The original title is "Italy stiffens terms of digital services tax in 2025 budget", which totally fits the required HN length. HN suggests to stick as close as possible to the original title, which given that this title does not overrun the length would be exactly this title.
Why is the title changed so much? I know we're supposed to assume good faith, but in some cases it is difficult.
I haven’t decided yet where I stand on this, however…
…As I understand it, the intent of the law is to avoid that large companies book billions of revenues in the country, but then use price-transfer schemes to book the profits somewhere else, and not pay any taxes locally.
The net effect of the law on larger internet companies is probably marginal, but I am not sure the law was designed well enough, so as to avoid collateral damage on smaller internet companies
The way Italy is implementing their own law looks kinda like ultimatum for others to implement minimum corporate tax law. As was agreed, but then never done because China and US are arguing details and everyone knows last one to implement theirs is likely a winner economically.
You can sit around and wait for decades until this might get meaningfully implemented, loopholes get closed and enforcement is strict. Great step by Italy to refuse that and just implement a measure in the meantime. Can always be repealed if indeed things get fixed on a global level.
This is mentioned in the article, but it's important to know that this is not just some Italian novelty, there has been a worldwide effort to figure out how to tax digital services provided by multinational companies in a way that makes sense and avoids funny business with transfer pricing and other tax loopholes, see https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifti.... The news here is primarily that Italy is not waiting on a big multilateral agreement but has started to implement some of these ideas on its own.
Paying tax is normal for most companies. I am not sure why the us is being the slave of these companies and threatening retaliation. Apparently it wants to be the only one to take a cut (despite money being made from Italians). That's extreme. If NATO is a family of mobsters, then this is not how things are done within the family. I know we're not supposed to anger the us as they are the best guarantor for European security and freedom but such bullying tactics, effectively making Italy pay a tribute like a vassal state, does make me question whether we can be independent and guarantee such things ourselves.
The current HN Title bears zero-ish resemblance to the Reuters article title. And that article seems to assume a load of prior knowledge.
SO - what is the fuss over here? Is Italy doing anything more than say "if you sell digital widgets into Italy, then you gotta pay Italian sales tax on that revenue"?
Yes - "if you have Italians connecting to your website and look at ads, even if you make $0.01 total, you have to register and pay 3% of that, or else".
This is already in effect for big corps like Google, but now it seems to be for everyone - therefore its presumed relevance to HN.
Revenue (not profit) taxes have a bad history and are generally abhorrent because they incentivize many suboptimal things both in theory and practice. Trying to impose this kind of tax on companies that have no meaningful presence in your jurisdiction, subjecting them to these perverse incentives, is going to invite significant backlash. Everything about this seems foolish and poorly thought out.
Think of it as sales tax for b2b transactions. It's a giant hole in most countries' taxation schemes, where b2c transactions are taxed, but b2b are entirely tax-free.
That's not the problem. You can't tax Google profit in Italy. It's an American company. You can apply sales tax and custom duties, however. This is what this "tax" is. But because of the WTO, they couldn't apply duties, so they are twisting the story.
The WTO agreements and institutions are due to collapse in the next 2-4 years (and nope, am not saying that, see Macron latest interview about cars).
America was only actually relevant to their point because it is not Italy. Ireland is also not Italy so their point works equally well with America replaces with Ireland.
The issue, which has been raised in diplomatic discussions on this matter, is that multiple countries are claiming the same revenue as “domestic” and wish to tax it simultaneously. This quickly becomes untenable and isn’t a good look for tax policy.
Slovakia is probably one of the worst countries in the EU in terms of opportunities, maybe just getting out of that specific place might help you? Czechia is right around the corner, Poland as well, and they fare better than Slovakia in pretty much every way.
Edit:
> "Portuguese, Indians, Brazilians are on my no-hire list. They have corruption and cronyism embedded in their DNA."
Ah, just noticed you were the user who posted this stupidity some weeks ago, thought the name was familiar because this comment really showed some true colours. Please, pack your shit and get moving to Russia to stay away from the hellhole :)
It's also one of the EU countries with the least debt to gdp, still has industries, good agriculture, 90%+ of home ownership, &c.
France and Germany are in much deeper shit compared to Slovakia, look at property tax, tax on land, income tax, Slovakia is almost a tax heaven in comparison
I think you could have toned down the rhetoric a bit, but I do agree that the comments you mentioned aren't great, and did add context to the comment you replied to.
You're not wrong, though. Slovakia is at or near the bottom of EU average wages iirc.
> I think you could have toned down the rhetoric a bit, but I do agree that the comments you mentioned aren't great, and did add context to the comment you replied to.
I understand your point but personally I simply cannot accept such xenophobic stupidity, if someone spouts that in public they need to be publicly shamed for it. Unfortunately there are many safe places for this kind of abhorrent behaviour on the internet, I believe this forum shouldn't be one of them.
I agree with you that xenophobia and racism have no place here.
However, we have to endeavor to exercise good faith. Sometimes it's enough to simply let another's words speak for themselves, and by quoting alone, you have done the community a boon. The site isn't for public shaming, it's for thoughtful discussion. I would rather show respect for others by my response and hope to have a real human interaction that can show someone my true colors rather than tell someone else who or what they are or aren't.
I guess I care about people, even if I don't like their behavior or speech, because I want to understand them and their experiences. People make sweeping statements or unfair generalizations, and that's an opportunity to ask people how they came to believe or say such things. Sometimes, people don't even have specific things they can point to, and they may be more amenable to reason than you realize. It just takes willingness to meet people where they are, not where we'd rather they be.
Thank you for being here. If I have done anything, it is by learning from others.
"Darkness cannot drive out darkness, only light can do that. Hate cannot drive out hate, only love can do that."
Strength to Love, 1963.
"If we are to have peace on earth, our loyalties must become ecumenical rather than sectional. Our loyalties must transcend our race, our tribe, our class, and our nation; and this means we must develop a world perspective."
Christmas sermon, Atlanta, Georgia, 1967.
> just register a digital business and make one euro, an average American would cry out laughing.
At least in my country (France) it's not any harder than registering as an independent worker (you often use the exact same legal vehicle for both).
The real problem with European tech is that it's too easy for US company to land on the continent, and since they have a biggest market to begin with they always end up stronger than European companies when it comes to addressing the other European markets. The “single market” is a fantasy, every country has its own language, culture and business practices, things that EU's homogenization of regulations between country since the 80s have never overcome and never could have, and because of that it's not harder for an American company to do business in an EU country that it is for another European country.
Since forced homogenization isn't gonna do it, the correct approach would be to put barriers to foreign entry like Evey successful Asian country did in the second half of the 20th century with great success.
Advocating for free trade with a much more powerful country than your is as insane as it would be to advocate to remove the fences in a zoo…
The problem is euro-racism and not much integration of workers and businesses in EU.
A successful french startup means a loss of jobs and wealth to other countries. DACH customers will prefer working with DACH companies, French customers will prefer working with French startups.
If you dont work in english speaking environment (IT) moving countries within EU is practically impossible for people working normal jobs.
Yes, this is entirely true as well. Though US companies face this effect as well. But as a result EU companies get practically no competitive advantage compared to an American company when they want to operate in other EU countries, and if the EU wants to exist this imbalance of power need to be addressed or it will keep snowballing.
The EU regulatory burden is the real culprit, it stifles international reach and makes it much more expensive for small companies.
Not saying all regulations are bad, I like a lot of them, but if you have a company in the EU, especially one in the manufacturing industry then you know.
Yet regulation is nowhere to be seen in the leading complaints from French manufacturing companies (which means it's way behind the price of energy, the lack of qualified workforce, and the lack of capital).
It also doesn't prevent international actors to arrive in the EU market, and from personal experience it's easier to do business in the EU when you are an American company than the opposite by a significant margin.
Here's what it took for the small American company I work at to get registered to sell downloadable digital goods from our American web site to EU customers:
• About 15 minutes or so on the website of the Irish tax authorities.
Once we started selling, here's the ongoing burden:
• Collect VAT at the VAT rate of the country the customer is in.
• Early on in each quarter run a script that produces a report that shows our total sales for each EU country and how much VAT we collected for that country.
• Upload that report to the Irish tax authorities and give them the total VAT we collected. The Irish tax authorities deal with reporting our sales to the other countries and distributing the collected VAT to them.
• Keep our VAT rate table up to date. Unlike sales tax in the US VAT rates rarely change. Looking at our database of VAT rates I see an average of 1.7 rate changes per year over the last several years. That's 1.7 changes per year for the whole EU, not per country.
When VAT changes it almost always changes on a quarter boundary (I think I've only seen one or two times when it changed during a quarter).
Since the rates are per country there aren't many of them. It would not be too much hassle to simply download the rates from some EU government site and manually update our rate DB.
What we actually do is use an API from apilayer.com. Their free tier allows 1000 requests per year which is way more than are needed to keep up with VAT changes since it is one API call to get the rates for all of the EU.
We used Ireland because English is one of their official languages. We could have picked any other EU country to deal with instead of Ireland, although the registering and reporting details would differ so registering and reporting might not be as easy.
Compare to what an American company that wants to sell to multiple American states has to do to deal with sales tax. The tax depends on the exact address of the buyer, not just the state, and you have to register and file with each state. Generally dealing with that means you have to use a paid service which will charge a percentage of your sales.
If you only need to collect tax in the states that have joined the Streamlines Sales Tax group you can get a sort of EU like experience. To that you have to agree to collect tax for all of the SST states even if you only are actually legally required to collect for some of them, and then you can use a paid tax service from their list and the SST states will pay the cost of that.
If you need to collect tax for any of the approximately half the states not part of SST then you'll have to deal with those states separately.
So... crypto will be taxed the same as stocks? The pathology is that in Europe the only untaxed gains are on crypto and real estate (after some years of ownership usually). That's how you arrive to a pathetic state the EU is now dwelling in. Slovakia economically sits on the lap of German automotive. When you visit you see many luxury cars and prices of real estate in village of Bratislava are through the roof, weird isn't it?
> The pathology is that in Europe the only untaxed gains are on crypto and real estate (after some years of ownership usually).
Where in the developed world do you get untaxed gains on anything? Not even the USA has untaxed gains... Many loopholes if you are rich but you probably don't have access to those mechanisms.
In Poland you don't pay gains tax on real estate if you own longer than 5 years. If you own shorter than 5 years you can skip tax when buying another real estate right away. The prices increased 100% in the last 5 years. No limitations for foreigners. Please come buy and invest to make the bubble spectacular. People needing a place to live cannot afford anymore so it doesn't matter.
If taxing something discourages it, we should instead create a "failure tax", which you only pay if you don't make very much money, to discourage failure.
In that case, have a tax on tax, where the government takes 100% of it's own tax receipts, which should logically lead to no taxation at all, right? :p
There are taxes on tax too, its called “cess”, a lot of countries have that too -_- , so you pay taxes, and then there is an extra tax on the tax collected too.
> The problem with "sales tax", or "value-added tax" in Europe, is that it applies only to consumers.
That's not quite correct. At each transaction you pay VAT on the margin, that's why it's called Value Added Tax. So if company B buys from company A and sells to company C then company B pays VAT on the difference between what it charges company C and what it paid company A.
That infrastructure does get its share, its called income taxes, sales taxes from products people buy, payroll taxes, mandatory employee provident fund contributions which governments use as their personal piggy bank in a lot of countries , and most importantly the product/service itself, good luck swimming in your pool of tax dollars, when that dollar is worth nothing, because you dont have much products or services to buy with it.
The reality is , recent politicians have been wasting money excessively, 50-60-70% of the tax revenue ends up being lost to corruption, inefficiencies, etc.
One can continue promoting taxing more and more, it’ll just end up killing the golden goose.
The problem is more with the oligarchic style of engagement between big corps and gov, its stifling innovation, making medicines 10000x more expensive than it needs to be, with extremely insane patents stifling competition and small startups defeating old barrons, a overly litigious society which is rampant in most western countries.
We keep losing our free market, and thus losing prosperity of the middle class, and we keep blaming it on not taxing enough…
Europe being Europe. But more importantly, I find it a but strange the countries with growing deficits thinking that raising taxes is the right move towards improving the economic situation instead of restructuring
> I find it a but strange the countries with growing deficits thinking that raising taxes is the right move towards improving the economic situation instead of restructuring
Speaking of restructuring, how about we restructure the way multinationals pay taxes in Europe?
"Microsoft’s Irish subsidiary posted £220bn profit in single year [..] An Irish subsidiary of Microsoft recorded a profit of $315bn (£222bn) last year [..] The profit generated by Microsoft Round Island One is equal to nearly three-quarters of Ireland’s gross domestic product – even though the company has no employees."
https://www.theguardian.com/world/2021/jun/03/microsoft-iris...
Yeah, the reason that governments are introducing revenue-based taxes is because companies found a lot of loopholes to avoid paying profit-based taxes. This creates an unfair advantage of foreign companies compared to local companies, who have to pay taxes on their profits.
I wonder how they are going to game revenue based taxes?
You do realize there is trade imbalance between EU and US in favor of EU. VW USA BMW USA ASML etc. do exact same thing. IF EU starts changing rules US will mirror those changes an EU will have a net loss. The MS example is about corp structure change and some wiered accounting consequences MS net profit for all of 2020 was 44 billion globally.
If a corporation has operations in a given country including a physical presence and employees and everything, then the profits connected to those operations are absolutely taxable there, regardless of where that entity is incorporated or where its securities are traded or anything like that.
From that perspective, the U.S. operations of a European firm look to the U.S. taxman very similar to the U.S. operations of a U.S. firm, and vice-versa.
The revenues of such operations are usually easy to work out, but the cost-side can be pretty difficult if it's globally distributed and double-taxation treaties are also pretty difficult. This is where transfer pricing and flag of convenience shenanigans come in, allowing these megacorporations to evade the taxman.
It's not like the political will to fix this stuff is not there, but it requires coordinated action from nation-state players, which is not that easy to accomplish.
So, instead, you get these populist governments pandering to their base by going certain things alone in a way that almost certainly backfires economically.
There are always local subsidiaries, so these are generally European companies making the profit and paying no tax. Several of these companies famously exploit jurisdictional loop holes with how they define where the value arises to avoid paying much tax anywhere. While there are rules around how they can do this, they do seem to be broken.
Then maybe the US should change that. Does not change the fact that other countries should be taxing US companies for their local online sales and revenue.
(As a European) I see the party Brothers Of Italy which currently hold power in Italy as a decidedly hard-line right-wing party. And just like pretty much every other right-wing party with a populist bent they promised a lot of tax cuts to get into power.
But then they realised they had to raise taxes _somewhere_ to afford everything else they wanted to do… So instead of doing a mea culpa they instead put forth this stupid law.
True, but as with every canon right wing party, beside being populist they're also strong nationalists, therefore what applies to them does not apply to us, also because local big businesses are the ones keeping those bozos in power.
Why is the title changed so much? I know we're supposed to assume good faith, but in some cases it is difficult.