TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, November 1, 2018

Facebook, Google May Face Billions in New Taxes Across Asia, Europe, Latin America

WSJWall Street Journal, Facebook, Google May Face Billions in New Taxes Across Asia, Latin America:

Dozens of countries are stepping up efforts to levy new taxes on technology giants such as Alphabet and Facebook, hoping to capture revenue from digital services as economic activity increasingly shifts online.

Inspired by European Union proposals to impose a tax based on the revenue of tech companies rather than their profit, South Korea, India and at least seven other Asian-Pacific countries are exploring new taxes. Mexico, Chile and other Latin American countries too are contemplating new taxes aimed at boosting receipts from foreign tech firms.

Such taxes, which are separate from corporate income taxes many companies already pay, are broadly known as digital taxes and could add billions of dollars to companies’ tax bills. They seek to impose levies on digital services sold by global companies in a given country from units based outside that country. In some cases, the proposed taxes target services involving the collection of data about local residents, such as targeted online advertising.

“Countries across the planet now understand they must impose a digital tax,” said Bruno Le Maire, France’s finance minister, who is lobbying across Europe for the tax ahead of a meeting of EU finance ministers in November. “It is a question of fairness.”

In Europe, where the digital tax has run into opposition, some countries have signaled they are prepared to act unilaterally. U.K. Treasury chief Philip Hammond, who is set to make his annual budget statement on Monday, said earlier this month that his country is prepared to “go it alone with a digital services tax.”

The efforts in Asia, the U.K. and Latin America make it likelier that several different taxes will go on the books, even if the European proposal faces a political fight. Europe is the largest overseas market for many tech firms, and the EU estimates that its proposal would bring in about EUR5 billion ($5.7 billion) annually. But digital taxes could eventually take a bigger bite in Asia, where growth is faster and there are many more internet users. ...

Opponents of digital taxes, which include lobbyists for multinationals and countries with big exports, say a patchwork of new rules that vary by country will hurt smaller firms. They say the initiatives could lead to double taxation of corporate profits that will stifle international trade and discourage investment.

Wall Street Journal, U.K. to Roll Out First-of-Its-Kind Digital Tax:

The U.K. said it will move ahead with plans to introduce a first-of-its-kind tax on locally generated revenue by large technology firms—the most concrete attempt yet by an industrialized nation to rewrite the world’s tax code for the digital era.

The new tax comes as dozens of other countries are contemplating similar levies on digital services sold by companies such as Alphabet’s Google and Facebook. These governments are hoping to capture more revenue from such services as economic activity increasingly shifts online.

At issue is how governments collect taxes from the handful of tech firms, many based in the U.S., that have morphed into global, digital consumer-services giants. As they have grown, governments outside their home jurisdictions have struggled with the digital nature of their wares in coming up with an appropriate level of local tax to levy.

Big American tech firms have been criticized for reporting relatively little of their profit in local jurisdictions, opening them up to scrutiny. An international effort among rich nations to help standardize how and where to tax these digital services has been progressing slowly. The U.K. on Monday said it could no longer wait. As part of its annual budget, it said it was moving ahead with a plan to begin a digital tax for large tech firms by 2020.

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Comments

Given how Adobe, Apple, Google and their kin have been using the Dutch Sandwich to evade billions in taxes, I find this news quite delightful. Too bad it can't be made retroactive.

https://en.wikipedia.org/wiki/Dutch_Sandwich

Posted by: Michael W. Perry | Nov 1, 2018 4:52:48 PM

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