San Francisco (AFP)
The G7 countries, which are lucrative markets for US tech giants, have come closer to a plan to squeeze more tax money from the coffers of Amazon, Apple, Facebook and Google.
The group, which includes Great Britain, Canada, France, Germany, Italy, Japan and the USA, has visions of a global tax rate of at least 15 percent on the multinational giants.
The move comes as U.S. President Joe Biden urges a rise in the corporate tax rate, specifically targeting businesses that are reaping wealth.
“The pressure has built up over the years,” said Lilian Faulhaber, law professor at Georgetown University.
“I think some of it is honestly just political.”
The impact of the pandemic on economies has made it more difficult to balance state budgets, the professor noted. At the same time, voters see stories of internet companies raking in profits while avoiding taxes and perhaps taking advantage of market dominance.
“More and more voters were upset about this,” said Faulhaber.
Silicon Valley giants are increasingly coming under fire in Europe and the United States for worrying about wielding monopoly power.
“Perhaps resentment about tax avoidance and the impact these companies have on the way we live is bleeding from one side to the other,” said Alan Auerbach, tax advisor in the University of California, Berkeley School of Economics.
– Outdated tax code –
Nations eager to optimize tech company tax revenues face powerful corporations that use data, analysis, and ingenuity to build markets and profits.
# foto1
In the United States, internet companies are taking advantage of investment or recruiting tax credits. Elsewhere, companies use legal strategies to move profits to low-tax countries and losses to high-tax places.
“It is wrong to call them ethically or morally flawed because they use the incentives we offer them,” said Auerbach.
“The international tax system is designed for an earlier era when companies had a clear place of residence and production took place in one place,” added Auerbach, co-author of the recently published book Taxing Profit in a Global Economy.
Using a 19th century tax law in a 21st century economy is a recipe for lost revenue, he argued.
Part of the G7 reform plan provides for multinational corporations to be taxed where they make their living and not where they have offices or factories.
“There are all these people who both get services and offer eyeballs,” said Faulhaber, referring to the online audience that was generated by Internet companies that rely on digital advertising.
“Her role in international tax law has not yet been recognized.”
In Europe, such a change in tax law would be felt in Ireland, which has attracted companies like Apple with a favorable tax environment.
– A mere ‘pinch’ –
It remained unclear whether the G7 would achieve its goal.
# foto2
One of the questions to be answered was whether countries could advertise companies with deductions or deductions and which profit shares should be taxed.
What would happen to the digital taxes already in place in countries like Great Britain, France, Italy and Spain?
Nuances of a global tax would need to be negotiated by the parties involved, and everyone would need to figure out how to apply the rules fairly.
Authorities also need to create a code that targets large tech companies while avoiding penalizing small or unaffiliated companies.
“It’s a pinch in the end; it won’t be a backbreaker,” said Dan Ives, an analyst at Wedbush Securities.
“Because Big Tech’s global tax structures are ultimately some of the most complex in the world.”
Seattle-based Amazon, for example, wanted to differentiate itself from Silicon Valley firms by upgrading its e-commerce core with warehouses and a relatively meager profit margin of six percent.
The profile changes significantly as soon as Amazon Web Services, its lucrative cloud computing division, is included in the equation.
Saying Amazon isn’t a tech company is “like saying (Lionel) Messi doesn’t play football,” quipped Ives, referring to the Argentine football star.
© 2021 AFP