The Anti-Competitive EU

Now the European Commission wants to tax “behemoth” digitally-oriented multinational companies for doing business within the EU.  The only companies that fit the EC’s definition of behemoth—large firms with annual worldwide revenue above €750 million ($922 million) and annual taxable EU revenues above €50 million ($61.5 million)—are American companies like Alphabet through its Google subsidiary, Apple, and Amazon.com.

That taxable EU revenue is key here.

The EU says these firms have exploited loopholes in tax laws and managed to lower their tax bills by shifting profits to low-tax jurisdictions within the EU such as Ireland and Luxembourg.

The effective corporate tax rate paid by digital firms amounts to just 9.5%, but traditional businesses pay about 23.3%, according to EU data.

But the measure is likely to pit low-tax European member states against countries like France and Germany, which have often complained about digital companies’ aggressive cross-border tax planning….

Heaven forfend the EU should lower, or allow its member nations to lower, those traditional business’ effective tax rates to the 9-10% range.  On the contrary, the EU is adamantly opposed to tax rate competition and to lowering member nations’ tax rates.  All members much charge substantially the same high tax rates.

And this anti-competitive, so say nothing about anti-liberty, position:

the European authorities’ push for more control over how the digital world operates.

This is the tax portion of the EU’s mercantilist push for protectionism, even as it decries what it sees as American protectionism.  The EU, though, is aiming its moves at its own members as well as the outside world.

I am Shocked, Shocked

Recall Amazon.com’s playing off of several cities against each other in order to maximize the tax breaks and other returns that company might get for building its second headquarters in the “winning” city.  Now we discover this in the offing:

US cities vying for Amazon.com Inc’s second headquarters risk facing an unexpected consequence to victory: other companies will demand the same hefty tax breaks conferred on the online retail giant.

How amazing is that?  Other companies want in on the goodies.

I’m not shocked at that; I’m shocked that those cities’ managers didn’t see this coming.  Their lack of anticipation speaks poorly of their ability to respond to those demands.

It also speaks poorly of the competence of those cities’ managers.

You Didn’t Earn That

The European Commission has criticized seven member states for “aggressive” tax practices, whereby governments try to undercut others to attract multinational companies.

Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation, and Customs doesn’t like competition; he actually thinks it interferes with the “integrity of the European single market.”

[T]hese practices have “the potential to undermine the fairness and the level playing field in our internal market and they increase the burden on EU taxpayers.”

This, of course, is nonsense on a number of fronts.  The Commission has yet to justify the high taxes of those member nations that are so put upon by the others’ low(er) tax rates.  The Commission has yet to say how competition is disintegrative.  The Commission has yet to explain why the playing field cannot be leveled by those high-tax nations lowering their tax rates and thereby also lowering the burden on those EU taxpayers who are citizens of those high-tax members.  The Commission has yet to demonstrate that tax competition creates, in any way, an uneven playing field—especially since the varying national tax rates are fully within the control of those nations.

Besides, that money belongs to EU Governance, not to the people who earned it or whose enterprises earned it.  And you member nations: your sovereignty belongs to us.

Because, Tax

In a further demonstration that the Progressive-Democratic Party knows only how to tax and to raise taxes, there’s this.

Senate Democrats on Wednesday proposed repealing major pieces of the just-passed tax law, in a plan that would raise taxes on corporations, estates, and high-income households to pay for $1 trillion in new infrastructure spending.

And the Progressive-Democrats actually are touting this for the mid-term elections this fall.  It’s not your money, after all, it’s Big Governments, and Progressive-Democrats Know Better how your money should be spent.

Can’t possibly pay for the infrastructure by cutting spending somewhere else.  Mm, mm.

That today’s Republican Party can’t figure out how to cut spending somewhere else (House Speaker Paul Ryan’s (R, WI) Social Security and Medicare reforms come to mind) just compounds the problem, it in no way excuses the Progressive-Democrats’ failure.

Online Retailers and Taxes

The Trump administration is looking at forcing online retailers to pay the same taxes that their brick-and-mortar competitors must pay.

The Trump administration on Monday urged the Supreme Court to expand states’ authority to collect sales tax on internet transactions, joining a chorus of state officials seeking to overrule a 1992 precedent exempting many online retailers from having to add taxes to a consumer’s final price.

This is a mistake.

  1. This question is a political matter, not a legal/judicial one. If the administration thinks online retailers should pay the same taxes as brick and mortar retailers, then they should offer a bill to Congress (and State governors to their State legislatures) that fills in any gaps in existing statutes that allow online retailers to not pay. Judges cannot make law, as Art I, Section 1, makes clear—even if this is honored egregiously in the breach.
  2. If governments are worried that online retailers are competing unfairly by not paying the same taxes as their brick-and-mortar competitors, the far better solution is to lower the taxes charged the brick-and-mortar companies so they can compete. After all, that’s what was done with the Federal corporate tax rates, both for domestic consumption and to improve competitiveness with foreign competitors, and it’s working quite well.