Digitax and why it is no fun

France just voted a piece of legislation regarding the taxation of large digital corporations. Most of the comments I have seen where encouraging the steps and applauding France. I would like to make some counter points and ask for feedback.

First I would like to give a simplified representation of how a website like Facebook works. When you open your browser and point it to facebook.com your browser is getting data that is stored on a server. Now let’s say for arguments sake that server resides in the US. That means the information you are getting is coming from the US. It was stored on a server that was bought by a US company, who paid tax (VAT) on the server. They paid income tax, property tax, land tax, probably some local tax and they provided jobs to many US people who could in turn buy lot’s of stuff with that money again (also paying huge sums of tax again). So far so good.

Now let’s see the other side of that action. If I would be from France the device I was looking up this website was bought with money that I first had to earn (and pay tax over), then I would have paid VAT over it and the data was coming into my device via an internet connection that I paid for (which was taxed) and it would go through cables that were also paid for and taxed, by people who paid tax on their income. The service I get is free, I am in no way forced to use it, I could do my job without, and live my life perfectly happy without ever using Facebook. The website is sponsored by ads that were paid for by companies in France, but most of the time they would be placed by middlemen (in France) who would charge for the service of helping you put ads on Facebook and monitor the progress. They pay tax in France and help to fuel French economy.

Again so far so good. Lots of tax already paid and new jobs are created. Now let’s try to figure out why people from France are using this service from a US company and not from a French company? It has to do with investments. In the US, before Facebook found the right combination¬† of ingredients that made it a super successful company, a boatload of companies had been funded by investors who ALL LOST their money. Not a bit of money, a huge amount of money...and not once but hundreds and hundreds of times…they funded those companies even after the so called dotcom bubble exploded and wiped away almost ALL of the money that was invested in those companies. Yet some idiots persevered and continued to pour money into companies that were racking up ENORMOUS debts and where not making any money at all……. for years!

So while European investors and public laughed and snickered about these idiots in the US that were losing money at such a staggering rate, some people continued to invest and fund smart young people who had dreams and who were willing to risk it all.

Fast forward ten years and after all the failed attempts and after all the spilled trillions of dollars, several companies remained and thrived and build up a business that actually and literally changed the world and is changing humanity (I’m not saying it’s all for the good, but it’s undeniable changing humanity). Now the rewards are finally there for those who kept investing and….France suddenly demands a piece of the action. Not because they earned it, or because they lost trillions, or were willing to risk everything….no, just because they think it’s unfair that Facebook gets to keep all the marbles…..