I know this isn't exactly parallel to the digital service tax, but for the larger debate: The huge obvious revenue tax is VAT. On (almost) anything sold in France they get 20%, and it's very hard to dodge. It does not depend on where you claim your headquarters to be.
All these arguments about which country gets to collect a few percent tax, of a few percent profit, are dwarfed by this much larger slice. Which every country is free to adjust as they wish.
Maybe, but there are several arguments against using it in this context:
- Collection can be reduced by deducting VAT on company purchases, meaning the company only pays the difference between the VAT charged to the customer and the VAT they've incurred on purchases.
- It's regressive. It primarily affects poorer consumers since it is effectively a tax on the end user rather than the company.
- Some countries aren't free to set their own rates. For example, in the EU the standard rate cannot be set below 15% without first changing EU law (and convincing a majority of Member States to agree to do that) so it's not very competitive.
Sure, it's not the same as a revenue tax. But compared to a profits tax, money spent on company purchases also never makes it into the profit column. But money the company later spends on salaries, is taxed by VAT.
There's an argument that VAT is regressive but this isn't it. Who effectively pays (meaning economic incidence) is complicated. But sometimes it works out that poorer people pay a larger proportion of their income in VAT than do richer people. It seems entirely OK to have a mixture of regressive and progressive taxes.
And sure, not completely free within the EU, but the range of acceptable rates is pretty wide, maybe 17-27 exist today? I haven't done the numbers but France could surely raise an order of magnitude more money from VAT than they collect from corporate profits, if they wished.
Well, who pays tax is kind-of a complicated question. VAT is collected at many points along the supply chain (and sales tax typically at just one). But who pays economically depends on a bunch of elasticities: if the consumers will buy X at any price, then the tax lands on them, whereas if they will only pay at maximum Y (otherwise they go without) then the tax lands on the seller. (But in reality, nothing is at either endpoint.)
The companies in the middle of the supply chain can reclaim any VAT they paid on goods/services used in the business [1], so effectively they don't pay it.
VAT is definitely not a tax on profit, that's usually called "corporate tax" [2] which is a completely different thing.
All these arguments about which country gets to collect a few percent tax, of a few percent profit, are dwarfed by this much larger slice. Which every country is free to adjust as they wish.