Politico: Europe needs tax system overhaul for digital age

Personal income tax was deployed in the 1910s to make the most of the rise of salaried jobs: taxing workers’ income was made easier by the introduction of the worker’s salary, a single-sourced, recurring revenue stream. The modern corporate tax on profits, meanwhile, was established in the 1920s by a group of economists working for the League of Nations to avoid large corporations seeing their profits taxed twice by two different governments as they expanded their businesses across national borders. VAT was invented in the 1950s to account for the lengthening of value chains in many industries. [...]

This realization gave rise to a more practical idea: Instead of fixing the current, dysfunctional corporate taxation, we could simply get rid of it altogether and levy taxes exclusively on individuals rather than corporations, by taxing personal income on one hand (personal income tax and payroll tax, for example), and individual transactions on the other (such as with VAT or sales taxes).

There are three obstacles to implementing such as revolutionary change. First, renouncing taxing profits would privilege certain individuals over others and raise questions of fairness. In many cases (but not all), taxing corporate profits is simply a way to correct the imbalance, from a tax perspective, between workers and shareholders and to prevent the latter from escaping income taxation altogether. Indeed, taxing a corporation’s profits is simply a centralized way of taxing its shareholders’ dividends. It also makes it possible for a government to tax dividends paid to foreign shareholders.

The second obstacle is that in the current state of tax administration, it’s still much easier to tax a corporation’s profits than to go after its many individual stakeholders. A corporation is a hub for financial flows: Prices paid by customers and paid to suppliers; wages paid to workers; dividends and stock buybacks paid to shareholders. Instead of running after each of those individuals to tax their income or the transactions they take part in, it’s easier to tax the corporation itself — all the more so because it has a proper accounting system and various auditors and legal services that can certify the corporation’s financial position and operating results. Individuals, on the other hand, are harder to track, scattered, and often messy in their personal finances.

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Politico: Macron gives EU tech tax a political push

The French-led push fits into broader European efforts to rein in Silicon Valley companies, ranging from a $5 billion antitrust fine against Google to ongoing investigations into Facebook’s data practices. The large tech firms have so far responded by ramping up their lobbying efforts in the European capital, while U.S. Treasury Secretary Steven Mnuchin has warned the Europeans against jeopardizing tech investment — although so far Washington has stopped short of bringing the digital tax issue into its argument with Brussels over trade. [...]

While Paris claims to have the backing of 19 countries including the United Kingdom — whose chancellor, Philip Hammond, has pledged to “go it alone” on such a tax — it’s far from garnering the unanimous support needed for the measure to pass. A group of countries led by Ireland and including Estonia, Sweden and the Czech Republic remains strongly opposed.[...]

Tech firms’ opposition to the tax plan is due mainly to its long-term implications rather than any immediate financial impact. Under the current proposal, which was put forward by the European Commission for consideration by EU states by year-end, companies with substantial digital operations in the EU — those generating more than €750 million in annual revenue — would be subject to the new tax. The Commission has suggested a tax of 3 percent on revenues would raise some €5 billion a year. [...]

The problem for tech companies has more to do with the fact that France, and many EU allies, want to enshrine the idea of taxing value added from the collection and deployment of personal data for advertising — in other words, the engine at the core of Facebook, Google, Twitter and, increasingly, Amazon’s wildly successful business models. A European tax on data could prompt other countries to impose similar measures — just as Japan, South Korea, South Africa and a slew of other countries have imposed their own variations of Europe’s far-reaching data privacy rules.

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Politico: Hungary and Poland’s multispeed Europe

Of course, not joining the euro and being circumspect over immigration and asylum are legitimate policy choices (even if, for instance, 53 percent of Hungarians are supportive of the common European currency). But one should be under no illusion about the consequences. The monetary union is by far the EU’s most important political project, and as such it’s bound to be at the center of the bloc’s integration efforts.[...]

As the United Kingdom, the EU’s second (or third, depending on what measure one uses) largest economy, leaves the bloc altogether, the periphery will look much less attractive. True, there will still be Denmark, with its opt-out from the common currency, and Sweden, where voters rejected adopting the euro in a 2003 referendum. Few others, however, see non-euro EU membership as an attractive destination. Bulgaria, for example, agreed in July with the Eurogroup on initiating the process leading to membership in the monetary union — a first such attempt since January 2014, when Latvia and Lithuania adopted the common currency.[...]

Bulgaria has also committed itself “to thoroughly implement the reforms monitored by the Commission under the Cooperation and Verification Mechanism in the areas of judicial reform and the fight against corruption and organized crime.” It is hard to imagine the governments in Budapest and Warsaw acquiescing to similar demands, even symbolically, while also continuing in their widespread authoritarian abuses. [...]

As a result, the periphery is going to be an increasingly lonely, awkward place. It was, after all, the inability to commit itself fully to the European project that helped to drive the U.K. to its 2016 Brexit referendum. For Poland, Hungary, and also the Czech Republic the problem is primarily political. Staying out of the eurozone denies the three post-communist countries a place at the table for weighing in on key decisions.

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UnHerd: Germany’s identity crisis

The standard interpretation of the recent vote is that the entrance of Alternative for Germany, or AfD, into the Bavarian Landtag (legislature) is another example of Germany’s inability to deal with its nationalistic element. In fact, a closer look shows that the real issue is not how to deal with nationalism but how to define it. All sides in the election were propounding their own views about what German nationalism, and its peculiar Bavarian interpretation, is about.[...]

Their sense of nation included acceptance of change and growth, but only against the backdrop of an ethnic German supermajority and a Christian-influenced public morality. Feeling betrayed by the CSU, nearly one in eight Bavarians supported the radically anti-Islamic AfD in last year’s federal vote, with proportions rising in the CSU’s rural, Catholic heartland. [...]

The CSU therefore staved off catastrophic defeat, but only at a great cost. The AfD share of the vote dropped compared with the 2017 Bundestag election in rural regions and small towns, and some of those voters returned to the CSU. The FW, however, also gained some of these voters as they were a safe protest party for those who wanted to send the CSU a message.

In the cities, the CSU defined itself in a way that proved unacceptable to economically conservative but culturally liberal voters who want a Germany that is open to migrants and the world. The SPD’s collapse also showed that the old ways no longer hold; the two parties combined for less than a majority of the vote. The centre held, but just barely.[...]

Meanwhile, the AfD is now the largest party in the former communist East. Combined with the party descended from the former Communists, Die Linke, nearly half of East Germany’s voters support a party of either the far Left or far Right. Thirty years after the fall of the Berlin Wall, it seems that East Germany’s politics have more in common with those of their former Warsaw Pact allies, where Right or Left-wing populism is also rising, than of the western part of the nation they now call home.

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BBC: Clever crows reveal 'window into the mind'

New Caledonian crows are known to spontaneously use tools in the wild. This task, designed by scientists at the Max Planck Institute for Ornithology in Seewiesen, Germany, and the University of Oxford, presented the birds with a novel problem that they needed to make a new tool in order to solve.[...]

The sticks were designed to be combinable - one was hollow to allow the other to slot inside. And with no demonstration or help, four out of the eight crows inserted one stick into another and used the resulting longer tool to fish for and extract the food from the box. [...]

And this study, he added, has reinforced the evidence that the crows have "highly flexible abilities" that allow them to solve novel problems very quickly with tools they have never seen before.

The researchers suspect that the crows might do this by envisaging a simulation of the problem in front of them - playing out different actions in their brains until they figure out the solution.[...]

The problem-solving demonstrations could also help in the development of artificial intelligence in robots - to discover ways to build machines that are also able to reach "autonomous creative solutions" to new problems.

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