If there is no benefit to moving around the income earned, companies would stick to declaring their income at the point of earning (so where they provided the services) because that would likely be the easiest, and would eliminate all sorts of currency based risks, transaction costs, etc.

> Anyway this could be the push that the EU needed to start their own Silicon Valley.

Given the combined market caps of Apple, Microsoft, and Amazon (~$5.6T) is larger than the national net worth of all but the four largest EU countries, I don’t think there’s a lack of motivation here.

[edit] "all but the four largest"... my bad, I misread. Not sure why comparing mega-corps to small nations has much value though.

Not sure where you got your info, but I'm afraid it seems inaccurate. The total wealth of the four largest EU nations, as of 2019, are as follows:

    Germany: $14.7T
    UK: $14.3T
    France: $13.7T
    Italy: $11.37T

Just FYI, the three wealthiest nations are: the US at $106T, China at $64T, and Japan at $25T.

This info is from a Credit Suisse report and is widely cited (https://en.wikipedia.org/wiki/List_of_countries_by_total_wea..., https://www.visualcapitalist.com/all-of-the-worlds-wealth-in..., etc).

By digging a bit into the US data, those numbers are, if anything conservative. According to the US Federal Reserve Bank, in 2014, the US had total assets of $270T and total liabilities of $146T for a net worth of $124T.

> my bad, I misread. Not sure why comparing mega-corps to small nations has much value though.

No worries, it happens to all of us from time to time :)

As for why… the context is just that EU motivation was being discussed.

(Otherwise I would’ve said something like “Those three companies combined are valued more highly than the entire continent of Africa!”)

" of all but the four largest "

So those 4 not included.

Was about to say much the same; as the UK isn’t in the EU, Spain was in the other country in my not-included-four.

You can't compare market cap to GDP. If you compare to actual net ( you're actually comparing GDP) worth the numbers are very different.

No, I am not using GDP, when I wrote “national net worth”, I meant exactly that: https://en.wikipedia.org/wiki/List_of_countries_by_total_wea...

Yes, you're right. I'm not sure how why I was convinced it was GDP. I know offhand that's larger than the GDP of all EU countries. My bad.

wealth and income are not comparable

> Wouldn't that make companies pay taxes in countries they are based in (as opposed to where they make money)?

If an American SaaS company sells a product hosted in Ireland to a company in Britain, where was that money "made"?

Just tax the revenue in the country where the money changed hands. (The client's home) That's the taxable event. So, I think, for your case, Britain (UK)

How did the money change hands in Britain? The British person typed his CC number into a web form that routed to a server in the Cayman Islands that charged a bank in France. That bank in France will then demand repayment at the end of the month from the guy in Britain.

What was billing address on the invoice? The British company probably provided VAT number to buy VAT-free too.

The demand side actor is the driver of the transaction.

So if you had a completely Australian company selling stuff online, they'd be subject to US corporate tax for profit earned from American customers, French tax for customers from France, etc?

This seems complicated because unlike sales tax, corporate tax is based on profit at the end of the year. It's much more complicated than sales tax. Companies would have to handle corporate tax code for up to 195 countries.

Sure? Why not? I practice it wouldn't be 195. We're trying to fix a tax avoidance issue so we've to fix the money somewhere. Demand-side seems the right choice. I'm assuming there'd be some minimum threshold. Most companies are selling mostly at home. And if you want to play InternationalBigCo game it seems a reasonable burden to me.

To start with, how do you figure out how much profit this completely Australian company made in France? It's not their revenue from France, and all their expenses are in Australia. Does the company calculate expenses according to Australian law, or French law? Calculating expenses is complicated, and each country has different rules. You're effectively forcing companies to file full taxes in every country where they have customers.

If the company doesn't declare a profit in France, is France going to audit them? They have no presence in France.

Multiply this issue for every country where customers reside. This is bad for consumers. Companies are going to choose which markets are big enough for it to be worth the additional burden. If you're from Canada, too bad; we don't sell to Canadians.

Australia and France have similar tax rates. This doesn't have much effect on how much tax the company pays; just how much goes to France.

We have already have sales tax, which is a much simpler system that taxes revenue, not profit.

> If an American SaaS company sells a product hosted in Ireland to a company in Britain, where was that money "made"?

Britain. If corporations want to pretend that (for example) China has the authority to restrict what users in China see on foreign websites (cf recent Bing tank man mess, among many others), they can apply the same reasoning to tax liability.

It removes the tax benefit of realizing profits abroad, which would likely bring revenue back to the market where it was earned.

I suppose a company could still move profit wherever they choose, but mostly likely inertia would keep it in place.

EU would need to remove a lot of regulation and red tape, which is the EU's sole reason for existence. So this will never happen.

Do you really think something like the SV can be created top-down?

It takes time. But SV was kickstarted by gov investments.