EU to tax foreign online services

[wu_trax]

Originally posted by Dante Hicks
Yes, they are. Unless that was your point.

hmm, i doubt thats the same here. i mean if you hire a craftsman to buy a house for you you have to pay his bill including VAT. so it wouldnt make sence to have acollection of such services (i.e. a house) tax-free. (the situation is probably different if you buy an old house from another private person though). but then, im no tax-expert.

Plenty of markets are fairly inelastic. Petrol consumption does not increase dramatically when there is a temporary cut in consumer prices for instance. I doubt electricity usage changes that much per short-term price changes.

only on short term. if you look around in europe you will see far less SUVs here, simply because people dont want to drive a car that needs 20l per 100 km, so the market very well reacts elastic, it just takes a little longer.
fuel is a bad example anyway, because its extremly high taxed, with the intention to influence the market.

The issue is thus :

"Poor" people (i.e. those on lower incomes, although it's more complex than this, as queball said) tend to spend a higher proportion of their income. This goes without saying. If you are on a low income you tend to live from one pay cheque to another. Not due to lack of planning but there is simply less money to save, etc. A certain proportion of spending (electricity bill, telephone service charges, rent, food, etc) is more "fixed". The thing is that once poor people have spent their monthly outgoings they will have spent most of their income. So any tax system highly biased towards saving (with no regard for income) will help the rich at the expense of the poor.

but if you tax the income out of capital income with the same rate as the vat, surely that problem would be solved, wouldnt it?
(obviously that choice i mentioned above would be lost, but anyway)

Also, there's practicalities. Income tax is a pain but if I am careful I can put my spending into the things I want (e.g. a computer, a TV). Because you think this is a "luxury" the price I have to pay for it would be hugely inflated under your system. To entirely fund things through VAT (without VAT being on food, etc) the VAT level would probably need to be close to 50%. Our VAT is already quite high at 17.5% (on most items, as stated) and this only raises a fifth of government spending. So you'd at least have to quadruple the tax (and more if you're going to allow things like electricity to be exempt).

if i remeber correctly my goverment makes half of its income with vat, the rate is 16% here (without social security because of our different system though).
the price itself wouldnt be a bigger problem than in the current system, because you have a higher available income.

[wu_trax]

Originally posted by Dante Hicks
Erm, we already have to rely on business figures for capital gains tax, income tax, national insurance contributions, etc, etc.

As for credit - obviously this does depend on asset valuation. How do you think loans are secured?

surely these figures are checked by someone, arent they?

[wu_trax]

Originally posted by queball
Nope, but stamp duty is the same sort of thing.

i know too little about your taxation-system to discuss this any further

No-one wants to pay tax. I suppose VAT means that if you don't buy anything you don't pay anything but it's just a popularity thing.

well, forget about what i said. if capital income would be taxed by the same amount as the vat-rate (or more), there would be no choice anyway.

Ah, I didn't look at it like that. Alright, an example:
Say you have a painting in your art gallery I want and you're willing to sell it for £90 or more. I'm willing to buy it for £100 or less. With VAT in place we don't exchange anything and are both worse off.

if your available income is high because there is no income tax, you most likely will be willing to pay a higher price for that painting though.

This is why I object to taxing tranfers of money (VAT, income tax, etc). Even considering that VAT is passed on to consumers, VAT does mean that unemployed, poor, skilled people have their potential services taxed, causing poverty. While CEOs of corporations selling goods to each other at trade prices aren't taxed. Or something.

i dont see the difference. you can argue about the right of the state in general to take tax-money, but replacing income- with value added taxes wont change anything on this aspect, because the people have a higher available income and therefore will be willing to pay a higher price.
the only advantage is the much easier system, which means the state needs to spend less money on collecting the taxes and because of that would be more efficent.

I know it's not a popular idea. Taxes are (obviously) things that can be priced directly because they are: everyone pays a certain amount. It's not what could be sold consenually, perhaps.

maybe i used the wrong word: the service the state provides for you in exchange of the taxes you paid cant be priced directly. this fact makes it difficult for the state to tell you on what exactly which tax-money is spend. i dont see how much it would change if you would know that 50% of the taxes you pay as vat is spend on defence or 75% of the taxes on fuel is spend on national healthcare.

You seem to think that the government should extract tax in any way it can without any sort of principles except popularity. You don't use the word popular, you use the word fair, but you use the word fair in such a loose sense that they're equivalent. I haven't seen any sociological or economic reason to think that VAT is fair.

i dont see what popularity has to do with this. i dont even think that my system would be especially popular.
its fair because everyone pays about the same percentage of taxes (except those poor peope who spend a larger percentage of the money on the things necessary for living).

[Chrism]

Originally posted by wu_trax
surely these figures are checked by someone, arent they?

There are hundreds of thousands of companies trading in this country. They can't check them all.

[queball]

If the government makes me pay an extra £1 every time I go to the gym, how is that not a direct price? The reasons why they put a charge on going to the gym are vague and mysterious, but that doesn't matter - they make money by introducing charges, and I will call that a price even if no-one else calls it a price. Why? Because you HAVE to consider the small scale effect every tax has. When you talk from a very high cloud about how an amount of tax must be collected and should be collected fairly you are only looking at one half of the world. What you don't see is how taxes create inefficiency by making things more costly than they really are.

When I consider a tax, I try to consider every aspect of it. A good tax is one that helps the economy by charging fair prices. Instead of income tax and VAT I'd like taxes on land, partially because countries with pure land tax have been very successful (Japan before 1980, America before 1910, I'm not sure of the dates). There are some fine justifications for the taxes I oppose, here are some examples:
- When someone earns an income, the state has helped them earn that income. When someone doesn't earn an income, the state has failed them. The state has provided a service, therefore it is just to have progressive income taxes.
- When someone buy a Mars Bar from a corner shop, they get certain legal protections. The state acts as an insurance; if you need to sue the shop and don't have the money a lawyer will be provided. People would be unwilling to pay for good without this legal protection, so the state is providing a service, and VAT is just.

Originally posted by wu_trax
maybe i used the wrong word: the service the state provides for you in exchange of the taxes you paid cant be priced directly. this fact makes it difficult for the state to tell you on what exactly which tax-money is spend. i dont see how much it would change if you would know that 50% of the taxes you pay as vat is spend on defence or 75% of the taxes on fuel is spend on national healthcare.

I'm just confused about what you meant by saying that a person can choose to pay VAT or not. Choice is pretty vague. I try to see how "choice" is a benefit in any way possible.

If I knew that the military was completely funded by cigarette taxes I'd try to give up cigarettes; no-one chooses to pay tax, but people would choose to pay one tax instead of another if given the choice. I offer this as what I understand by choice of tax, and ask what you mean by choice with respect to VAT.

[queball]

Originally posted by wu_trax
if your available income is high because there is no income tax, you most likely will be willing to pay a higher price for that painting though.

Very astute, VAT is dual to income tax in this way. The difference is subtle. I don't like either, but I think each marginal rise in income tax is better than a rise in VAT.

However, I probably misunderstand the whole VAT system. Any decent webpages? Wikipedia is kinda light on details: http://www.wikipedia.org/wiki/VAT. But taxing value sounds like a bad idea, instinctively.

Edit: everything2 is better.

[pablissimo]

Originally posted by queball
I'm just confused about what you meant by saying that a person can choose to pay VAT or not. Choice is pretty vague. I try to see how "choice" is a benefit in any way possible.

I think the choice part of it refers only to the non-obligatory nature of the tax. At least, noone's forcing you to buy that painting and therefore pay VAT; you could save the money, or put it under your pillow, or invest it, etc etc etc.

Though we don't have a word for that that I can think of when my eyes feel like BURN.

[Dante Hicks]

Originally posted by pablissimo
you could save the money, or put it under your pillow, or invest it, etc etc etc.

All three of those things are the same choice (i.e. save). Which isn't much of a choice, as I've outlined "Buy something with your money or don't" isn't much of a choice. It's like saying income tax is voluntary because you can choose to be unemployed - true, but unhelpful.

[wu_trax]

Originally posted by queball
If the government makes me pay an extra £1 every time I go to the gym, how is that not a direct price? The reasons why they put a charge on going to the gym are vague and mysterious, but that doesn't matter - they make money by introducing charges, and I will call that a price even if no-one else calls it a price. Why?

if they chrage you directly for one special service, that isnt a tax, at least not here. charges are not taxes, but charges

Because you HAVE to consider the small scale effect every tax has. When you talk from a very high cloud about how an amount of tax must be collected and should be collected fairly you are only looking at one half of the world. What you don't see is how taxes create inefficiency by making things more costly than they really are.

the markets doesnt fix everything on its own though, unfortunatly. goverments need income to pay for some services that can never be provided by the free market on the same scale the goverment can provide them. ofc, you can discuss ages about what these services are, but its a fact that the state needs some money.

(have to go to work now, will continue later, sorry)

[Fifth_teletubbie]

Originally posted by Sandsnake
like Norton, AOL, and Amazon

Basically, while on the surface, it means that the playing field just got levelled, it also means that downloaded software, music, and services just got 17.5% more expensive for european citizens. European businesses will now find that advertising on the major search engines like Google just got much more expensive.

Nah, it wil merely make european companies and consumers more likely to buy from european (internet) suppliers rather than US suppliers.

This will mean less exports for the US, further increasing your trade deficit.
Better invade another country to make up for it

[pablissimo]

Originally posted by Dante Hicks
All three of those things are the same choice (i.e. save). Which isn't much of a choice, as I've outlined "Buy something with your money or don't" isn't much of a choice. It's like saying income tax is voluntary because you can choose to be unemployed - true, but unhelpful.

They're different types of not spending your money entailing different risks and returns.

And rarely do you ever have choices beyond 'do or don't' for a given situation. I realise it wasn't a great example, but I was just trying to come up with an explanation as to why I and others would say you to some extent have a choice in paying that tax. It's not a great one but it's the best I could do. don't hate me, mister

With a specific respect to your alternative example of being able to say income tax is voluntary, I'd differentiate between the two by suggesting becoming voluntarily unemployed impedes your ability to supply yourself with necessity items, things which you have little choice in buying, which are coincidentally things that are exempted in the most part from VAT.