What does the French digital tax have to do with your business? Maybe nothing, but the thought process behind the decision is definitely a mental trap you need to avoid to be a healthy successful business.
Here’s the podcast episode:
Or if you’d rather watch the video:
So the title of this episode is Don’t Make the French Digital Tax Mistake in your business.
How on Earth does the new tax hike in France relate to your business at all?
France Passed a Digital Tax on International Tech Companies
Let’s back up a bit and have some storytime.
Recently, France decided to levy a 3% digital tax on international tech companies. This upset the United States, particularly because these big tech companies are headquartered in the US.
Politics between the United States and France got a little heated. The European Union was also trying to figure out what France was doing, and why.
So, companies had to decide how they were going to respond. Amazon responded by increasing the seller’s fees for e-commerce sellers in France.
If you live in France and used Amazon to sell your products, you saw an increase in your seller’s fees. Amazon also sent out an email, directly blaming the French government. They didn’t even try to hide it at all!
This was, of course, much to the dismay of these sellers. Most of them are small. They’re just trying to make a living off of their passions or have an income through Amazon.
So these sellers have to make a choice: do they want to pass those costs onto the customer, or do they want to eat that profit loss?
Why Was This Tax Passed?
Getting Their Fair Share from Tech Giants
I think there are a couple of motives behind France’s decision to do this. On the surface, it could be that France wanted to get their fair share from these companies, but all they did was pass on that tax to the French sellers.
Instead of actually getting more money directly from Amazon, the French government would be getting more money from the French sellers who are already paying taxes and probably don’t want to pay anymore.
The business problem here is applying an overly simplistic solution to a complex issue. We have the habit of doing that in our businesses.
Setting Things in Motion
Another reason why I think France did this, is to get the ball rolling faster, in terms of addressing the digital tax and everything.
On the surface, it looks like they were just trying to get their money, so that’s what we’re going to go with.
The Gaps and Loopholes of International Laws
France is just trying to get their money, so they apply a simplistic solution.
“We’ll tax the digital tech companies more, so we’ll get more money from them.” Instead, they should’ve just addressed the portions of their tax code that allow for this to happen.
These companies are huge, with armies of lawyers. They’re not breaking the law, but there are gaps and loopholes around the world that allow any international-type company to pay fewer taxes than what the governments would like.
Just Like How Amazon Paid $0 in US Federal Taxes
This is incredibly similar to how Amazon paid $0 in US federal taxes last year. Newsflash! I’m a business and I paid more in federal taxes than Amazon did, but I’m not mad at Amazon because it’s not illegal. Amazon can do that, so good for them. If the tax laws were set up in such a way that Amazon couldn’t do that, then they wouldn’t.
If they did and they were breaking the law, it wouldn’t be splashed over headlines. They’d be trying to hide it. But it’s not against the law. They’re just doing what they’re allowed to do.
Don’t Fall into the Trap of Simple Solutions
Again, tying this back to your business; when you have serious problems in your business, you cannot apply a super simplistic solution to a complex issue.
There are No Magic Shortcuts
For example, you might not be getting enough business. Then don’t fall for those marketing funnels, which promise you hundreds of leads every month.
It sounds incredibly simple, and that’s how they get business owners to pay for it. In all actuality, it probably isn’t simple or doesn’t work for your business. They’ve also likely got it set up so you can’t request a refund or something like that.
They play on your FOMO (fear of missing out), and that’s what gets you to make the purchase.
Determine If You Need Help
What if your content isn’t performing? There’s no easy fix for that, but you can start with a careful review.
Is all of your content not performing or is it just some of it? Is there something wrong with your website?
Maybe there are issues at play here that you’re not equipped to deal with. In that case, you’d typically bring on someone else. If your content is not performing, you’d bring in a content consultant. If there’s something wrong in your supply chain, you’d bring in a supply chain consultant. While you are equipped to handle your business, you can’t run everything yourself.
Maybe if it’s a CBD supply chain and you know all about CBD, you know what to do. But do you know everything about the supply chain? No, probably not, because you know all the things about CBD.
You can’t know everything about everything. That’s why you’d bring on a supply chain consultant to help you understand the complex issue within your supply chain.
Don’t Uproot Entire Processes Abruptly
Let’s say you’re not getting enough profit. That doesn’t mean you cut all spending. That’s not the solution to not having profit. What you should do is check for excess spending, or money that’s “disappearing.”
As an example, let’s say you work with contractors and freelancers. Now you’re not going to do that anymore. The end. No more freelancers, no more consultants, no more outside stuff. “We’re doing everything in-house.” You say.
Can your business afford to take that hit? Any outsourced work that you’ve got built into your business processes would disappear. That’s not to say that you couldn’t move to an in-house solution, but you can’t just wake up one day and eliminate it without serious business consequences.
Simple Answers Are Only Simple in Theory
That’s not to say some problems don’t have simple answers, but even simple answers can be tough to execute in real life.
So let’s take the answer of yes for the scenario I just described above. Let’s bring everything in-house. Let’s set up a timeline for 6 months, and migrate what we’re outsourcing, in-house to bring costs down. You’d have to take as much time as you need for that.
Of course, you’d have to determine if this was actually going to bring costs down with a thorough comparison of costs now versus other resource expenditures related to your proposed solution.
Do not apply overly simplistic solutions to complex issues in your business.
Take a step back if it feels like it’s too much and assesses what’s going on. See if you need to bring on help and move from that point. Don’t just cut off things and throw things away haphazardly, or you’ll end up in the French Amazon position.