French Government Thinks Amazon Is Too Customer Friendly

[Xanthe]

:The argument has become circular, so that's the red herring that's being tossed in.

[aceflor]

Originally Posted by Nothingness

I studied french literature ("Literature and medias", I picked Cinema) in Cegep (College?) for two years and like I said, up to the Romantic and Symbolist eras french literature was awesome. After that not so much, like the Dadaism, Naturalism (Zola makes me falls asleep) and Surrealism, but I really love Les Chants de Maldoror by Comte de Lautréamont which is a masterpieve of surrealisme.

Read Pot-Bouille, Au Bonheur des Dames, and Nana, all three from Zola, and if you are still falling asleep, have yourself checked for trypanosomiasis.

We have had glorious writers in the 19th and the 20th Century, and the 21st has started quite well. But I agree, two years of Literature cannot make you an expert.

[HarryT]

Originally Posted by aceflor

Read Pot-Bouille, Au Bonheur des Dames, and Nana, all three from Zola, and if you are still falling asleep, have yourself checked for trypanosomiasis.

There was an excellent BBC TV adaptation of "Au Bonheur des Dames" on last year, using the title "The Paradise". Thoroughly enjoyable.

[Rizla]

Originally Posted by HarryT

No, I certainly don't. But companies have no obligation to benefit society, whereas they do have a duty - a legal requirement, in fact - to maximize the benefit to their shareholders. (That's under UK law. As we've discussed before, I think things may be different in German law.)

Yet you do seem to have an axe to grind in Amazon's favour. Why is that?

[aceflor]

Originally Posted by HarryT

There was an excellent BBC TV adaptation of "Au Bonheur des Dames" on last year, using the title "The Paradise". Thoroughly enjoyable.

You are absolutely right, it was indeed excellent (I managed to see it on iplayer).

[John F]

Originally Posted by HarryT

No, I certainly don't. But companies have no obligation to benefit society, whereas they do have a duty - a legal requirement, in fact - to maximize the benefit to their shareholders. (That's under UK law. As we've discussed before, I think things may be different in German law.)

I added the bold...

I've seen this mentioned before, but it is usually in wording like "maximize profit". Can a public company, as long as the shareholders agree, have a goal other than monetary gain? For example, couldn't a company say "we want to be an environmentally friendly company", so they may sacrifice profits to achieve that goal?

Thanks, and sorry for side tracking the thread.

[jersysman]

Originally Posted by John F

I added the bold...

I've seen this mentioned before, but it is usually in wording like "maximize profit". Can a public company, as long as the shareholders agree, have a goal other than monetary gain? For example, couldn't a company say "we want to be an environmentally friendly company", so they may sacrifice profits to achieve that goal?

Thanks, and sorry for side tracking the thread.

A company can have whatever goals that they wish. However, most investors invest in companies that will make them the most money. While altruistic goals are nice, the average investor will just pass those companies right by and then the company will find itself cash-strapped. I'm sure there are companies that can do this, but most of those are privately owned and do not have to answer to shareholders.

[murraypaul]

Originally Posted by HarryT

No, I certainly don't. But companies have no obligation to benefit society, whereas they do have a duty - a legal requirement, in fact - to maximize the benefit to their shareholders. (That's under UK law. As we've discussed before, I think things may be different in German law.)

That is a red herring of an argument.
Companies frequently take a deliberate decision to hold themselves to a higher standard than required by law, even though that means they incur more cost. Not doing business with certain suppliers, not taking advantage of child labour even in countries where it is legal, imposing lower hourly working limits than required, and so on.
If enough stink is raised about the legal tax avoidance that these companies are employing, they will decide that the loss of goodwill is great enough for them to start to wind back some of the most egregious examples.

This has already happened with Starbucks, who employ a similar scheme of artificially reducing taxable profits by means of intercompany IP charges.

http://www.bbc.co.uk/news/business-20624857

Starbucks admitted that the degree of hostility and emotion surrounding the tax issue had "taken us a bit by surprise" and that the move was an attempt to rebuild trust with its customers.

"Since we started doing business here, we have always organised our tax affairs according to the letter of the law," said Mr Engskov.

"[But] with the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more," he said.

The extra tax payments will be funded by not claiming "tax deductions for royalties or payments related to our intercompany charges", Mr Engskov said.

This is the 'problem' that should be addressed, multi-nationals are able to arbitrarily decide that any of their subsidiary companies will never make a profit. In Starbucks UK case this was done by (over)paying royalties to one sister company, (over)paying for beans from another and (over)paying interest charges for loans from another.
HMRC should be cracking down on this, there are already requirements in place that such intercompany transactions be reasonable, but they are not being aggressively enforced.
The result is that large multi-nationals can shop around to get the government regulation they wish.

During an investigation into corporate tax avoidance, the company's global chief financial officer told a committee of MPs last year that the tax deal struck with Dutch authorities was "an attractive reason" for basing operations there.

Ordinary tax payers don't get to buy the (secret) tax treatment they want.

From the Public Accounts Committee report:

8. Starbucks told us that it has made a loss for 14 of the 15 years it has been operating in the UK, but in 2006 it made a small profit.[19] We found it difficult to believe that a commercial company with a 31% market share by turnover, with a responsibility to its shareholders and investors to make a decent return, was trading with apparent losses for nearly every year of its operation in the UK.[20] This was inconsistent with claims the company was making in briefings to its shareholders that the UK business was successful and it was making 15% profits in the UK.[21] Starbucks was not prepared to breakdown the 4.7% payment for intellectual property (which was 6% until recently) that the UK company pays to the Netherlands based company.[22] The Committee was sceptical that the 20% mark-up that the Netherlands based company pays to the Swiss based company on its coffee buying operations, with a further mark up before it sells to the UK, is reasonable .[23]Starbucks agreed that it had a special tax arrangement with the Netherlands that made it attractive to locate business there, which the Dutch authorities asked Starbucks to hold in confidence, and that Switzerland offers a very competitive tax rate.[24] In addition, there is an inter-company loan between the US Starbucks business and the UK Starbucks business over a period of time with the interest rate set at higher rate than any similar loan we have seen.[25] We suspect that all these arrangements are devices to remove profits from the UK to these areas with lower tax.[26]

9. At the hearing we were frustrated with the representative from Amazon, who we found evasive and unprepared to answer legitimate questions on the company's structure and the true location of its economic activity.[27]Amazon has subsequently provided this information.[28] Amazon has a reported turnover of £207 million for 2011 for its UK company (Amazon.co.uk), on which it has shown a tax expense of only £1.8 million, however it shows a European-wide turnover of €9.1 billion for its Luxembourg based company (Amazon EU Sarl) and a tax of €8.2 million.[29] Amazon.co.uk is a service company in the UK providing services to Amazon EU Sarl for which it receives payment.[30] That company is owned by a holding company, which is a subsidiary of Amazon's group companies.[31] Amazon subsequently provided a copy of the unaudited accounts for Amazon Europe Holding Technologies S.C.S for 2011 showing a profit of €301.8 million and no tax payments.[32] Amazon also provided information showing that for 2011, £3.35 billion of sales were from the UK, 25% of all international sales outside the USA.[33] Yet Amazon has over 15,000 staff in the UK, invoices UK customers from the UK, hires UK staff in the UK, has inventory physically in the UK for UK customers and to all intents and purposes has the majority of its economic activity in the UK, rather than in Luxembourg, but pays virtually no corporation tax in the UK.[34] Amazon has received an assessment from the French tax authorities which it disputes.[35]

10. Google explained in its responses that it minimised tax within the letter of the law and that low tax areas or tax havens influenced where it located its group companies.[36]The vast majority of Google's non-USA sales are billed in Ireland.[37] Google makes money from business to business advertising, adverts which can be targeted to the UK website and to UK Google users[38]. In the UK, Google Ltd recorded revenues of £396 million in 2011, from Google Ireland, but paid corporation tax of only £6 million.[39] Google Ireland paid for the services provided by the 1,300 staff in the UK.[40] Google had approximately 700 staff who undertake marketing work in the UK as part of their activities, but only 200 of Google's Irish staff of 3,000 were involved in marketing Google in the UK.[41]

11. Google accepted that profits should be taxed in the jurisdictions where the economic activity generating those profits occurred[42] but it asserted that its underlying economic activity arose from the innovative software technology underlying its Google search engine generated by the US company.[43] Google also confirmed that it had an entity based in Bermuda to protect its intellectual property.[44] We consider that the company undermined its own argument since it remits its non-USA profits (including from the UK) not to the USA but to Bermuda and therefore may be depriving the USA of legitimate tax revenue as well as the UK.[45] Subsequently, Google told us that there were no outstanding issues with HMRC about Google UK's accounts. HMRC is currently carrying out a review of the tax returns filed by Google UK for 2005-11 inclusive and Google told us this is standard practice and that it is co-operating fully with that review.[46]

[Andrew H.]

Originally Posted by Rizla

Yet you do seem to have an axe to grind in Amazon's favour. Why is that?

Why do you constantly spread misleading statements about Amazon and then attack the motives of people who try to clear up your misinformation?

[tompe]

Originally Posted by Billi

No, nobody would want Amazon to pay more than the law requires. "We" all would be more than happy if they would pay as much as the law requires. If a company founds a number of sub-companies with the only business to limit the tax burden then this is not covered by the law of France or Germany or whereever they do so.

This is actually illegal in Sweden in some cases.

[elcreative]

Frankly if the law doesn't work fairly then it's time to get on to our legislators and get them to change things... this is happening in the UK. Personally I believe that money earned in any country should be subject to the tax regime of that country. Warping the way a company handles this procedure, so that profits can be moved out to a subsidiary in a lower tax regime, should be stopped... we should at least have a level playing field on taxation for large and small businesses which these transfer arrangements block...

[Xanthe]

Originally Posted by Andrew H.

Why do you constantly spread misleading statements about Amazon and then attack the motives of people who try to clear up your misinformation?

I was wondering the same thing myself. HarryT's responses just factually stated what corporations do and why they do it, eliminating the hyperbole.

One may not agree with the corporate tax laws as they stand, or why they exist as they do. But railing against corporations that operate under those laws when they are doing so legally is like spitting in the wind - it serves no purpose. Working to get the laws themselves changed, though, is what is needed.

Starbucks isn't really a good example of a "responsible company" because it is a niche market, dependent upon people who can afford their prices and who like pretty designs on their coffee, and with their limited menu more subject to the vagaries of economy. To compete with local merchants and fast food places who offer more services and choices, they need to distinguish themselves and create the impression that they are somehow "better". Getting called on their tax version of 3-card monte and subsequently "correcting" that behavior, serves that purpose.

[SteveEisenberg]

Originally Posted by murraypaul

Companies frequently take a deliberate decision to hold themselves to a higher standard than required by law, even though that means they incur more cost.

I agree with this.

As an individual, if I treated those around me as poorly as legally allowed, I wouldn't be much of a person. As for government laying out and enforcing all the rules for moral behavior amoug individuals, this would be utterly impractical. Isn't the same true for corporations?

Re mention in this thread of responsibility to shareholders, see:

Down with Shareholder Value

“Look at almost any company that has lasted,” he continued. “It is inevitably because executives see themselves as trying to move the organization forward, and not because they are incented by their pay package to maximize the share price.”

Lorsch, for his part, says that he believes that “the function of business in a society is not just a return to investors, but to provide goods and services, provide employment, pay taxes, and so on.”

Emphasis added.

[JD Gumby]

Originally Posted by murraypaul

It is already against EU law. Luxembourg is not allowed to charge a 3% rate on eBooks, but are doing it anyway.
The EU law change is not to prevent charging 3%, but to make it so that VAT is charged at the rate of the consumer's country, not the base of operations.

Can't see how it's illegal - they're just charging the same VAT as they do on physical books (something I consider extremely reasonable - just because they are HTML files inside an archive doesn't make them software). Estonia & Italy (at 4% for both physical and electronic), Hungary (5%), and a few others at similarily low rates do the same thing. Luxembourg is just the lowest.

http://ec.europa.eu/taxation_customs...t_rates_en.pdf

[elcreative]

Originally Posted by JD Gumby

Can't see how it's illegal - they're just charging the same VAT as they do on physical books (something I consider extremely reasonable - just because they are HTML files inside an archive doesn't make them software). Estonia & Italy (at 4% for both physical and electronic), Hungary (5%), and a few others at similarily low rates do the same thing. Luxembourg is just the lowest.

http://ec.europa.eu/taxation_customs...t_rates_en.pdf

UK has physical books VAT exempt (or 0%... end result same thing) but eBooks get hit with 20% VAT!!!