Online tax: Is Europe on crack?

but for adult site operators, you have to pay GST on every sale. I think the point is that our gov would want 14.5% and the EU would want 15% and we get fucked.

what the fuck are you talking about???

take these and buy a clue

Maybe it is different in Canada, but in Australia you are not required to charge GST on goods or services which are exported (ie sold to someone outside Australia). If you sell a membership to someone from the EU you wouldn't charge GST only VAT.

That is a choice Europeans make. You are willing to take on a higher tax burden in return for 'free' services provided by the government which is fine. This attitude has a limit where at some point in the future it will not be affordable if too many services are provided by the government and not directly from the populace. Those that believe that they have too much to lose will leave with their money. Your societies grow older on average, who will pay when most are retired?

It is not my problem if you didn't take political and economic theory in college.

that explains it

you're dealing in theory

reality is quite different

I bet you're a student

same goes with canadians,quiet will retire before 32-33!

this is tedious, but I'll humor you...

you're assuming that the state will take over more and more of the country

just look at the UK - the trains were public owned, now they're privatised

different governments do different things - there's currently a labor government in power which are 'meant' to be left-leaning

privatising the trains has not worked too well - perhaps in the future they'll become public owned again

You know as well I do that Germany and France, the two largest economies in the EU, have about the same debt as a percentage of GDP as does the US.

I don't know that, so therefore am not sure it is true

I would be very surprised if it was anywhere near that figure (for many reasons)

not to sound too much like that complete fuckwit theking - but can you point me towards proof?

Yeah you usually don't, but if you dig thru some threads here, you'll see that the CDN GST agents or whatever the fuck they are called have been demanding GST on worldwide sales... They say if it can be accessed in canada or some BS that they want the tax on it...

I've seen a few webmasters here that have been fucked over by the canadian GST guys.

It sounds gay, it is gay, but so is the Canadian CCRA.

Damnit, I have to do your research for you. Give me a few minutes. Japan and Italy are REALLY high. Prepare to be surprised.

Here you go. Graph at the bottom.

http://www.mof.go.jp/english/budget/e1b060b.htm

I graduated with honors with a major in the Political Economy of Industrialized Societies from the University of California at Berkeley 13 years ago.

VAT. Yeh sure ok whatever you say.

some really good points in here.

The thing with Canadians is, the new ecommerce regulations makes you pay 14% on ALL gross income.This new EU law would make you charge 15-25% for all EU residents. So, you make 1M USD/yr with your Canadian paysite, you pay $70,000 GST. 30% of sales are EU, so you pay $45,000 VAT (15%) to EU.That's $115,000 right off the bat. Then you pay for expenses and from your net you get taxed 30-42%.

What the EU is trying to do is to make a level playing field. Mind you in offline stuff, merchant collect only their state/federal taxes and non residents can claim that at Customs when leaving. Fair enough. Why do people like buying stuff in Nevada or Delaware?

Imagine if this type of law was introduced offline. You're from EU and you go you Nevada to buy some smokes and you get taxed 20%! All Americans and worldwide customers get taxed 0% for the same product. Just because you're from EU you get taxed. Discrimination by your own kind? You decide.

Now EU is trying to put this in the hands of merchants. The task of keeping up with VAT changes for EVERY COUNTRY IN EU is simply a pain in the ass. Some companies will have to hire extra staff to implement and monitor this. Overhead, overhead.

This system MIGHT work if every country in the world opted for such a thing where their residents get taxed online on all products independent of region & origin.

I still think it's a bad idea.

debt as a percentage of GDP

http://www.economist.co.uk/markets/i...b-23b1f51fe65a

Know what's interesting here?

US debt as a percentage of GDP has decreased from 71.4% to 60.2% in the decade ending 2000. Currently it's at 61% using latest GDP and debt figures.

Some of those other countries have had huge increases. France and Germany for example are going completely in the wrong direction. US is improving.

Which really does totally prove Sarah's point. To say your information is biased and based almost totally on theory rather than fact would be an understatement.

Unfortunately in life a good education does not always mean a good understanding of things in the real world. The point is very much proven here. Mind you, I must thank you for the posts. Not too many things make me laugh that hard these days.

i think i read about something in the US trying to do this with state sales tax state-to-state, but i think it was just "voluntary" at this point.

Na.. start a company in Gibraltar.. offshore, no taxes. But wait and check out the small print of any tax shit!

Some interesting points here and some wrong also. Bussines companies don't earn or lose anythign with VAT, just colect it for the goberment. For example in Spain where we operate, lets say i want to sell something for 100?, i must charge the customer that 100? + 16% = 116? (even on the invoice you must write it that way, total price & total price + VAT). Then each 3 months i need to pay that extra 16? that are not really mine to the spanish goberment, so i don't earn or lose anything from it, just colect it. Is the customer who pays that 16% VAT, in exchange he get free hospitals, schools, a payment after retirement, etc.
What the EU goberments want is that all companies, even not europeans, colect that VAT for them, as it is now with the online bussines, europeans can buy things from usa not being charged of that VAT % that is a big advantage of USA companies vs EU. For example, as it is now, if i sell a DVD for $100 to an spanish from my spanish company, he will pay $116 with VAT included, while the same guy buying it online from USA will pay just $100, so my spanish company can't compete with that, at least in theory as are more things involved like shiping etc.
The problem is that this will go vs EU goberments, as lots of USA companies will take the advantage of this, charging an extra % to EU customers because VAT and then after 3 months refusing to pay it to EU, so the USA company get an extra 16% profit and the EU lose that 16% that goes to USA. Of course this will be ilegal... but how to punish that USA companies?
Tradicional bussines laws can't be applied to online bussines, the problem is that politicians don't know shit about the online biz, they only know we make a good money and they want a part of it.

I do not understand how they (EU) are going to enforce this as I see there is no way to verify accounts of for example US companies. Of courese there are tax treatis, but I doubt they do not cover this kind of thing - or I hope so.

Plus I don't understand how in the hell the EU could imagine that they could require non EU companies to add tax on behalf of EU.

I fully understand that US Gov could tax US based companies and EU could try to enforce taxes for EU based companies, but hell now this is getting really nasty.

Do you have any news / reactions available from US trade organisations / US government ? Sure there are some? US is not going to accept this - or? I really hope that no... Please post links if you know any.

Both the EU and US will charge taxes at some time - they just ain't got a clue as to how to enforce em. But, they are getting there!

The next step is offshore and when one offshore jurisdiction falls under pressure, there are 100 more waiting in line to take their place - and life goes on!

I've mentioned this issue months ago....actually it's 1 of the
reasons why I'm now going to move out of the EU. The EU
will enforce this new law and therefor create "unfair" competition
with other regions.....

Of course not every EU country will be able to enforce it properly
but I can guarantee you the richer EU countries can and they
CERTAINLY will. Holland, Germany, Scandinavia those are
countries that have a system in place to enforce it.

so I expect a lot of Online companies to move out of the EU.

DynaMite

This is indeed the whole problem. It's not possible to enforce it
everywhere.....and certainly not outside the EU therefor it creates
unfair competition because companies inside the EU will never be
able to offer the same prices as companies outside the US.

DynaMite

DynaSpain:

You summed it up!

We made that decision a few years ago when we got tired of spewing out tax checks like confetti. Now we pay not one dime in taxes and have, literally, saved millions.

The only sure thing is that "civilized" nations will continue to find ways of levying taxes and these will rise - tis the nature of the beast.

Any links about US commnets on this ?

I vote for trade war between EU - US.
This is nasty thing.

I have recently established a company on one of the futurecoming EU country with 0% company tax and about 20% personal tax rate. Now I need to go Belize or ???

Exactly the sad part is only that this affects only the companies
that cannot afford to move away....so those are the ones that
get hurt, while this law is intended for everyone which of course
will never work.

It will only make it even more harder for startup and small
companies.

DynaMite

brutus:

Belize ain't too good... mangrove swamp :-) There are much nicer places than that!

Desperate times call for desperate measures.

Yep... true! People who have invested in "hard assets" are gonna end up lumbered with this - tis, well.. almost impossible to move out. Tho I can think think of serveral countries that would certainly appreciate investment in industry etc - and to the great benefit of the shareholders

I have no gripe with taxes in proportion, but sure ain't gonna work for nothing and support a workforce and die early in the process - ya only have one life

What you are saying is that you prefer a model where YOU and people in a similar position pay less because you don't help pay for services to people less fortunate.

That is the fundamental difference between European and US politics: European states in general have a much more extensive social security net. Yes, this cost us. On the other hand, most Europeans don't need private health insurance - here it is considered a luxury that you get if you can afford paying for extra service. Additionally, private health insurance here is relatively cheap, as you are typically paying for the extra services provided - not the basics.

That is, many plans involve you going to your regular, government financed doctor first, and going to see a private specialist if you feel you need it.

Similarly, while many will save in private pension plans, in most of Europe you aren't fucked if you don't.

Yes, we are redistributing wealth. And ultimately, I don't see that as bad for European economy. On the contrary. Poor and middle income families spend a much higher percentage of their income than rich families do, which keeps capital much more mobile.

As for moving if you have much to lose, why
would that concern us? If you aren't prepared to pay, why would it be a loss for us if you leave? On the other hand, I haven't seen an exodus of wealthy people from Europe at any point.

You also make the interesting assumption that government will take over more and more of the economy, and this will lead to services that aren't affordable. This is interesting, considering that everything point the other way: Governments in Europe have privatised and deregulated more and more services over the last decades.

The primary care functions, however have remained publicly owned, but even there more and more private competition is allowed in by having the government contract out parts of the operation of public services to private firms in many cases. While the typical UK NHS (National Health Service) trust for instance is government operated, they will be utilizing the services of a large number of private companies to carry out their work.

As such, European taxes channel massive amount of business to European companies, where the competition with non-European companies would be much more fierce had the money gone straight from consumers to private service providers.

While this take away some competition, it also helps keeping capital flowing inside Europe instead of out to external markets, which can make up for quite a bit of inefficiencies and still give significant advantages.

At the end of the day, though, I tend to find that my tax burden isn't much different from most Americans. I currently live in the UK. I pay 17.5% VAT on most goods, and given my income level, which is way above twice the national average, I end up paying
about 32% in taxes and national insurance. At a comparable income in any of the Scandinavian countries, I would have paid 40-45%.

Had I been at the average income, my tax rate would have been around the 25% mark.

(As a side note, UK has an "interesting" tax structure, which is designed to make it look like low income people pay much less tax, with low tax bands of 10% and 22% on the parts of your income that are in the respective bands. However at those tax bands you also pay approximately 10% national insurance on most of your income, while when you reach the highest tax band of 40% there's only a 1% national insurance contribution on top for that part of your income. The net result is that it looks like the tax system is weighted very much towards lower incomes, but in reality it's quite flat unless your income is really low)

Compare that with the combined federal and local taxes and basic health insurance of most Americans at 2-3 times the US average income level, and it's certainly not much higher, though the variance between US states can be huge, just as the difference between the UK and Scandinavia is. I know Americans that pay 45% in taxes alone, and I know Americans that pay around 20%. When people compare taxes, they seem to mostly be comparing the higher tax bands of federal/national taxes and forget all the extras, deductions and local rules that dramatically change the end result.

Eh... If you operate a company IN the EU you have been liable for taxes and VAT all the way through. What this new rule does is tip the scale more towards EU companies by requiring you to pay taxes to the EU if you sell to EU consumers regardless of whether or not your company is in the EU.

In other words: Either you stop selling TO the EU market, or you pay taxes.

For EU based companies this is great news, as it makes it easier for them to compete with US companies in the European market.

The EU already charge taxes. If you are in the EU and your sales are high enough to require VAT registration and your product or service is one that VAT is levied on, you are breaking the law if you don't pay VAT on sales within the EU. It's always been like that.

This step from the EU is intended to equalize that situation, by levying taxes on companies outside the EU selling to the EU, to make it easier for anyone in the EU to compete.

There's a wide variety of ways to enforce it: Confiscate property in the EU of companies not complying. Make the card processors, card associations and banks responsible for not paying funds to non-complying foreign companies. Sign tax treaties with some of the foreign states in question (though I doubt the US will play along, which weakens that weapon).

Going offshore won't help against this - the only thing it will do is make it a bit harder to collect (hence my comment about involving card associations and banks).

Uhm. The US WAS improving until Bush got elected and started growing the deficit to ridiculous proportions with his tax cuts.

Remember Clinton? He cut debt a lot while simulatenously dramatically reducing the US budget deficit. That's what you are seeing in those tables. Now Bush is doing his best to reverse the trend.

As for Germany etc., yes their debt has been rapidly increasing, but according to the link you posted, at the same time their budget deficit has dropped, dramatically improving their ability to deal with that debt, provided they maintain the budget improvements.

The point is that offline there is a barrier: You either have to go there, or order and have it delivered. In both cases there are additional costs and inconveniences that benefit local companies, and in both cases you would typically get taxed when the goods enter your country for many types of products. So you are ALREADY paying taxes on many physical items you buy abroad when bringing them back.

Online, however, that barrier is much less apparent. Especially for services delivered over the net. There is no delivery time, and no inconvenience or cost involved in "visiting" the foreign merchant. This has tipped the balance dramatically in favor of low cost, low tax countries. At present, this is the US in many instances.

However, it won't neccesarily stay that way. The barrier to operating online service providers cheaper in lower tax locations than the US are rapidly dissappearing. At that point you can bet the US will respond in a similar way - the US is infamous for it's trade protectionism.

US trade protectionism is likely to be the toughest problem for this EU legislation too, though, as I'm sure the US will bite back.

Don't worry about it! Bush will declare the EU as "enemy combatants" for levying this tax, which is probably an act of terrorism under the Patriot Act.

The U.S. could just add a 90% internet tax on EU companies for products they sell to people inside the U.S.

Trade war!

Mr. Purple,

Correct if I'm wrong. Didn't Germany JUST got reprimanded a few months ago for breaking the EU pact on annual deficit well in excess of the 3% limit?

I wouldn't know. I was replying to the link posted to stats for the decade up to and including 2000. Whether or not what you say is correct, Germanys economy is certainly not good at the moment. Regardless of the deficit, they have seen their debt rise dramatically, and still battle high unemployment.

My point was only that with regards to the stats posted, the numbers for the US showed the improvements under Clinton, and not the devastating effect Bush has had on the US deficit, and that similarly, looking at those numbers Germany didn't look too bad - steadily improving throughout the 90's.

If Germany haven't managed to continue that trend after 2000 (which might very well be the case, I'm don't exactly pay much attention to the German econmy...), that just further underline my point that drawing conclusions about current situation based on three year old data doesn't work

"Devastating effect"? I'll update the numbers for you. The US debt is about $6.4 trillion as we speak. US GDP is about $10.4 trillion (2002 numbers). That's 61.5%. If a rise of less than 2% in two years is "devastating", then the entire world must be in an unprecedented economic crisis.

Germany and France, like the US, are trying to spend their way out of a slow economy. That's the classic Keynesian response and the one governments have used ever since the depression in the 1930's. Stimulus is borne by cutting taxes and raising government expenditures. This is why France and Germany are being reprimanded for violating the EU treaty and why the US has a record annual deficit.

The idea that there is a crisis or "devastation" of any sort if not rooted in reality. The US debt compared to the size of it's economy is similar and even less than some of the other countries that top the list of largest economies. There is plenty of room to play with the usual stimulus ideas.

In deference to my numerous gay friends I won't call this situation "gay", that is unless we include gay rape If the product or service is sent to someone outside of Canada then it *IS* an export. The fact that it's transported via fibre instead of a ship is irrelevant. Death to all Tax Nazis (whatever their nationality or sexuality)!

Yeah but that doesn't rhyme. CCRA is FUCKED, they are discouraging people from conducting E-Commerce in Canada. Basically they are doing this by interpreting legislation that wasn't written for the internet, most likely without the full knowledge of the gov't



Here is their reasoning for it: (BTW website access in canada is defined as a supply of intangible personal property, all info found on the link at bottom)

Pursuant to paragraph 142(1)(c) of the Act, a supply of intangible personal property is deemed to be
made in Canada if the property may be used in whole or in part in Canada, ........ then ......


The expression ?may be used? in paragraph 142(1)(c) is interpreted to mean ?allowed to be used.? In
other words, a supply of intangible personal property could be considered to be made in Canada even if
it is not actually used in Canada. The fact that the supply may be made to a recipient who is outside
Canada has no bearing on whether the supply is made in Canada.

taken from

http://www.ccra-adrc.gc.ca/E/pub/gm/b-090/b-090-e.pdf

Those dudes must be smoking some crazy weed

Probably, other than that they sit around on thier asses all day deciding how to fuck over Canadians some more.

Yes in theory you are right, but who is going to enforce that if
I sell stuff to the EU where those laws do not apply.....and how
are they going to do it? You really think that for example the US
is going to make sure that all US companies pay those taxes to
each EU country..........keep on dreaming.


For the other guy who claimed there is no tax exodus in Europe
I think you're not really mister current affairs. I agree that the EU
social system requires money but the way it's setup is not working.

Every company that makes really a lot of money has ways to
go around it, the guys that are a little above average they get
hurt. Want me to name a few havens where EU money is mostly
stored? Luxembourg, Isle of Man, Gibraltar, Switserland, Belgium,
any other offshore location.

It pays off to setup a construction that enables you to (legally)
manouvre between the laws. These cost money but it pays off
so bigger companies or wealthy inidividuals use them. Most
people wouldn't do this if it was within reason which most likely
results that more taxes are being paid than they currently get.
Some countries are up to 60% just on income tax and then all
the other stuff comes on top off that. In the EU you pay tax over
tax over tax thus making is worth the effort to go around it.

But the people who cannot afford such construction are the ones
taking the hits....which is sad because the high rates were really
meant to take the TOP level.....but it in reality very far from how
it works.

DynaMite

Let me say it straight: Europe is fucked. There is something called eurosocialismus [less work, more taxes, more regulations], and this thing is getting stronger with every year. That's a fact. Sorry.

J.