>Those companies will just raise their prices to cover the tax

How exactly will Facebook raise prices in a way that it will hit the average consumer?

> How exactly will Facebook raise prices in a way that it will hit the average consumer?

The average consumer is also a worker and depends on an employer that will be paying higher advertising costs for the same benefit.

And now %X of that cost will return to the economy instead of going overseas. Ad costs should stay roughly the same, since they are the result of bidding. It's not like Facebook leaves $2 on the table and says we'll keep that there for you guys unless we get taxed.

When something has near zero marginal cost, it is all just about demand. The only scarcity is caused from other bidders.

Why should a country send %X margin on all of their consumer products overseas (via ad costs) to someone who is selling their own citizens' content and capturing the users/locking them in with network effects? There is a lot of innovation at Facebook et. al., but they get a massively outsized portion of the network's value when you compare what they put in vs. what users are putting in.

Where it could hurt would be a service that can barely break even using ad revenue and goes under as a result. But for big corps with network-effect lock-in in their segment, it seems like a net win for any country that does this.

More to the point, if Facebook isn’t selling anything to UK consumers, will it pay any tax?

It's selling ads. Its consumers are the (UK) businesses buying those ads.

If this is a tax on sales, rather than impressions, they could prefer international sales by 2%. If this is a tax on views, then this is harder.

Facebook could also raise the reserve price for auctions for UK ads.

They'll raise prices on advertisers in the UK, who will subsequently raise prices on consumers.

“Why weren’t you already charging more, if you could?” Would be my obvious first question at that point, if I was a shareholder.

Because the competitive equilibrium doesn't allow it unless the cost curve shifts for everyone at the same time.

They are not shifting for everybody at the same time, they are shifting only for “tech companies”, who are currently perceived (rightly or wrongly) as undercutting “normal businesses” in an unfair way. (Scare quotes because in practice I don’t trust the UK government know what they mean by the words).

Well, then tech companies will raise prices and product makers will buy fewer ads, leading them to increase the ad load, or similar. It demands on the demand elasticity.

More ad/content ratio

I’m pretty sure FB already maximizes their profit per user based on what they think the user can tolerate, and I doubt it can be arbitrarily pushed further on a whim.

Facebook has a payment platform with various products.

Statu quo is also hurting the local economy. All local businesses have to charge taxes to customers, they are at disadvantage to foreign based companies.

> This will only hurt the people who live in the UK. Those companies will just raise their prices to cover the tax.

If amazon could charge an extra 3% without losing customers to other suppliers, why wouldn't they do that with or without the tax?

Currently if amazon charge £10 and argos charge £10.20, amazon wins, if amazon charge £10.30 (to 'recover' the new tax), argos wins.

A rational company optimizes profits, rather than just revenue, when your costs go up, you may be interested in raising your prices, even if it reduces the number of items you sell, because part of the revenue has to be paid to someone else. You can see this trivially if a business only has a 1% profit margin on an item.

It's likely going to fall on some combination of business and consumer that we won't know a priori.

Is Argos exempt from this tax? They certainly exceed the 500m in revenue threshold.

If they are, this tax seems to be more like a tariff than not.

Argos isn't an online market place.

It will not “hurt” people in the UK. If that tax passes through and is applied, it’s possible that the price transfer will only apply to UK residents. In that case, the Treasury will have more money to spend on services for UK residents which would hardly be hurtful.

Sure but then why not just raise taxes on UK citizens?

The whole point of this tax is to penalize the "tech giants" which happen to all be American, and it won't really do that.

Those companies are 100% American: they rely on technologies like the Web invented by an English scientist working at the frontier of France and Switzerland. They rely on algorithms invented by Russian, French, German scientist. They hire students from university around the world, to be engineers, managers, salesperson for clients also from everywhere in the world.

If those companies want to keep on hiring people without staggering student’s debt, they need to contribute to the local economy. I know they already do that (I worked for such companies for long enough, and paid a lot of taxes locally) but my point was twofold:

- paying more tax is often a good thing for the people who are going to benefit from the corresponding government services; that is certainly the case in the UK;

- if your company develops, promotes and sells products in a country, it makes sense to also pay added-value- and profit-tax there, and not avoid tax by claiming that the value was created in a tax shelter like Suriname, where you have no activity.

I take it you have never encountered the competence of a U.K. government-run service?

I grew up in the UK and I’ve lived there for the last four years. I’ve lived and paid taxes in six other countries so I’m happy to compare.

There certainly are possible improvements, but it’s overall very well managed and there are here many aspects of how civil servants are trying to improve at the same time the cost, the efficiency, the quality but also how to think about the service that touched me. The National Health Service, for instance, is a little bare-bones but the cheapest developed health service there is. The Land Registry is incredibly helpful, especially when you depend on reliable, sensical data for your business. The BBC is expensive but peerless. Transport for London, for all its sins and there are many, transport more people, faster, further, more reliably than anyone; it’s heavily dependent on having redundancy rather than reliability but at least it works often enough. Social services are minimal and insufficient, but nowhere else can people find jobs so easily if they are motivated and willing to learn. That is also not just due to companies, but also government services that manage to let people employ others without making it too difficult.

I sincerely believe that the same system, without the stress that the Tory government is putting on the budget for education, police and health, could be world-class.

If Amazon raised their prices to cover the tax they're not currently paying High Street retail shops would at least stand a fighting chance against them.

You'd still have to leave the house, and look up reviews yourself.

" They're just using it as a point of negotiation for a new US trade deal after Brexit."

Is this really that useful in that case? Not to say the UK is irrelevant, but after leaving the EU the UK won't be as big a market, is a 2% tax on a market dominated by the US really much of a threat to, anything?

Not to say the tax has no value at all in other ways (revenue) but as a negotiating tacit, not sure what it does.

> They're just using it as a point of negotiation for a new US trade deal after Brexit

I suspect it's got more to do with countering Labour

The tech giants are free services! Adding 2% to the price of Facebook leaves it still free!

I know it's a dogmatic talking point that you have to make to pretend that tax incidence is pointless, but it doesn't work here.

> The tech giants are free services!

No - See [0] which is Facebook's own page about their charges. Either Facebook will soak the additional costs up and / or pass them them on their paying users - the advertisers. Who may in turn pass the increased ad costs to the buyers of the advertised products / services and/or cut internal costs. Something like that.

[0] https://www.facebook.com/business/help/201828586525529?ref=f...

This is a great argument for breaking up these tech giant monopolies.