US Tech Giants Have Brought A 3% Sales Tax On Themselves

This feeling that the US tech giants don't pay their way is gathering momentum. We now have a proposal being made by the EU's Economics Affairs Minister that means what has long been talked about in the corridors of power is now a firm proposal on the table.

A 3% sales tax is what the EU is suggesting -- and it is likely to win widespread support. The UK and France have been the loudest voices at the European level, complaining about how the GAFA bloc (Google, Apple, Facebook and Amazon) construct accountancy methods to avoid paying their fair share of corporation tax.

Typically, companies register themselves in Luxembourg or Ireland to seriously reduce their tax rate. Sometimes payments to parent companies for using the brand name are used as a way to move revenue from a profitable country to another location where it can be taxed at a much lower rate. 

To qualify for the new tax, companies would need to have global revenues of €750m or more and taxable EU revenue above €50m. 

The proposals will be met with criticism in some quarters. Ireland has already opposed the move. One need only look at its track record on encouraging tech giants to set up there and pay low taxes to realise why. Even when it was ordered to levy an extra charge on Apple, to represent unpaid taxes, the government still dug its heels in to oppose the move. 

You will doubtless also see a bunch of organisations with three- or four-letter acronyms pop up to say this is discriminating against tech companies. My only response is to reach for the world's smallest violin while anyone who is sane wonders whether they could actually care less.

GAFA and others like them have dominated the UK and EU markets, but they haven't played the game. They have achieved market dominance in their fields, yet they don't adopt the same tax procedures that us normal people and company owners do of accounting for all revenue where it was earned and paying tax on the full profit. That means without reporting it through some other low-tax jurisdiction or charging the EU division to bear its name or raise some other cost that funnels money from the EU to be taxed elsewhere.

What we're seeing here is an admission from the EU that if they want, the tech giants can keep finding ways to get round the tax rules. So the EU is proposing throwing in the towel and moving the game on. If you're not going to be taxed fairly on profits, we'll tax you on revenue instead.

it's the ultimate win-win. The companies may say it's unfair, but they've had years to mend their ways. They may also say they have to pass this cost on to customers. Not only would this fail to reflect the massive profits which easily give enough room for a sales tax, it would suggest people don't understand how they operate. Google and Facebook can't pass a cost because there is no charge in the first place.

As we are finding out to our shock with the Cambridge Analytica case, we are the product. We supply our data so we can swap messages and photos, while watching videos, allowing advertising to be better targeted.

Usually, anyone in the UK would be loath to bring in a sales tax of any description. We already have a sales tax, in the form of VAT, rated at 20%, but if the tech giants won't play the game, we have to set up rules that ensure British revenue is taxed in Britain. If the only way to do that is to tax it at revenue level, then so be it. 

Despite all the protestations you're going to hear, the UK is the biggest market in the EU for GAFA. Do you really think they'll walk away over a 3% sales tax they know they could have avoided if only they hadn't spent so long avoiding their fair share of tax.

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