Comment by tacker2000
1 month ago
The EU doesnt collect income/corporate tax, the individual countries do.
These big corps use holdings in low tax jurisdisctions like Ireland and Luxemburg, funnel all their EU subsidiaries’ revenues there and end up paying 0 tax in the individual EU countries.
This system is actually legal, EU lawmakers should pass laws to prevent this.
And let us not forget the millions and billions the global IT corporations pay in the EU in form of social security taxes, income taxes, the jobs they create, and the further millions and billions in the form of purchases from local delivery companies, consultants, DC vendors, office suppliers, taxi companies, delivery companies, food and catering and all the other local EU-based companies who benefit from having these giants walking among us.
If that's a substitute for corporate taxes, why even have them at all, instead of there needing to be schemes so specific that they have their own Wikipedia articles to describe them [1]? Either you think that corporate taxes should exist, and therefore companies shouldn't just get to opt out of them based on whether they can make a claim to benefiting the economy via trickling down, or you don't, in which case you might as well just state that directly.
[1]: https://en.wikipedia.org/wiki/Dutch_Sandwich?wprov=sfla1
Those taxes are paid by the individuals, not by the companies.
And the decision how to distribute these (corporate tax) should be done by the government. Essentially, companies evading [corporate] tax decides themselves where to distribute that money. Obviously, they make decisions that drives more profits and income, not the public good. Even if it improves living conditions (ie. delivery service would help elderly), it still requires that person to be user of the product. A layman/citizen cannot effectively utilize the benefits.
A small price to pay for having your democracy subverted by hostile propaganda distributed through social media, your politicians influenced by lobbying, and your smaller businesses killed by giant corporate oligopolies.
> EU lawmakers should pass laws to prevent this.
So EU lawmakers should determine the amount member countries collect in tax?
No, but EU should somehow mandate products and services that are built within EU and used within EU or elsewhere, should receive the benefit(s) in terms of taxation.
To give an (absurd) example; You work in country X, but the parent company is in country Y. Imagine your income tax is not going to where you reside but where you work, (usually the opposite) in this case, country Y. (~20-40% of the gross salary).
One day, your basic needs (electricity, water, etc) stops working. You call the relevant government department asking what's the problem. They reply with saying they do not know and cannot afford to figure our or fix because they do not have the money to do so.
But you've been paying at least 20% (and up to 46%) of your salary as the income tax. Where the money go? Why do you work here but someone else in the other side of the world getting that slice for free?
The VAT part does work like that, taxable where the goods are being sold.
No, actually the EU cant force this, you are of course right.
The countries like Ireland and Luxembourg need to stop granting these loopholes.
I don't really understand this perspective.
What should be taxed?
Amazon, as an example, has servers in country X. Country X taxes the transaction or the income from the server company.
Amazon pays delivery drivers in country X to deliver goods, and the driver is taxed through various means (vehicle, fuel, payroll, etc).
What is Amazon doing in country X that should be taxed?
> What is Amazon doing in country X that should be taxed?
its profits within that country (income minus actual expenses)
in practice expenses are fakely inflated to transfer tax payments top jurisdiction with near-zero taxes
How can profit be calculated if a significant component of expenses is intellectual property and brand awareness which was paid for somewhere else?
Amazon can add up the costs to install and operate a datacenter or warehouse in country X, but most of the demand for services from that datacenter or warehouse will be due to expenses incurred in country Y.
Let me explain in-depth;
Profits of the company, like all other (local) companies do.
Amazon has servers in Germany, Germany is unable to tax the transaction or income from Amazon, because;
1. The user completes a transaction either on Amazon (buying a product) or in AWS (running an EC2 instance)
2. If the user is a business, there is no VAT. Because VAT is applied only to the end user. (To prevent compounding effect also). If it was the end-user, then end-user already pays for their VAT, usually around 18-20% in the case of an EC2 instance. But that has nothing to do with Amazon. User technically pays the VAT directly to the government depending on where he/she is located and where the server is.
3. Obviously Amazon does not sell the products or servers for free, they have a markup or profit margin, let's say 40% for a 100eur EC2 instance. So, 40eur lands into Amazon's bank account. While other 60eur goes to the operating expenses. (ie. Electricity, maintenance, employees' salaries, etc...)
4. In this case, Amazon should be taxed from that 40%, (ie. from the 40eur profit). Luxembourg corporate tax is about ~16-17%. Mind that US federal corporate tax is 21% itself. For the sake of simplicity, let's take 20% as the corporate tax. This would make 8eur going into the government's pocket. while 32eur stays as the profit with amazon.
5. All other companies provide the same service and has no magical entity outside pays that ~8eur to the government. Which in turn used to provide services to the citizens. (For example, Luxembourg has completely free public transportation that works 24/7, subsidized by the taxes)
6. However, Amazon having a magical entity, they declare all that 40eur profit belongs to the US entity due to the IP rights. They essentially say 100% of the things that are produced in Luxembourg, by employees in Luxembourg even owned by the US entity. Therefore, they do not pay any income tax as in fact there is no income on paper.
7. Instead, since they were able to save that 8eur, they can reduce the prices of the services up to that amount. But instead, Amazon usually reduces prices about half, reducing 4eur for customers and other 4eur going into Amazon's profit pocket.
8. It all seems nice so far, since users also benefit from reduced prices, right? Unfortunately, no. In the longer term, it hurts competition as other companies must pay taxes and losing the customers [to Amazon].
9. When there is no competition left, then Amazon can just start syphoning all the 8eur profit back to themselves. Even setting the prices as there is no longer any alternative to go.
10. Not only it hurts customers, it also hurts the random person on the street; as they receive services from government which were subsidized by the taxes. You may say that Amazon can or may invest even better products or services, but that's again not helping the layman unless he/she is an Amazon customer. And mind that a citizen does not need to be Amazon customer to get their electricity and water running.
Similar to the above, Amazon does not pay VAT or any other service taxes for any of the services they provide. But the driver does! It is even worse for the driver when he/she uses Amazon because on the net balance sheet, the driver pays income tax from his/her salary. Pays VAT for the services they receive. If he/she receives 1000eur salary at the end of the month, they can use at most about ~60% of their salary to receive goods and services. (~20% income tax + ~20% VAT). Hence, there is a corporate tax that balance these scenarios. But evading it causes more harm than good in the long run.
All the profits (earnings, surpluses) they receive should be taxed.
You can say amazon doesn't pay VAT but it's just as honest as saying Americans don't pay for tariffs
The consumer pays a certain price for a product and a portion of that money goes to taxes and costs to Amazon (including things that are taxed, like driver salaries and fuel). Those taxes are collected on the way from Amazon to the end user in every country they pass through, more or less.
Amazon is creating commerce that is taxed. They aren't skating by for free.