Andreas Hellmann

Czech Republic Introduces Digital Tax on American Tech Companies

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Posted by Andreas Hellmann on Friday, September 13th, 2019, 5:42 PM PERMALINK

The Czech Republic joins a growing number of European countries that are imposing a harmful digital services tax on American tech companies. The Czech Ministry of Finance has drafted a law introducing a 7 % digital tax on revenue from online advertising, the sale of user data, and inter-mediation services, following the European Commission’s similar proposal from 2018. 

The Czech government expects the levy to be introduced in mid-2020 and estimates the tax will generate CZK 2.1billion ($90 million)  in additional revenue in 2020, and CZK 5 billion ($215 million) annually after that.
 
The tax hits companies with global turnover higher than 750 million euro annually and with sales within the Czech Republic over 1.9million euro.
Finance Minister Alena Schillerova is following the French approach saying that the tax will apply until global tax measures are agreed at the OECD level. 

Make no mistake that the Czech digital tax is discriminatory. By using revenue as a proxy for nationality, the Czech Republic is looking to pillage the accounts of American tech companies in order to get their “fair share” of tax. While the OECD is working to develop a global consensus on the issue, the Czech have decided to go ahead and follow France, risking worsening the Czech-American relationship and a massive blow back on future trade.

Photo Credit: 3D_Maennchen


France Hits American Tech Companies With Digital Services Tax

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Posted by Andreas Hellmann on Thursday, March 7th, 2019, 1:10 AM PERMALINK

At a recent cabinet meeting, French Finance Minister Bruno Le Maire introduced a Digital Services Tax hitting almost exclusively American tech companies. The new tax will be imposed retroactively to January 1, 2019, and will likely start a wave of digital taxation all over Europe.

This new tax poses unprecedented dangers to tax competition, tech-fostered innovation, and European and worldwide economic growth. The new levy represents a dramatic and irreversible shift for the international tax system and damages the transatlantic relationship and will likely lead to a spiral of retaliation.

The French government will apply the tax to companies that have global revenues of over 750 million Euro ($848 million), and French revenue over 25 million Euro ($28 million) and expects to bring in over 500 million Euro new revenue in 2019, going up to over 650 million Euro by 2022. 

Bruno Le Maire claimed, that „this is about justice, these giants use your personal data and make a significant profit from it, without paying their fair share of tax." A recent study by ECIPE, the European Centre for International Political Economy in Brussels shows that American digital companies actually often pay more in taxes than non-digital EU based companies.

The sole reason for the French government to impose this tax is not tax fairness, but an easy way to exploit the tech industry which is non-existent in France. 

This tax will result in double taxation, less innovation, negative economic growth, add fuel to an already ongoing trade war and will lead to higher costs for French businesses and price hikes for French consumers.

Photo Credit: Sens Commun


Senate Finance Committee Criticizes EU Countries' Unilateral Digital Tax Moves

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Posted by Andreas Hellmann on Thursday, January 31st, 2019, 11:59 AM PERMALINK

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) have again criticized European plans to tax American tech companies. In a letter addressed to Treasury Secretary Steven Mnuchin, the Senators criticize individual European Union countries that have already imposed a digital services tax or will do so soon after failing to agree to an EU levy.

The European Commission was not able to make a case for their tax proposal since multiple low tax member states like Ireland, Luxembourg, and the Nordic countries strongly oppose those plans. The letter comes at a time where more and more countries like France, Spain, Austria already have or soon will impose their own local Digital Services Taxes.   

“We write to express our serious concern regarding unilateral action by foreign countries to establish digital services taxes designed to discriminate against U.S.-based multinational companies. It is important that you make clear to the representatives of these countries the need to abandon unilateral actions and work through the multilateral process at the Organization for Economic Cooperation and Development."

An EU-wide or even unilateral Digital Services Tax poses unprecedented dangers to tax competition, tech-innovation, European and worldwide economic growth. The new tax would represent a dramatic and irreversible shift for the international tax system.  It would mean damage to the transatlantic relationship and could lead to a spiral of retaliation.

The EU intentionally designed this tax in a way to almost exclusively target American companies as there is no comparable digital industry anywhere in the European Union. 

Read the full letter here.

Photo Credit: Bankenverband - Bundesverband deutscher Banken


French Finance Minister Pushes Again For EU-Wide Digital Services Tax

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Posted by Andreas Hellmann on Tuesday, January 22nd, 2019, 2:57 PM PERMALINK

In a recent interview with "Le Journal du Dimanche," the French Finance Minister Bruno Le Maire said he expects the European Union to agree on a Digital Services Tax by the end of March. 

An EU-wide Digital Services Tax poses unprecedented dangers to tax competition, tech-fostered innovation, European and worldwide economic growth. The new tax would represent a dramatic and irreversible shift for the international tax system.  It would mean damage to the transatlantic relationship and could lead to a spiral of retaliation.

Le Maire's comments come as a surprise.  The EU member states have failed to reach a unanimous consensus on the European Commission’s digital service tax plans for over a year.
The process concluded in December thanks to many EU member states including  Luxembourg, Sweden, Denmark, Finland, Malta and Ireland actively opposing the plans to impose this tax.

Those countries host not only many foreign tech companies but also fear a worsening relationship between the EU and the United States and a dramatic shift in the system of international taxation. 

The EU is under pressure as more and more countries like Spain, UK and France either already have a digital services tax in place or announced like Austria's chancellor Sebastian Kurz that they will follow through with their own levy shortly.

The European Commission's interest is not to increase competition between the member states but to "harmonize" taxation within the EU and is therefore strongly pushing to put an end to the veto power member states have over EU tax matters. This approach is poison for the very different economies, differences between different locations comprise many factors, and it is obviously not the same to operate a business in Luxembourg or one in rural Ireland. 

Nevertheless, Bruno Le Maire shows his determination in the interview saying that there are still some "hesitant countries," but he is convinced there will be agreement by the end of March and “with the European elections just a few months away, our citizens would find it incomprehensible if we gave up on this.” 

The European Commission’s original proposal was to force mainly American tech companies like Google, Facebook and Amazon to pay a 3% tax on their revenues in each country, rather than where the business is headquartered for purposes of taxation.

Now it is of the utmost importance for EU member states opposing a Digital Services Tax on the EU level to make their voices heard louder than ever, and in the U.S., the Trump administration must further step up its opposition.

Photo Credit: Sens Commun


EU "Climate" Regulations Could End Germany's Famous No Speed Limit Autobahn

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Posted by Andreas Hellmann on Friday, January 18th, 2019, 2:02 PM PERMALINK

The days of freedom on the German Autobahn without a speed limit could soon be over if the federal government adopts a draft proposal on "climate" protection by its own committee called "The National Platform on the Future of Mobility."

The committee which should be called "The National Platform on the Future of Immobility" proposes measures that guarantee controversy in the car-nation Germany, whose half a century old highway network is famous for “no limits”  all over the world.

The proposal imposes measures including:

-Speed limit of 130 km/h (80 mph)

-Fuel tax hike of three Euro Cents starting in 2023, ratcheting up by Euro Cent each following year, although Germans already pay one of the highest prices for gas - up to $6.50 per gallon.

-Abolition of tax breaks for diesel cars

-Quotas for electric and hybrid car sales. 

The measures would need to be adopted by the federal government and parliament in 2019 and will likely lead to a similar form of Yellow Vest protests as the most recent demonstrations against the attempt of French President Macron to raise fuel taxes. 

So it's official, "climate" activists ruin everything.

Photo Credit: holgileinchen


The EU's Shifty Fight For More Power And Money

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Posted by Andreas Hellmann on Friday, January 11th, 2019, 6:15 PM PERMALINK

The European Commission desperately wants to be able to raise its own taxes to gain more power AND control, to blow up the already excessive budget and eliminate tax competition.  Therefore the Commission is seeking to identify tax areas where decision making could be changed to a qualified majority of member states instead of unanimity.
 
This effort comes right before the upcoming European elections in May 2019. In its 2019 work program, the EU Commission named taxation as an area where it wanted "more efficient lawmaking” and claims that voters demand powerful solutions that can only be addressed on a European level.
 
The truth is that all efforts for the EU to raise taxes failed due to a lack of unanimity. The most recent proposal for a Digital Services Tax was stopped by low tax countries like Ireland, Luxembourg, and other Nordic member states that have a vital interest in tax competition within the EU. By changing this model to a qualified majority of member states, those countries would be overruled easily with devastating effects on their economies.
 
The idea was already floated by EU bureaucrats and especially by EU commission president Jean-Claude Juncker in his state of the union speech:
 
"Europeans taking to the polls in May 2019 will not care that the commission made a proposal to make internet giants pay taxes where they create their profits - they want to see it happening for real. And they are right. I also think we should be able to decide on certain tax matters by qualified majority,"
 
Now the European Commission launched a web questionnaire on the initiative to move to a qualified majority voting on tax issues where EU citizens can participate. The Commission hopes to use this instrument to support their efforts.
 
Though EU member states have to adopt the decision by unanimity and it is likely to fail is essential to be aware of this issue and stop the EU from eliminating tax competition and from gaining more control and power over the member states.

Photo Credit: European Parliament


Carbon Tax Pushers Can't Take A Hint

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Posted by Andreas Hellmann on Monday, November 26th, 2018, 11:31 AM PERMALINK


Carbon tax pushers just can't take a hint. For the past decade carbon taxes have been thoroughly rejected by voters. In the November election, blue Washington state voters handily rejected a state carbon tax measure, and carbon-tax-pushing congressman Carlos Curbelo was kicked out of office. Right now in France, hundreds of thousands of French citizens are protesting Macron's proposed carbon tax. 

But today Bloomberg reports that a handful of congressmen led by Rep. Ted Deutch (D-Fla.) will introduce a new carbon tax bill this week. Just like the Macron proposal, the Deutch tax hike will aggresively ratchet up, year after year.

"The proposed carbon tax is a gas tax and a tax on your electric bill. Worse, it increases automatically year after year so the politicians can raise your taxes without ever having to vote," said Grover Norquist, president of Americans for Tax Reform. "The tax will be hidden in the price of all goods and services. A hidden tax. A permanent tax. An uncontrolled tax that increases without end."

A carbon tax is not only toxic at the ballot box but also creates resistance on the streets as demonstrations enter their eighth day in France. Protests are being held mainly in Paris but also nationwide over a proposal by Macron to increase the "fuel tax" designed to curb fuel usage.

The new law would tax 55 Euro ($63) per ton of carbon starting in January 2019. A liter of diesel already costs 1.90 Euro and regular gas costs over 2.0 Euro per liter. That's $8.20 per gallon of diesel or almost $9 per gallon of regular gasoline. 

Hundreds of thousands of protesters all across the country are bringing the protest to the streets and highways, wearing “yellow vests” – “gilets jaunes” so called because the protesters are wearing the high-visibility vests that French drivers are obliged to carry in case of emergencies or accidents. The grassroots movement relies on social media and online petitions to spread their message. 

In the U.S. and Canada this year, the carbon tax was firmly rejected by voters:

November 6, 2018 --Washington State voters reject a carbon tax, again. Washington state voters rejected a carbon tax ballot measure -- Initiative 1631 -- by a margin of 56-44. This is the second consecutive time Washington state voters rejected a carbon tax ballot measure (See the November 8, 2016 entry below).

November 6, 2018 -- Florida voters reject carbon-tax-pushing Congressman Carlos Curbelo. In September -- with much fanfare at the National Press Club -- Florida congressman Carlos Curbelo introduced a bill to impose a massive carbon tax on the American people. The bill would have imposed a $688 per year hike in household energy costs, hitting lower income households the hardest. If re-elected, Curbelo pledged to hit the road and travel across the country to sell the legislation. Instead, voters kicked him out of office.

June 7, 2018 -- Canadian voters revolt against carbon tax-pushing politicians. Due to her support for a carbon tax Liberal Ontario Premier Kathleen Wynne went down in the worst defeat of a governing party in modern Ontario history. Liberal Wynne was in favor of a carbon tax and decisively lost to the conservative Doug Ford, who ran on abolishing the carbon tax. Ford made an explicit, written promise to the voters that he would end the carbon tax if elected.

July 12, 2018 -- Anti-carbon tax United Conservatives wins Alberta elections. Laila Goodridge has been elected Member of the Legislative Assembly of Fort McMurray-Conklin in the byelections with over 65.9% of the votes by fighting against a carbon tax. "Tonight, voters overwhelmingly rejected the NDP's carbon tax, their smear and tax hike agendas," said Goodridge.

July 12, 2018 -- Anti-carbon-tax conservative Devin Dreeshen wins election. He won the Innisfail-Sylvan Lake (Alberta, Canada) byelection. "They voted by huge numbers to send this failed NDP government a message that you’re living on borrowed time and next year we’re going to fire this NDP government and scrap their carbon tax to get Alberta’s economy back on track.”

A bill summary obtained by Bloomberg Environment shows the Congressman Deutch measure would impose a $15-per-metric-ton carbon tax, ratcheting up $10 per year.

According to a new study by the Insitute for Energy Research, a carbon tax would hurt the economy and cause particular stress on state budgets. Key findings include:

A carbon tax will not be pro-growth. Most carbon tax scenarios reduce GDP for the entirety of the 22-year forecast period. Better than break-even economic performance may not be possible unless revenue is devoted entirely to corporate tax relief. A lump-sum rebate results in lost GDP equal to between $3.76 trillion and $5.92 trillion over the 22-year forecast period.

A carbon tax is not an efficient revenue raiser for tax reform. Using standard scoring conventions, a carbon tax is likely to only produce net revenue available for tax reform of 32 cents on the dollar.

No carbon tax modeled is consistent with meeting the long-term U.S. Paris Agreement INDC. As a standalone policy, consistent with World Bank and IEA estimates, all carbon tax scenarios analyzed are far off of the trajectory the Paris Agreement sets for 2040, undermining claims that a tax-for-regulation swap will satisfy emissions commitments.

Depressed GDP leads to long-term fiscal challenges, with particular stress on states. Persistent reductions in economic performance lead to trillions of dollars in lost GDP, thereby reducing state tax revenues and straining state budgets. The average annual burden on the states and local government during the first 10 years of the tax would range from $18.9 to $30.6 billion.

Stay tuned this week for more carbon tax updates from ATR.

Photo Credit: NightFlightToVenus


French Revolt Against Carbon Tax

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Posted by Andreas Hellmann on Sunday, November 18th, 2018, 4:15 AM PERMALINK


In France this weekend, 283,000 people at 2,000 sites protested already high and rising taxes on fuel and yet another attempt by French President Macron to increase the carbon tax to 55 Euro per ton ($63) in January 2019. One liter diesel already reached the price of 1.90 Euro and regular gas over 2.0 Euro per liter. That's $8.20 per gallon of diesel or almost $9 per gallon of regular gasoline.

With another tax hike, it will be almost impossible for middle-class French to afford using their cars.  Many of the protestors are wearing yellow vests - gilets jaunes - a symbol of identification amongst the protesters. They block streets and slow down traffic to generate attention and call their protest "Opération escargot" - Operation Snail.

The main complaint is that diesel was traditionally taxed at the same rate as gasoline which is no longer the case: Taxes on diesel have risen 6.2 percent per liter in 2018 as part of the French government’s "green" preening.

Diesel is by far the most common fuel in France, leading many to view recent policies as an attack on working people. For many years the French government offered major tax incentives for people to buy and drive a diesel car - millions of diesel owners feel betrayed by their own government.

The loudest and most famous voice from the weekend protest is that of Jacline Mouraud, a diesel owner from Brittany who has become the star of the yellow vest movement due to her YouTube videos and appearance on all major French news outlets. 

 “You have persecuted drivers since the day you took office. This will continue for how long?” she said in a YouTube video that has millions of views. “You only need those taxes for new china in the Élysée palace or another expensive swimming pool for your private residence!"

Read here what devastating effects carbon taxes have on the economy.

 

Photo Credit: Screenshot France Bleu Pays de Savoie Facebook Page


Study Shows Devastating Economic Impacts Of Carbon Tax

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Posted by Andreas Hellmann on Thursday, November 15th, 2018, 2:00 PM PERMALINK

A new study called "The Carbon Tax: Analysis of Six Potential Scenarios" commissioned by the Insitute for Energy Research and conducted by Capital Alpha Partners provides deep insight on how damaging a carbon tax could be. 

The key findings include:

A carbon tax will not be pro-growth. Most carbon tax scenarios reduce GDP for the entirety of the 22-year forecast period. Better than break-even economic performance may not be possible unless revenue is devoted entirely to corporate tax relief. A lump-sum rebate results in lost GDP equal to between $3.76 trillion and $5.92 trillion over the 22-year forecast period.


A carbon tax is not an efficient revenue raiser for tax reform. Using standard scoring conventions, a carbon tax is likely to only produce net revenue available for tax reform of 32 cents on the dollar.


No carbon tax modeled is consistent with meeting the long-term U.S. Paris Agreement INDC. As a standalone policy, consistent with World Bank and IEA estimates, all carbon tax scenarios analyzed are far off of the trajectory the Paris Agreement sets for 2040, undermining claims that a tax-for-regulation swap will satisfy emissions commitments.

 

Depressed GDP leads to long-term fiscal challenges, with particular stress on states. Persistent reductions in economic performance lead to trillions of dollars in lost GDP, thereby reducing state tax revenues and straining state budgets. The average annual burden on the states and local government during the first 10 years of the tax would range from $18.9 to $30.6 billion.

 

Read the full study here. 

 

Photo Credit: qian


European Countries Are Pushing For Digital Services Tax At OECD Level

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Posted by Andreas Hellmann on Thursday, November 15th, 2018, 11:34 AM PERMALINK

The European plan for a digital services tax is delayed due to a strong opposition of low tax Nordic member states, Ireland and Malta and fierce criticism from German business and manufacturing associations. But French finance minister Bruno Le Maire who pushed for this tax more than any of his colleagues announced that France would join forces with German finance minister Olaf Schulz's to delay the introduction of an EU tax to allow the OECD to make a comprehensive proposal by 2020. 

Behind the scenes, Paris was deeply disappointed that Berlin  scrapped the idea after the two countries agreed on the initiative in the Franco-German Meseburg declaration, a vision of the future of the EU, stating the two countries would aim for “an EU agreement on a fair digital taxation by the end of 2018.” 

The true reason behind France's motivation to push for this tax has nothing to do with ensuring "fair taxation", but is a direct attack on US companies as French finance minister Bruno Le Maire said at an informal meeting: "We want to tax American tech giants, but certainly we don’t want the Chinese to tax Louis Vuitton."

In other words, he wants to rob the money from an industry where his country cannot compete and therefore would not be affected - apparently, that is acceptable. But of course, he could not let the Chinese tax a famous French fashion company. That double standard is the core of the problem. 

Ireland, which hosts big tech firms’ European headquarters like Apple, Facebook, and Google, sees it realistically:  “What kind of reaction would this bring if this was a model that was imposed on us?” Irish finance minister Paschal Donohoe asked his other EU finance ministers at a meeting in Brussels. 

In December the EU member states will formally announce the plan to lift this topic to the OECD level. At a recent conference with the focus on international taxation and the digital economy organized by the OECD and BDI (German Business Association) in Berlin, Pascal Saint-Amans, Director at the OECD Center for Tax Policy and Administration said that he sees different emerging ideas. 

The idea to tax user contribution, which would especially hit digital companies like Google, Facebook and others, not affecting companies like Amazon and Apple. But countries that want a long-term global solution like the United States see user contribution as only one part of the discussion.
Another bad idea is a global minimum tax where some countries say they can "protect" themselves to avoid "loosing" to a zero or low tax country. A very important aspect is that this new process must not change permanent establishment and therefore the international tax regime. 

The focus in the coming months must be to challenge those 12 countries like Spain in the European Union that implemented a local digital services tax already or starting in 2019. 

Photo Credit: European Parliament


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