San Francisco (AFP)
G7 countries that are lucrative markets for US tech giants have moved closer to a plan to squeeze more tax dollars out of the coffers of Amazon, Apple, Facebook and Google.
The group, which includes Britain, Canada, France, Germany, Italy, Japan and the United States, is considering a global tax rate of at least 15% on multinational giants.
The move comes as US President Joe Biden lobbies to raise the corporate tax rate, particularly targeting high-net-worth businesses.
“The pressure has increased over the years,” said Lilian Faulhaber, law professor at Georgetown University.
“I think part, honestly, is just political. “
The pandemic’s blow to economies has made it more difficult to balance government budgets, the professor noted. At the same time, voters see stories of internet companies making profits while avoiding taxes and, perhaps, profiting from market dominance.
“More and more voters got angry about this,” Faulhaber said.
The giants of Silicon Valley are increasingly criticized in Europe and the United States over concerns over the exercise of monopoly power.
“Maybe resentment is bleeding from side to side in terms of tax evasion and the influence these companies have on the way we live,” said Alan Auerbach, tax specialist in the department of economics from the University of California at Berkeley.
– Obsolete tax code –
Nations seeking to maximize tax revenues for technology companies face powerful companies capable of using data, analytics, and ingenuity to create markets and profits.
# photo1 In the United States, Internet companies are taking advantage of opportunities for tax credits for investments or recruiting. Elsewhere, companies use legal strategies to shift profits to low-tax countries and shift losses to high-tax places.
“It is wrong to label them as ethically or morally flawed because they take advantage of the incentives that we are offering them,” Auerbach said.
“The international tax system is designed for an earlier era; when companies had a clear residence and their production was done in the same location, ”added Auerbach, co-author of the recently published Taxing Profit in a Global Economy.
Using a 19th century tax code in a 21st century economy is a recipe for losing income, he explained.
Part of the G7 reform plan is to tax multinational corporations where they earn their money rather than where they have offices or factories.
“There are all of these people who both receive services and provide eyes,” Faulhaber said, referring to the online audiences cashed in by internet companies relying on digital advertising.
“Previously, their role was not recognized in international tax law. “
In Europe, such a tax code change would be felt in Ireland, which has attracted companies like Apple with a favorable tax environment.
– Simple “pinch” –
It was still not clear whether the G7 would reach its target.
# photo2 Questions to be answered included whether countries could woo businesses with deductions or breaks, and what portions of profits should be taxed.
What would become of the digital taxes already introduced in countries like Great Britain, France, Italy and Spain?
The nuances of a global tax should be negotiated by those involved, each figuring out how to apply the rules fairly.
The authorities will also need to develop a code that targets large tech companies while avoiding penalizing small or independent companies.
“At the end of the day, it’s a pinch; it won’t be a back breaker, ”said Dan Ives, analyst at Wedbush Securities.
“Because at the end of the day, the global tax structures for big tech are among the most complex in the world. “
Seattle-based Amazon, for example, was keen to distinguish itself from Silicon Valley companies by showcasing its e-commerce core, with warehouses and a relatively low six percent profit margin.
The profile changes dramatically once Amazon Web Services, its lucrative cloud computing division, is factored into the equation.
To say that Amazon is not a tech company is “like saying (Lionel) Messi doesn’t play football,” Ives joked, referring to the Argentine soccer star.
© 2021 AFP