A digital tax war is brewing across the world, even if Trump has put a lid on it for now
- France and the US have backed off from a digital tax war, but they are only kicking the can down the road. Tech giants should pay tax in countries where they generate revenue, and the world has to reach agreement on how to tax them
Benjamin Franklin hit upon one of life’s immutable truths in 1789 when he wrote that “in this world nothing can be said to be certain, except death and taxes”. However, our global multinationals – in particular, our digital titans – have worked fiendishly over the past three decades to prove him wrong. Perhaps not about death, but certainly about taxes.
But the tax can has merely been kicked down the road, and if solutions are not found before the year’s end, disputes over who taxes which companies where are likely to escalate into yet another war over globalisation and international trade. Behind France, another 13 economies have plans to introduce digital taxes, and at least 12 more are discussing them.
Arguments about tax as a weapon of trade and investment date back at least a century, around the time places like Panama emerged as tax havens. But the growing global power of multinationals – some with revenue equivalent to the gross domestic product of many countries – and the recent emergence of tech behemoths like Apple, Microsoft, Amazon, Google and Facebook, have injected steroids into the debate.
France’s finance minister Bruno Le Maire reflects widespread sentiment when he argues that governments must stand up to digital giants that have become the equivalent of sovereign states and act with virtual impunity.