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Thread: Is the proposed 3% EU tax on online ads and other online revenues reasonable?

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    Default Is the proposed 3% EU tax on online ads and other online revenues reasonable?

    See What the EU's new taxes on the tech giants mean - and how they would hurt Ireland

    The recent UK budget included a 2% tax on these online revenues which would take effect in 2020 barring an international agreement on such taxes. The target of the tax is the big US multinationals. If it proceeds,this tax would cause trade tensions with the Trump administration.

    Online ad revenues of US tech giants Facebook and Google are akin to exports from the US. The online services they provide attract large viewing audiences,generating huge ad revenues.

    Similarly, US movie and TV studios export their programming products to EU cinema and television operations and get paid in cash instead of advertising. Those exports are not taxed in the EU if the seller doesn't have a physical presence in the EU. Technically, a physical presence isn't absolutely necessary but a lack of presence would hamper effective marketing. Where a physical presence exists, an EU tax on the profit from the value added by the presence is reasonable. That would be a complicated tax calculation.

    An obvious multinational example of where value is created is provided by the pharmaceutical industry. Given the heavy R&D on new drugs, usually in hundreds of millions,pharma companies are justly entitled to be taxed largely in the country where the R&D occurs. An EU 3% tax on sales would be very damaging to the industry.

    From a EU tax standpoint, should a distinction be made between profits from a Facebook fan using US software, a person watching a US movie in a cinema and a person on US pharma drugs?

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    The US tech giants are destroying local media, high streets and advertising revenues, and old rules are inadequate to address the extraordinary challenge they pose. In effect, they are getting a massive free ride on the tax front because legislation hasn't caught up with them yet. If EU companies were doing this in the US, can you imagine the noise Trump would be making? Countries are only sensible to look for new ways to make Facebook, Amazon et al. pay something remotely approaching their fair share.

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    Politics.ie Member clearmurk's Avatar
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    This would not arise if sophisticated tax evasion schemes were not at play.

    Who believes that such "products" are 99.9999% intellectual property, with close to zero associated net margin? Our taxation authorities, apparently. I wonder why.

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    The EU is always looking for a toehold into fiscal policy and this is the latest example. I am concerned that with the UK leaving the EU, it will become a lot harder to block this. But we should use our veto if necessary. This is an attack on the tech industry and by proxy an attack on Ireland's attractiveness to it.
    Fair and Balanced

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    Politics.ie Member clearmurk's Avatar
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    Quote Originally Posted by Dame_Enda View Post
    The EU is always looking for a toehold into fiscal policy and this is the latest example. I am concerned that with the UK leaving the EU, it will become a lot harder to block this. But we should use our veto if necessary. This is an attack on the tech industry and by proxy an attack on Ireland's attractiveness to it.
    Why should the "tech industry" be exempt from the rules that other companies have to conform to?

    Are these supposed US exports subject to customs duty and/or VAT?

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    Quote Originally Posted by Ardillaun View Post
    The US tech giants are destroying local media, high streets and advertising revenues, and old rules are inadequate to address the extraordinary challenge they pose. In effect, they are getting a massive free ride on the tax front because legislation hasn't caught up with them yet. If EU companies were doing this in the US, can you imagine the noise Trump would be making? Countries are only sensible to look for new ways to make Facebook, Amazon et al. pay something remotely approaching their fair share.
    Facebook and Google take advertising revenues from old media within countries and have damaged the business platforms of many newspapers. That doesn't justify the proposed discriminatory 3% tax on their revenues separate from VAT, revenues earned by services provided online and transmitted with little or no physical business presence. The economic damage to old media could be seen as a cost of economic disruption and progress typical of the ongoing industrial revolution.Historically, Luddites were among the first to revolt against such disruption by destroying textile machinery.

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    Politics.ie Member Dame_Enda's Avatar
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    Quote Originally Posted by clearmurk View Post
    Why should the "tech industry" be exempt from the rules that other companies have to conform to?

    Are these supposed US exports subject to customs duty and/or VAT?
    They shouldnt be exempt but neither should they become an excuse for EU to meddle in our taxation system. Without natural resources, the only card Ireland has to play in attracting investment is our corporate tax rate and the English language (like it or not). They used to say our education system was a factor too, but that has been slipping in the global league tables.
    Fair and Balanced

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    Quote Originally Posted by clearmurk View Post
    This would not arise if sophisticated tax evasion schemes were not at play.

    Who believes that such "products" are 99.9999% intellectual property, with close to zero associated net margin? Our taxation authorities, apparently. I wonder why.
    It is very difficult to draw the line on intellectual property. A drug company's R&D is obviously that. But Starucks' charges to franchisees which are untaxable in the countries of the latter? Some portion of those charges minus modest related costs could be regarded as taxable profits.

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    You guys think Ireland can veto the proposal and it will all go back to the old days? No, the alternative is introducing such taxation changes on country levels. The EU proposal is to stop some member states from introducing national solutions that could divide the single market and make it more difficult for companies in the EU.

    The tax is coming either we do veto or not, but we can get EU to strongly support our Brexit agenda and offer a no-veto in return.

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    Quote Originally Posted by Patslatt1 View Post
    Facebook and Google take advertising revenues from old media within countries and have damaged the business platforms of many newspapers. That doesn't justify the proposed discriminatory 3% tax on their revenues separate from VAT, revenues earned by services provided online and transmitted with little or no physical business presence. The economic damage to old media could be seen as a cost of economic disruption and progress typical of the ongoing industrial revolution.Historically, Luddites were among the first to revolt against such disruption by destroying textile machinery.
    Fine, then suggest a better system. The basic principle is this: letting a tiny group of foreign companies pay no tax on unprecedented revenues is simply not acceptable.

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