes paid by Google employees is better, but then most of them would also be paying high income tax if working for businesses that didn't use elaborate schemes to repatriate their profits.
Unless actual numbers are cited, discounting government's VAT income from Google's operations is not useful. We need a number to understand whether or not Google's contribution to the coffers are actually lesser than the fines it pays.
Unless actual numbers are cited, it is not useful to credit Google with paying taxes which (i) are actually paid by Google's customers if at all and (ii) are generally directly deducted from those customers' own tax obligations and thus generally net to zero.
What in my statement implies Google directly pays VAT taxes. I make it amply clear that "discounting government's VAT income from Google's operations", i.e. owing to the actual operations that result in transactions with Google, under EU law, subject to EU VAT, regardless of who pays it!
On (ii), ANY and all costs incurred in operating a company, including paying VAT, can be deducted from revenues while calculating profit. That in NO WAY takes away from the actual VAT being paid to the government!!! HOW exactly does that "generally net to zero."? It certainly reduces profits, but unlike other "costs" that reduce profit calculation, VAT cannot be viewed as tax avoidance, if anything, the resultant profits post VAT are still subject to corp income tax, constituting double taxation. No CPA will advise a company to pay more VAT as a tax avoidance strategy, so I'm still trying to understand why booking VAT payments under "costs" net to 0, and for whom?
The entire premise of VAT is to guarantee a certain income for the government, as a % on EVERY transaction that happens in the economy. Hence, the mere existence and operations of Google in the EU resulting in transactions, is a source of VAT income for the government. Google can always move ALL incorporation out of the EU, and buyers can make "American" transactions to an American company that completely circumvent EU VAT. By choosing to have an EU entity subject to EU VAT, Google is contributing to EU coffers.
Unless there is an agenda to malign Google, ignoring government income from Google's operations seem convenient, and click-bait-ey.
Your claim that it is "completely disingenuous" and click-bait-ey to note Google avoids so much corporation tax on its European operations it actually pays more in fines rests on a completely disingenuous claim that VAT on Adwords should be counted as "dollar amounts Google has raised for the EU", despite them generally resulting in zero net change to company tax bills as they're fully tax-deductible for VAT-registered businesses.
It's a bit rich to accuse others of having an agenda to malign an organization when you started off with claims about what the EU wanted based entirely on your own ignorance of how VAT on business expenses actually works. (It's actually a rare example of a tax designed to avoid "double taxation")
Ah! If VAT is not a tax, and Google's operations inside the EU doesn't contribute to EU coffers, you must be all for moving Google's EU subsidiaries offshore, and saving whatever VAT Google's customers pay?
Google recorder $40B in EU revenues in 2017. About 20%, or $8B was the VAT related revenues that EU received. Let's move all that away from the EU, since it's all one big non-tax.
Also, let's abolish VAT, as my "ignorance of how VAT on business expenses actually works" is being exploited by big-evil Google for tax avoidance. Everyone knows that paying VAT is the #1 way to reduce tax liabilities, translated, "let's all pay taxes on transactions, as a way to avoid taxes on income! Hurrahs all around for the genius CPAs".
VAT is an evil tax on revenues (transactions), that sellers conveniently pass on to the buyer. Whether you agree or not, every seller is also a buyer, and VAT merely increases the cost of doing business, while also effectively acting as a double-taxation ploy, as profits are subject to income taxes. Who ends up footing the VAT bill is immaterial, as VAT goes under "costs" that were previously $0, unless you're a company that buys nothing to sell something. And whether it's booked as "costs" or not, it's a tax that the government receives on transactions under it's jurisdiction. Buying ads from a US company as a US transaction doesn't incur a VAT cost on an EU company, hence, Google's EU presence is a net positive for EU coffers!
I suspect that Google ceasing to do business in the EU would be considerably more harmful to Google's revenues than to the EU (actually that whole argument works better the other way round. If Google is truly struggling to make any profit at all on all that investment they make in the UK, why don't they just leave?)
Please do yourself a favour and educate yourself on what VAT is before you Dunning-Krugersplain what the EU wants from it, how much you think it is worth to the economy and what you think an accountant would recommend a business does (I can recommend a good search engine as a starting point!). The entire point of VAT that it's a tax on the consumer of the final product only, and that businesses get to deduct all the VAT levied on intermediate goods they've purchased to make and market the final product. That's literally the most basic, definitional aspect of VAT that sets it apart from traditional sales taxes. Since Google Ads are bought almost exclusively by businesses, EU member states (the EU doesn't actually levy VAT itself) receive a net tax benefit from VAT paid on Google Ads only on ads bought for personal enjoyment or by VAT exempt organizations, which must be a tiny proportion of their sales. Now there's an argument that Google's customers' customers would buy fewer taxed goods and services if they didn't see the ads, but that's a very different argument and certainly not something you could object to journalists not counting as "government income from Google's operations"
There are other models of tax systems. Some are even not production and consumption based (you want to maximize production and consumption for growth, not stifle it with taxes). For example land taxation proposed by single-tax movement or monopoly based taxation in general. Ie. for providing a company the privilege to be a monopoly on a market, it needs to pay a fee to those guaranteeing such privileges, which is the state.
For example big pharma lobbied for its monopoly and now it is super hard for competitors to enter the market. Let these companies pay a monopoly tax for such privileges.
Other example. Somebody appropriates for himself a valuable piece of land with oil deposits. He prevents others from utilizing that land. Let him pay for having that exclusive rights of use, since clearly the government is providing private property related services (police, courts and army to guarantee his property) for him that others (non-owners) are not getting.