Paul L. Caron

Saturday, December 8, 2018

Mason: The Digital-Tax Proxy War

Ruth Mason (Virginia), The Digital-Tax Proxy War (reviewing Wei Cui (British Columbia), Digital Services Tax: A Conceptual Defense):

Wei Cui, a law professor at the University of British Columbia, has written a new paper, Digital Services Tax: A Conceptual Defense. In the paper, Cui defends the much-maligned EU digital services tax (DST). Under DST proposals, EU countries would tax only very large companies on certain kinds of income from provision of digital services. Spain has resolved to enact a DST with immediate effect, and the UK and EU countries are threatening to passDSTs with delayed starts if countries cannot agree via the OECD about how to tax digital giants like Google. DSTs have been criticized because they discriminate against U.S. companies, operate as tariffs, result in double taxation, may be passed on to consumers, and invite retaliation. ...

It’s too soon to definitively characterize the DST. It may be a political fig leaf to appease voters–-something that EU politicians can point to when accused of failing to tax big tech. Or it could be the camel’s nose in the tent — while the EU DST in its current formulation was estimated to raise only €5 billion annually, maybe the EU countries will turn up the rate in the future so that the DST ends up raising significant revenue. It is surely part of the European strategy to get Americans to the bargaining table on the real issue: rethinking source and residence and thereby allocation of tax revenue from cross-border economic activity. Cui gives us a new way to think about the DST — as an efficient tax on location-specific rents.

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