G7: Rich nations back deal to tax multinationals

[nomis5]

[bbc.co.uk...]

If Google end up paying significantly more tax because of this, it will affect our Adsense earnings one way or the other.

[Dimitri]

would apply to global companies with at least a 10% profit margin.

So the question is, will it concern an individual company or small business too? If you are registered in a European country, and affiliated to Google Adsense Ireland, will you have to make a declaration in Ireland and pay a tax there too?... And if yes, does it mean you will no longer have to pay a tax on this Adsense incomes, in your home country?... this would be rather interesting, since Ireland has lower taxes than other countries in the EU (even with the adoption of a minimal tax rate of 15%).

I know they keep making mention of multinationals, and big guys, like Amazon and Google, but I do remember that, when the GDPR was set up, it was initially targeting only "big" companies, but in the final text, everybody was concerned, including small and individual businesses (and non business too), because of France's pressure !

If Google end up paying significantly more tax because of this, it will affect our Adsense earnings one way or the other.

When France set up a 3% extra tax on Amazon France, I think that Amazon took away these 3% from the third party sellers' earnings.

ps: I have nothing against French, but sometimes ...

[Dimitri]

I don't know how long the article remains at Yahoo but here is another one : [news.yahoo.com...]

French Finance Minister Bruno Le Maire said he would fight for a higher global minimum corporate tax rate than 15%, which he described as a "starting point".

France :-)

The agreement does not make clear exactly which businesses will be covered by the rules, referring only to "the largest and most profitable multinational enterprises".
European countries have feared that a business such as Amazon could slip through the net as it reports lower profit margins than most other well-known technology companies.

So, you will see they will use a net with a smaller mesh size, catching all the big fishes, and also the little.

[NickMNS]

It will be fascinating to watch this play out. I think in the near term, it will work as expected. If all the developed countries can agree on a unified tax it will make it much harder for corporations, big or small to find away around these taxes. It will also make it easier for these developed countries to pass laws to make it difficult to use offshore tax havens.

But greed!
This structure is based on agreements, and if we have learned one thing from the last US president, agreements are much easier to break than to create. Now if developed nation are charging 10, or 15% tax, one could have a win-fall* in revenue by breaking these agreements and being the only developed nation to charge say 5%. Once one nation leaves it force the others to do the same and the race to the bottom continues.

This is basically a tax cartel and what I describe above has previously occurred with OPEC, all the parties agree to fix production/price and for some time period it holds keeping prices elevated and stable. Then one nation gets greedy (Saudi Arabia last time I believe) decides, screw the cartel, they drop prices and sell a whole bunch of oil as prices fall, inflicted pain on the other members. Once all the parties feel the pain of low prices they all make-up and the cycle starts over.

As for impact on Adsense...
Google's management has a fiduciary responsibility to maximize profits. If they could extract more revenue from publishers they would be obliged to do it immediately, and are doing it now, regardless of taxation. If tomorrow their tax rates go up, the management team will not be able to simply increase revenues to make up for the difference. And if they could, they would likely be sacked by the share holders, for not carrying out their fiduciary responsibility prior to the tax hike.


*Note, why a win-fall?
If all companies are forced to pay 15% tax everywhere, then companies would be indifferent as to the location of their operations. Thus one would expect tax revenue to be equally distributed across nations. But if one nation reduces it's tax then all the companies would shift their operations to that nation. Despite that nation earning less per "company" the increase in the number of companies now reporting there would by far make up the difference.

[Jori]

I predict a lot of new adsense registrations in countries outside of G7.

[Dimitri]

I predict a lot of new adsense registrations in countries outside of G7.

Why?

[ember]

If down the road Google has to give up 15% of its revenue, I doubt they'll just eat that. They'll find a way to pass the cost on, maybe by starting to charge for some of their products. Or maybe by changing the terms of their agreement with Adsense publishers. They used to occasionally insert a page with new terms that you had to agree to to get into your account. I imagine they could do that again with terms saying that we'll no longer be paid 68% of click revenue. Who knows.

[NickMNS]

If down the road Google has to give up 15% of its revenue, I doubt they'll just eat that. They'll find a way to pass the cost on, maybe by starting to charge for some of their products. Or maybe by changing the terms of their agreement with Adsense publishers.

First, tax in this case is to be paid on profits and not revenue.

Then, as I mentioned above, but more specifically there exists the Friedman Doctrine
[en.wikipedia.org...]

the goal of the firm is to maximize returns to shareholders.

If Google had the means to increase profits, say by increasing revenue by 15%, they would have the duty to their shareholders to do it immediately regardless of any taxes. Thus, we must conclude that profits are already maximized. It is very unlikely that being subject to new taxes or to better enforcement of existing tax laws would provide any new opportunities to increase profits.

[ember]

My mistake. Yes, tax is paid on profits, not revenue.