The Observer tries to convince us that the digital tech tax is righteous and justified. The very reasoning they use, that underlying concept, being the thing that we disagree with:
Talk of introducing an internationally agreed digital tax is all very well – but it could take years to implement, and looks like a delaying tactic. Amazon and similar companies take large profits out of Britain. It is only right they should put more money back through fair and proportionate taxation.
This is to misunderstand what profit is. Profit being the value added by the activity and value added is what we actually want in an economy. Value added being what GDP is (or, if you prefer, GNP, GNI, NNI, whichever flavour floats your boat).
Consider the basics. In a market economy the various inputs into any process are priced at their value in alternative uses. Land, labour, capital, further down the line into computers, telecoms and all the rest, the price is determined by what people are willing to pay for them to do all the other things that are done in the economy. Our aim in having an economy at all is to have more value added, for that GDP is, by definition, either all production, or all incomes, or all consumption.
Profit is the value added by this specific process, or organisation, above those prices of those resources being used to do other things. That’s just what it is. We like people making profits - in a free market of course - because this is us all getting richer. More value is being added in our economy.
The idea that we should therefore tax people for making us richer doesn’t make sense. It’s a perversion of the basic truth about the economy.
Sure, we’re entirely happy with the idea that we have a progressive tax system, that the wider shoulders carry more of the burden. But that’s righteously a function of the income tax system, not a corporate one.
It’s not even true that the likes of Amazon make money and then run away. They invest heavily etc. But rather more than that there’s that Amazon Effect. Studies in the US - and there’s no reason at all to think it’s not true here - have shown that the simple existence of the company (using it as a proxy for internet shopping in general) has knocked 0.1 to 0.2 % a year off inflation over the past couple of decades. Why do we want to tax the people who have done that?
Foreigners invest here, reduce inflation by doing so, that people voluntarily flock to them shows consumers like their offering, the whole shebang adding significant value to our lives. And this is the reasoning to tax them? Seriously folks, get a grip.