Also, what seems to have provoked this tax in the UK specifically is the tendency for such companies to artificially lower their profits to more or less avoid UK corporation tax altogether by claiming that sales of UK clicks to UK companies handled by UK based account managers were in fact completed in Ireland...

Exactly. I'm no fan of the current UK Government, but their hand has been forced. I'd rather all countries get together and ratify a standard for where profits can be realised. Hopefully this will open the dam for the others to get involved.

That is what Philip Hamond (last sane person in the cabinet) said - that of there was international agreement they would go with that.

Although isn't it the case that the actual product is almost entirely developed outside of the UK. It doesn't seem unreasonable to repatriate money to pay for that. It is exactly what happens to physical products that are manufactured overseas. The correct way of taxing that is VAT.

Companies aren't repatriating profits to Ireland or Bermuda because they're developing the product there...

If you built a software product, would you consider your customer service & sales staff part of that? How about the people who ensure the systems are kept running? How about the accountants & lawyers who are eligible to practice in those jurisdictions and know the relevant tax codes/laws?

Do you think your software product, if made in USA, would be bought in France or Germany or Italy or anywhere but North America if you did not have someone who worked in that timezone and spoke that language and knew that culture?

Would those people who did that role be considered an important part of your company, considering you would not have anywhere near the same number of sales from those regions if they did not exist?

To pre-rempt the "I'd outsource it" response. When 7+ figures of revenue(& profit) are at stake, I can assure you that you would change your mind. Or if you would not, the new guy the board hires to replace you would.

VAT only applies to consumer sales - if they sell to businesses, there's no VAT to collect.

There was a recent article highlighting that Ed Sheeran paid more in tax in 2017 than Amazon or Starbucks...yes, I don't think the current system works well - https://www.fastcompany.com/90251523/ed-sheeran-paid-more-uk...

The only possible criticism of the UK govt is that they made this bed for themselves by aggressively narrowing the tax base.

So you see it as a tariff? Do not let the more efficient foreign player in, to let the local equivalent develop?

Economically it does not make sense, if we are looking for a global optimum (literally); this is the standard free-trade argument.

It may make sense if there's no global trust; you don't want to depend on products of a potential unfriendly party, or let them have a large foothold in your economy, just, well, in case.

But here I (also) see the desire to milk a cow that can be milked.

No, I see it as "if you're going to pretend your UK profits are nearly all made overseas, we're going to tax your revenue instead".

Which is worse luck if you're a business with real unit costs and thin margins like Amazon than if you're selling near zero marginal cost ads or software, but it'd be a lot easier to sympathise with Amazon if they'd paid a bit more than £1.7m in tax in the last year.

Nobody expects the outcome of this to be a local equivalent developing, but they do expect companies to avoid less tax.

I take your point, but I think you've over simplified the situation. For example, in days gone by, the UK tax system happily forced retailers to pay vast amounts of tax ("business rates") based on the shops they occupied in town centres. This was part of the total tax burned on retailers. Online retailers avoid this tax and thus could be considered to have an unfair advantage over bricks-and-mortar stores.

Yes, excellent point. It's not correct to say a company is more "efficient" in the market simply because it can undercut another company due to being taxed differently. If the global companies are able to still compete effectively while paying the same taxes, then they are still welcome to displace local businesses.

Can any advantage even be fair, under such an angle? If it's legal, it's "fair". Hence, laws are being updated to level the playing field, that is, to remove the advantage which to the lawmakers looks excessive (as in making traditional industries fail) and exploitable to the benefit of the local economy (they will pay because it's still profitable).

There is no global economy. The mere notion of global doesn't make sense since everything is local.

Education and healthcare are provided locally "for free", assumed to be covered by taxes. It doesn't work if everything you ever pay or buy is magically transferred abroad and skip tax collection.

Of course, these are basic services provided in most of Europe. It may be seen differently in a different location that doesn't provide these.

It's not that the foreign player is more efficient, so much that the multi-national player is avoiding taxes that the local company has to pay, by virtue of accounting games, which distorts the market.

This is an attempt at redress.

A level playing field makes sense, and domestic companies are at a disadvantage if their local profits are taxed while foreign companies' "local profits" are taxed offshore at a lower rate.

That said, this doesn't level the playing field, it tips it towards local companies. The tax on business revenues should apply to domestic companies as well, and it should apply to businesses of all sizes. If it has to be netted against taxes on earnings ("tax is the larger of...") to make it not punish local businesses then they should do that.

Anything else harms the consumer by distorting the market.

2% does not tip it, it's actually a pretty low, but still sane, figure IMHO.

There's absolutely nothing wrong with a government tipping the playing field towards local companies.

There’s totally something wrong with favouring local businesses owners at the expense of local consumers. The benefits accrue mostly to people with incomes far in excess of the average.

Local business owners hire local employees.

Yes there is, especially if it results in the consumer paying more for a product. That's the government taking (additional) money away from you, and handing it to a local company.

If that doesn't make sense, an example could help when you want to buy a hypothetical WidgetBox.

Amazon WidgetBox: $100.00

Local WidgetBox: $102.00

After the added tax on Amazon, now you have no choice but to pay $102.00 for something you could previously pay $100.00 for. In business speak, it's call "screwing you" - in the article it's dressed up as "helping local businesses (screw you)".

Apart from the local company's payroll makes up $50 of that cost, of which $20 goes to taxes, so society is still up $18.

It's far more complicated than you make it seem.

> Yes there is, especially if it results in the consumer paying more for a product.

I don't see why ever-decreasing prices seems to be your metric for good here.

I voluntarily pay more for certain things because it is a more ethical choice in those cases.

> They have a negative impact on our domestic businesses (traditional brick and mortar, as well as home-grown digital businesses

I have a home grown, UK based digital business. This is going to affect me negatively more than the continued existence of the FAANG companies.

You do more than £500m a year in sales in the UK?!

Sorry you're of course right. I did a bunch of research before starting my company to work out whether HMRC had a tax on digital goods (currently it doesn't even have this concept at all) and understood they'd changed that, for all companies.