Italy Approves 'Google Tax' On Internet Companies 236
recoiledsnake sends this news from Bloomberg:
"Italy's Parliament today passed a new measure on web advertising, the so-called 'Google tax,' which will require Italian companies to purchase their Internet ads from locally registered companies, instead of from units based in havens such as Ireland, Luxembourg and Bermuda. Google, for example, says that it sells nearly all its advertising in Europe from an Irish unit, leaving little taxable profits in the countries where its customers are based. That unit in turn pays royalties to a second Irish subsidiary, which says its headquarters are in Bermuda. Google last year moved nearly $12 billion to the Bermuda unit, the majority of its worldwide income, cutting more than $2 billion off its global income tax bill. Google's Italian unit last year reported total income taxes of just 1.8 million euros, corporate filings show."
Loophole closed (Score:5, Interesting)
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What loophole? Is it only a loophole when you don't agree with it?
Google is serving ads from everywhere.
Maybe a consumption tax on goods and services would be better for the 21st century.
Re:Loophole closed (Score:5, Insightful)
From Italy, yes, otherwise... (Score:4, Insightful)
If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government.
Why is that so, if all of the equipment the ads are served from is not in Italy?
Are you saying (and you are) that someone in Italy who wanted to advertise on a popular blog hosted in the U.S., should not be able to do so? Or that the blog owner should be required to pay taxes in Italy even though all costs are incurred in the U.S.?
It's not like the person in Italy it not already paying taxes on his internet connection. It's not like they would not pay taxes if they bought something from the ad. It's not like the company who bought the ad is not paying Italy corporate income tax anyway.
It makes no sense that someone operating in a totally different state should have to pay any taxes at all based only on where someone is browsing from, or who buys services from them.
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They don't pay taxes where the costs are incurred either. The company buying the ads may also be playing the same game.
Re:From Italy, yes, otherwise... (Score:5, Interesting)
The equipment isn't in Bermuda or Ireland either.
It makes no sense that a Californian company is paying tax in Bermuda when it does nearly no actual business there.
Re:From Italy, yes, otherwise... (Score:4, Insightful)
Are you saying (and you are) that someone in Italy who wanted to advertise on a popular blog hosted in the U.S., should not be able to do so?
Yes. What's exactly wrong with that? If I bring three packs of cigarettes inside the EU, I will get fined at the border for evading something like 20 € of taxes, and my name will even end up into the list of smugglers. Even though the money was mine, and the cigarettes were made outside my country. Nobody has ever objected against that, because paying taxes is seen as normal. So if eluding 20 € of taxes is a crime, why should eluding 10 billion € be considered fair?
It's not like the person in Italy it not already paying taxes on his internet connection.
They're two different services, two different persons earning money, two different tax returns.
It's not like they would not pay taxes if they bought something from the ad.
It depends. If they buy them on Amazon, they won't pay a penny of taxes to Italy, thanks to the same Ireland-Bermuda trick, even though Amazon competes with italian sellers who do pay taxes and present comparable prices to the customers. It's a matter of fair competition, which certainly is very complicated to handle, but can't be dismissed altogether.
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Gah. Why do so many people not understand the difference between avoidance and evasion? Evasion is what happens when there's a rule, and you break it. Avoidance is what happens when politicians wish there was a rule someone was breaking, but there isn't, and as such tax avoidance is barely a well defined term at all. None of these companies are being accused of tax evasion. That would require someone demonst
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That's only one half of the equation -- ad server equipment. The other half is the infrastructure (roads, internet, electricity, etc) built by the Italian govt. that makes it possible for an Italian to purchase something from the internet. How is Italian govt being compensated for this cost?
Re:Internet megacorps not on level playing field (Score:5, Insightful)
Careful with your words... as you are accusing the lot of them of crimes.
Tax evasion is illegal in most locals... tax avoidance is not.
There is a difference, look it up.
This law simply makes tax avoidance a little harder for some in certain circumstances.
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To hell with your technicalities - We are accusing the lot of them with crimes. Perhaps not crimes anyone thought to formalize yet, but crimes, none-the-less. If I do business in location-X, I have to pay taxes there. The fact that companies like Apple and Google can afford to export all their profits to places with so little government oversight as to evade taxes outright, doesn't make it just peachy.
That said, I have to wonde
Re:Internet megacorps not on level playing field (Score:4, Interesting)
Someday people are going to finish school with a basic understanding of math and logic.
It is logically impossible for a corporation to pay taxes.
Let's make up an imaginary company that makes cars which have the following costs.
$1000 for materials
$1000 for employee wages/benefits
$1000 for facilities
$1000 for developement
and since they are evil
$0 for taxes
So that car costs $4000 to build and the company wants $1000 for profits so the car ends up going for $5000
Now the gov't closes all the loopholes they were using not to pay taxes and charges $1000 per car in tax
So yay the evil corporation is now paying $1000 in tax and not making evil profits. A company that makes no money does not stay in business very long, so they look to slash costs as fast as they can else people will sell their stock and the value of the company will tank.
So first thing out of the gate they slash payroll. Sorry guys everything else is in on contract or is not liquid like buildings and spare parts. Next the company implements a few efficiency programs and drives down the materials costs and sells off a few buildings. The budget for product development is chopped and finally they raise the price of the car by $100 because the market won't tollerate a $1000 jump.
$975 materials
$750 employee pay/benefits
$975 facilities
$750 development
$1000 taxes yay!!!
$100 price increase
Total $4550 with the new car price now $5100
$550 Profits - wait a second?! We wanted to tax them a $1000 per car that's not right they should have at most $100 in profits.
Hold on it get's better. The next year the company closes 1-2 of the factories and ships them overseas and automates a third along with another $100 bump in price.
$850 materials - less environmental rules to follow overseas, no import tax
$500 employee pay/benefits - overseas labor=cheaper - more machines = few people
$1100 facilities - new buildings cost money
$750 development
$1000 taxes
$100 price increase $5200 car now
$900 profit
Year 3 they just coast with a $100 price bump they are back to the $1000 profit margin per car. So who actually paid the tax? Did the corporation? Sort of for about 3 years. Did the laid off employees pay for it? No but they lost their jobs, but that would have happened anyway with innovation. Did the consumer who wanted the car essentially eat the entire tax. Yep. But wait the price for the consumer only went up $300 for the car, how did he end up paying the entire $1000? Because the government stole $1000 worth of innovation from the company which eventually would have been passed on to the consumer due to competition. Sure the company would have pocketed the bonus profits at first, as they should have for coming up with a better way of doing things, but eventually they would have had to lower their prices to compete in the market. So in the end what should have happened is the price of the car should have dropped to around $4300, but instead it rose to $5300. With inflation that number would be more like $5450 which is a whole another ball of wax of government theft.
Sure the government can go in and fool with regulations and taxes to put more burdens on the company, but eventually they'll figure out a way around them and again the consumer is left holding the bag, with the gov't stealling the profits that should have gone to the consumer in the form of price reductions. If a company can't then they lose money and eventually go under, or in the case with many "crucial" industries end up getting bailed out making the problem worse.
Corporate taxes are the worst kind of low brow, stupid, shoot yourself in your own foot while trying to dump the bill on someone else form of wish full thinking politicians use to pander to a willfully ignorant public who think they are getting something for nothing.
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Taxing just the profits doesn't change a thing. Do the math.
If the gov't charge 10% tax on "profits" and the company wanted $1000 per car profit, how much more profit would they need to make to get the $1000 after the 10% tax. The answer is $1,111.11. (Most people can't solve these simple word problems, which
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Your initial statement was a bit more important than you may have thought. At a 0% profit rate, ANY business would have to do something or face being driven out of business. And at a 100% tax rate, well, it would be close to impossible to run a modern business, so the point is moot.
You argue that any tax increase on profits will be sent directly to the consumer. This, however, carries a number of implicit assumptions:
1) Increasing the price will not impact sales: Increasing the price by x% may make fewer c
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Only if you don't understand a global economy.
You have taken the stance against a global economy. I'm going to ignore all of the little things, like finding a way to calculate all of the appropriate taxes without adding a cost to the consumers of purchasing a service to do exactly that in each nation, state, county, city, and locale on the planet.
If where things happen is important, we need all kinds of geo-tagging and tracking to ensure people are not cheating on their taxes. Billions of $(currency) are
Re:Loophole closed (Score:4, Insightful)
> If Italian products are being advertised to Italians, then the service tax on the adds should be paid to the Italian government
A contemporary, but yet outmoded thought, in my opinion. The internet really shows exactly how old
fashioned this line of thinking is.
What is italy ? The idea that a patch of land and history forms a magical entity which give a small group
of people the right to tax and control the people living therein seems entirely arbitrary to me.
People both within, and without italy, can access servers both within and without of italy's current ground boundaries.
The goods and services and even idle chatter moving over the internet can be in any language, sold in any currency
or other unit of account, or even be given away for free.
Why should the italian government have any special purview over what is bought and sold over the internet ?
Who's to say whether a specific ad targets italians or not, the language ? What if the ad is in english, would it still
be considered to target italians? What is the advertized product is not sold in Euro's, would it still be taxable and
subject to these regulations ?
How about a product, made in china, sold to an italian speaking community living in london, hosted by a server .info domain name; how many of these variables
which physically resides in sweden, and has a
have to change to make it subject to these new rules?
Re:Loophole closed (Score:5, Insightful)
look man I'd agree with that ONLY IF GOOGLE DIDN'T HAVE FUCKING SALESMEN WALKING AROUND IN ITALY.
but they do. that's all what the local offices basically do, selling advertisements and finding customers for the ads.
if the sillyness doesn't stop then soon enough I while in europe I won't be buying from my swedish/finnish/german/whatever grocery store even if I go into the store.. they'll just technically make the business of buying happen in Ireland... and the store is just a "showroom" and a "delivery cache".
Re:Loophole closed (Score:5, Insightful)
Agreed, as another example:
Google Argentina S.R.L. is an actual company. You can see their data here:
http://www.cuitonline.com/detalle/33709585229/google-argentina-s.r.l.html [cuitonline.com]
Their credit status:
GOOGLE ARGENTINA S.R.L. CITIBANK N.A. 10/13 1 1733,6 N/A -
(means Google took a loan from Citi for ARS 1.73M or USD 300,000)
AFIP (federal tax agency) reports Google Argentina SRL has a few tens of employees.
So. Why should they NOT pay taxes in Argentina, if they are a registered company, with employees, who enjoy the benefits of being a company here (for example, they can take a loan). And they make their profits here and send them abroad completely untaxed.
I hate paying taxes as much as anyone else. But what google does is not fair game. It doesn't allow companies to develop within the country: I'm pretty sure the first ting Larry and Sergei did wasn't exactly to register their company in the Cayman Islands. That was later, when millions already poured in, and creative accountants took over. They are simply exploiting a loophole.
Lots of comments come here from americans, who are very loud about anti taxing, and yes, I fully agree that paying taxes sucks, but you have to understand this: the US prints the world's money. Italy doesn't. All international transactions are made in USD. Italy (and any other non-US country) loses money from their reserves to pay google. Google takes this money offshore. They do the same in the US, but it doesn't matter, as the US simply keeps printing more and more money to compensate (why do you think the USD is so devaluated?). Another thing to notice is that in most of the world, "technicalities", the really nitpicky details you see in police procedural dramas, don't apply. In most of the world, a cop doesn't have to read your rights. And laws are thorough and redundant, leaving little room for argument. And no, lawyers don't have a sexy job of sweet talking a judge. It seems most of you understand that judges rule according to how nicely a lawyer puts his arguments. That's complete bullshit, at least outside the US. A judge won't accept crap like "the suspect crossed the state line as he was firing so technically he fired from another state and his trial is null here".
Making really stupid observations such as "the physical servers aren't in Italy" is incredibly shortsighted. Google is providing a service, and making money. They should pay taxes *LIKE EVERYONE ELSE*. By no means i say google should pay more, or less. I'm simply saying they should. Along with amazon, and any other company that makes not millions, but billions a year and pays ridiculous sums. They get to subvert the system, make a country lose millions every year in both reserves and lost tax money, unemployment from local companies that go broke because of the unfair competition,etc.
This is just the beginning. Most countries will start applying restrictions like this to international companies once the volume becomes big enough. It's not a problem if a few thousand people across the country make purchases. But it is when millions do every day.
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what google does is not fair game
What google does is not ethical game. Deontology in nowadays big companies is long gone. Basically, the big groups as of today are money machines - their performance assessment is basically the result of the equation Revenue - Charges. Fairness is not involved, Compliance with the law is, because lawsuits are the only thing companies are afraid of, nowadays, i.e. losing a lawsuit = inflate the "Charges" account. Google does what the law allows them to do - they own a large team full of people looking for wa
Re: Loophole closed (Score:2)
You mean like VAT?
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So they're really in Italy?
Ireland and Italy are both part of the EU single market. I don't know enough EU law to say for sure, but this might get struck down by a European court.
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Sure this is going to happen.
Then Italy can decide it does not want to obey EU rules, and while I do not think Italy government has the balls to do it, it is technically possible, and it would be quite interesting. Remember EU has not army, and therefore no way to force a member state to obey.
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The Italian government has a long history of ignoring EU rules and court decisions. Just google "Lettori EU". However, in this case, the boot is on the other foot. The Italian government would have to use the courts to punish companies that did not follow an Italian law which does not comply with EU free market rules.
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Re:Loophole closed (Score:5, Insightful)
The problem, however, is that it may run afoul of European law by discriminating between national and European registered companies. It will depend heavily on the exact wording and application of the law whether the EU will allow it. /that/ is a hard thing to do with all the lobbying going on. Maybe it is time that the tax-systems get better harmonised between EU countries and sanity can be implemented (I know, utopian thoughts, but still).
The loophole should be closed on EU level, but
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By the time it comes in and anyone has a chance to challenge it the new EU level tax system where companies pay based on how much business they do in each member state will start.
Under the new system if you sell a billion Euros of advertising in France you pay tax on a billion Euros of sales in France, even if your corporation processes everything through Ireland. No bullshit, just pay your taxes or get out, your choice. If you don't want to pay there are plenty of others who will take your business.
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You write that as if this "new EU level tax system" is being designed and deployed right now, but I've heard nothing about such a thing and it seems hard to imagine it happening, given that this was the system before the EU Common Market was created and it sucked hard, which is why it was replaced.
The common market makes everyone richer by massively reducing the paperwork involved in running a company. A small company can set up a one-man shop in Italy and sell to all of Europe pretty much immediately, with
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It's going to get thrown out in a year anyway. Both Italy and Ireland are part of the EU, and membership of the EU requires the free movement of capital, people, goods and services between members states. Because the new law prevents Italians from buying a service from other EU member states, it's illegal under treaty - you can guarantee it will be challenged and overturned.
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Sounds to me like a violation of EU common market treaties.
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The idea that they're ANY place is a "hoax". If anything, these firms exist only as a collection of habits, customs, and rules -- as abstractions in the minds of the owners and employees. Even as owners and employees change, the firm can continue to exist as the firm's culture is transferred fro
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They incorporate to save liability so they exist in a particular place insofar as a corporate structure is concerned.
Them living on in the face of change is only a product of that corporation. Not that i support the 3 card monte they are playing for tax considerations. But all they really have to do to get around this is charge all their hardware and administration costs to thei " italy componant" making their tax obligations negligable.
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US/Europe " You owe us taxes!!"
Google "Feel free to stop by our Mars headquarters and pick up your check....lol"
US/Europe "Hey China can we catch a ride with you?"
China "Go fuck yourselves"
US/Europe "Damn"
Surprised this didn't happen sooner (Score:4, Insightful)
Given the global fiscal debacle, I wonder what took so long. Countries simply cannot afford to leave that kind of money on the table when they have massive debt and double-digit unemployment.
Re:Surprised this didn't happen sooner (Score:4, Informative)
In some countries (like Ireland), yes it was the banks.
In countries like Italy, it was largely the governments. In countries like Greece, it was 100% the government.
that doesn't seem too unreasonable (Score:5, Insightful)
When Google sells some ads to an Italian company, it is not really a Bermuda company conducting business. Deeming the transactions to take place in the location of the customer isn't the only possible rule you could come up with, but it's a vaguely sensible one, and at least more sensible than the status quo.
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So, local Italian companies advertising in Italy will pay an extra "Google Tax", while other EU and multinational companies advertising in Italy won't. Thus, they're making local companies pay more than foreign companies. This is not likely to produce the results that the Italian government wants.
I'm not sure that this is "more sensible". I don't know how to produce a sensible tax system; it may be that such a system cannot exist. I am convinced that it is impossible to exist under the current US lobbyi
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It is far more sensible, because it means local companies are actually able to compete because they are on the same ruleset.
Right now google is effectively a parasite, punishing local companies that play by the rules and pay to taxes to each country by abusing a legal loophole not to. Such loopholes must be closed asap, preferably while competition still exists. It's going to be much harder to do once google has parasited all competition to death and is the only game in town.
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Why is it not really a Bermuda company?
I have been arguing with myself for quite a while over this. Mostly American employees? American founders? American headquarters based in America? Started in America?
What prevents BP, previously known as British Petroleum, from moving their headquarters to America, where a large part of their production and sales actually happens? Are they still British, or are they now American?
What if I make a better beer, and want to move to Ireland? Okay this is impossible, bu
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I don't think it is a sensible idea though.
Let's say there are a lot of Italian businesses selling to people overseas via the internet. Forcing them to pay tax in the location of the customer means they need to be compliant with the tax codes of all the nations they sell to, so that they can pay corporation tax. Instead of coming up with a singular profit/loss figure, they need to work out profit for each country they sell to so that they can sell an appropriate amount of tax to each country's tax service.
S
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It doesn't just seem onerous, it was onerous, which is why the EU single market was forged at great diplomatic difficulty and cost - exactly to avoid the crippling paperwork and bureaucracy that was involved with expanding companies.
Governments everywhere are passing stupid laws that try to tax foreign entities in a desperate attempt to fix their finances without impacting voters. Trying to tax people who are selling to their voters is a popular idea because it's harder for people to perceive a lack of good
Good (Score:2, Insightful)
I expect sociopathic behavior out of corporations, who seek to optimize their income in a shallow way (building up the countries they're in will increase income too, but corporate monetary thinking is very short-sighted) and take advantage of any system that they're in. So governments need to pass laws to prevent that kind of behavior.
My only concern is that when the laws get too complex, endless loopholes will be found. They need to have a very streamlined definition of corporate income that doesn't leave
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I root for the team that provides sustainable wealth creation and jobs.
But in which country is the wealth & jobs being created?
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Job creation doesn't necessarily occur in the country the corporation is located in, or where their shareholders live.
All having low taxation does is cause shell corporations to be set up in your country. Like the ones in Bermuda this article cites. Bermuda may get some wealth that way, but surely minuscule compared to the total economic power of the corporation.
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The problem is the way tax law is working, companies have become effective at moving their profits from the markets where the actual business is to countries like Bermuda.
Italy is using new laws to capture taxes on the transactions their markets generate.
Given the large debt loads now carried by developed nations I expect this to become popular.
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Any country can get some of that wealth and job creation for themselves by halting their confiscatory taxation policies.
Define "confiscatory taxation policies".
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Such BS (Score:4, Insightful)
Are you trying to say Google is the result of low US taxes? That is such a load. Californian taxes are HIGH. If next you come back telling me "but Bermuda..." I'll have to point to what you said and ask how Bermuda tax rates have anything to do with the tax policy of the country the company is in?
Next go and watch this video about the history of the Silicon Valley and go away with your propaganda: http://www.youtube.com/watch?v=ZTC_RxWN_xo [youtube.com]
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Are you trying to say Google is the result of low US taxes? That is such a load. Californian taxes are HIGH.
Combined State and Federal taxes are at historic LOWS.
Decades of lobbying has pushed us into a race to the bottom and framed the debate in such a way that historic tax rates are considered insane, despite earlier "confiscatory" tax rates at times of enormous growth.
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Oh My.
America's chief reason for revolting was to obtain self-determination.
READ THE DECLARATION. Taxes are not mentioned until the 17th grievance.
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Even more BS (Score:2)
The country had its best time in the 50s/60s after the war - with the highest taxes.
Also, myself an entrepreneur (albeit on a small scale) I know not a single entrepreneur including myself who ever looked at tax rates before deciding to become entrepreneurial.
Last, a good infrastructure - not just roads, the legal system!!! - for the most part benefits entrepreneurs and those with money. The worker classes go to small claims court at the most (I want to say it's about small change 99% of the time when they
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What does your statement have to do with anything I said? You try to reframe it so that it looks silly - but only YOU look silly, boy. I'm a (small) entrepreneur and I have NEVER looked at tax rates to decide whether a project should be done or not. Also see my reply to the other guy (why should I repeat myself) about who benefits the most from a government (and should therefore pay for it unless you believe in subsidies).
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Indeed (see my reply to the other guy). And yet, no entrepreneur looks at tax rates - if the taxes are high they just don't want to sit at home and not become rich any more? So out of spite they say "no, taxes are too high, I refuse to invest and make money just to spite you, government (- that benefits me as an entrepreneur much more than anyone else, but I don't want to pay for it)". My focus is tax rates don't matter for entrepreneurial decisions. Their result is how much money is left with the company -
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Two questions: what is capital? Where did it come from?
You use the term "productive wealth" - which I've met before, and have often found it to be a code phrase; then you use "confiscate" as, I'm guessing, a euphemism for tax. So I'm also curious - how would you go about rationalizing the existing way of doing things? I suppose I have a third question, first: what is the purpose of wealth? Or perhaps, what is the proper use of wealth?
(Some clarification, I guess, seeking some common definition. Likel
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Right now that appears to be China.
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Maybe the world has colors in it besides black and white.
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> I root for the team that provides sustainable wealth creation and jobs.
oh, so you're a socialist then? nice to hear.
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This is the result you get when your country ships off all its petty criminals to a nice sunny mineral rich land, and keep all the worst ones for themselves - basically lose. We may take the piss out of you Ozzies for being a bunch of convicts and for playing knifey-spoony [youtube.com], but you've got a bloody nice place to live.
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I root for the team that provides sustainable wealth creation and jobs.
Then you shouldn't be rooting for team corporatism, which has for the last 30-odd years been creating a system of completely unsustainable wealth creation and jobs.
The period of most "sustainable wealth creation and jobs" in human history, was the few decades post-WW2, up until the late '70s when the neoliberals took over the western world.
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Then you are rooting for democratic governments against corporations. It has been shown countless times throughout our history that when corporations are given free reign, following happens:
1. Rights of workers are pushed as low as possible. Preferred state no rights at all, including human rights. This is currently noticeable in third world where corporations outsource as much work as possible, because governments there are weak and rarely represent the good of their people. As a result, they are easier to
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unfortunately, the govt has powers to kill and imprison you for life.
corporations might ignore you, but they cannot hurt you.
IANAL (Score:3)
So what prevents Google for closing their Italian office altogether? Simple tell Italian companies, he is a webpage to buy services and an account in Ireland to pay. If you need help, here is a support number in India or some other location. Somehow I doubt Italy can enforce a rule that says companies can't buy an online service from Ireland.
The nifty thing with the internet is that you can work remotely. Or am I somehow missing the point?
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So you propose that Italian companies cannot run Italian ads on the largest internet ad platform, but that their international competitors CAN run Italian ads there? THAT is what prevents the government of Italy from doing this.
Or are you proposing that Italy can tell a US company what to show to Italy? Or something else? I'm not sure exactly what you propose, but I'm sure that it will not happen for long because local Italian companies will complain bitterly if they are put at a disadvantage compared to
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The law is written to stop Italian companies from buying services from foreign companies, which will seriously hurt Italian companies. Even if Google goes along with this and routes payments via Italy and pays Italian tax, lots of other ad networks won't and it's a competitive business.
Similar to Amazon dodging sales tax (Score:4, Informative)
Really this is a global problem, where an entity can set up an extraterritorial operation and avoid taxation.
Amazon does it to avoid sales taxes and so forth in the United States. Google and Apple do it to avoid taxes in particular countries.
Simply these shenanigans will cause states and countries to extend their cooperation across these boundaries. Eventually there will be a national sales tax system, and an international sales tax.
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Isn't that the recent environment in Somalia?
Solution (Score:2)
Gross receipts tax; money is received in the country/state/locality where it is paid or from where the transaction buyer originates.
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So PepsiCo sets up an Irish office to pay Google for ads worldwide (including in Italy). Local Italian companies are too small to do the same. And Italy is punishing its own companies. Bad solution, I think. I don't know what a good solution is, mind you, but that's not one.
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A Russian can import goods from China into the United States. They pay duties and other fees at the border of the United States as the goods enter the country; even if they intend to pay Americans to take the product.
The internet needs some kind of enforced border to ensure duties and other fees are paid on content as they arrive. The ads, in this case, would require payment in order to be presented to an Italian client. The "good" is being consumed by an Italian and taxes/fees should be paid when it crosse
A good first step (Score:5, Interesting)
Anything that discourages internet advertising is a step in the right direction.
What about EU freedom of cross-border trade? (Score:2, Insightful)
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Isn't it against European Union laws on freedom of cross-border trade or what's it called properly?
I don't know why this has been modded down, since this seems a blatant violation of EU law.
Anti Free-Trade (Score:2)
This kind of law has other negative side effects. An italian company can't buy an ad sponsorship slot on a blog in a different country; because the blogger is not a multi-national entity --- they won't have a company registered in Italy.
The potential advertising options for Italian companies just became very limited......
Breach of EU law (Score:2)
The text of the law (Score:5, Informative)
This is a non authoritative translation of a part of the law that I believe TFA missed, legal-Italian to plain-Italian to plain-English (as good as I can get it). Italics are mine.
Think about the implications of the part in italics. Your US company buys an ad in English from Google aimed to the US market. Unfortunately I end up seeing it from my computer located in Italy. Ops, somebody is in trouble now, either you, Google, me or a combination of those three parties. There is nothing in the law about what happens in case of violations and to whom it happens.
Furthermore TFA missed that the law binds companies like Google to register a VAT account in Italy, not to pay taxes there. They'll end up paying just VAT there, which by the way comes from Italians, not from Google. The law aims at quantifying the turnover of those companies in Italy, which can only be estimated now. Unfortunately the way it's worded makes it difficult to enforce.
Luckily a motion [giampaologalli.it] (in Italian, Google translation to English here [google.com]) has already been filed to suspend it. For another take on it you can read this Google translated post from wired.it [google.com].
PS: odd thing to do for me on Christmas morning :-)
Re:states dont want to compete. (Score:5, Insightful)
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When the EU pulls their heads out of their asses (as the USA has been urging since Bush41) & does something about uniformization of tax codes between members, THEN, we will have the beginning of a solution to this problem. Italy's "solution" is in direct contradiction with the free movement of goods within the EU that Italy has accepted treaty after treaty, will be contested every step of the way to the European high courts & will be defeated within 2 years.
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Being taxed where you are headquartered is not a scam, it's how the system is designed to work.
Re:states dont want to compete. (Score:5, Insightful)
You were so busy stuffing words in that guys mouth I wonder where you got the spare time to build a strawman.
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he bought one of ebay from china.... who in america makes things any more? besides paper work.
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I hope you arent serious. The time frame you are talking about was only possible because Europe had been decimated in a very intense and destructive world war.
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Re:states dont want to compete. (Score:5, Informative)
Except that the corporations haven't chosen to go where taxes are LOW; they've chosen the places where taxes are ZERO.
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Re:states dont want to compete. (Score:5, Insightful)
A better solution would be for Italy to simply lower their taxes until it did NOT make business sense to go through such contortions to avoid them anymore.
Because the race to the bottom has been demonstrated to be such a great idea in all other areas, yes? Healthcare, social security, heck anything with humans in it.
No, states should not have to compete. When you make business in a country you ought to pay its taxes, period. Tax evasion like this should be illegal, and if Google or anyone else doesn't like it - well, nobody forces them to sell ads in Italy.
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Perhaps a little tax competition between governments wouldn't be a bad thing? Competition keeps private companies on their toes, why not government? Monopolies are bad right?
Monopolies are generally bad but as in most things there are exceptions. Governments are what's called a "natural monopoly" - you can't have two states on the same territory competing for... well, what, actually?
No, I think applying economic thinking to political entities is wrong. You're trying to ride your sheep and shear your horses.
I don't think there is anyone out there that would claim their is not room for efficiency gains in government.
I think efficiency shouldn't be a governments #1 priority. How about liberty, democracy, society and culture and all the other non-economic values?
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A better solution would be for Italy to simply lower their taxes until it did NOT make business sense to go through such contortions to avoid them anymore.
Yes, because tragedy of the commons is the best solution!
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A better solution would be for Italy to simply lower their taxes until it did NOT make business sense to go through such contortions to avoid them anymore.
The reason corporate taxes make sense, ultimately (in a purely nationalist sense), is to export a portion of your tax base. Take the United States as an example: Suppose a pure US-based company that is publicly traded; all its payroll taxes and all the income taxes of its employees come out of US pockets. The capital gains taxes that we collect are only o
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It doesn't really work, sure they may get Google's business from Ireland, but because they pay "license costs" to a Bermudan company they're not actually paying Irish tax on their profits.
From the FT [ft.com]:
Google UK reported pre-tax profits of £36.8m in 2012 on turnover of £506m, compared with a pre-tax loss of £20.7m on £395.8m of turnover a year earlier. The turnover is predominately a sales and marketing service fee paid by its Irish affiliate, along with a research and development fee of £109m from the US.
Google Inc earns “substantially all” its foreign profits in Ireland, according to its annual report, but only a small proportion of these profits are taxed in Ireland because of royalties paid to Bermuda where its non-US intellectual property is held. As a result, it paid foreign taxes of $358m on foreign profits of $8.1bn, according to its last annual report – equivalent to a tax rate of less than 5 per cent.
So, Italy would be about $360m better off, plus they'd get a bunch of jobs, something which Eric Schmidt says you should be grateful for, instead of "whinging" about how little tax they pay.
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Damn. I wanted that title.