On Thursday, the French government decided to crank up taxes on globe-bestriding tech giants like Amazon, Apple, Google, and Facebook.
Here in America, the Trump administration responded by launching an investigation that could end in new tariffs against France. Seeing as most globe-bestriding tech giants are based in the U.S., the administration is upset that France’s new tax “unfairly targets American companies.”
The move was supported by Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.), who put out a statement saying, “The digital services tax… will cost U.S. jobs and harm American workers.”
The problem is, coming from a president who campaigned on standing up for everyday workers while railing against global elites, this is an utterly backwards and contradictory response. The major players of Silicon Valley are at the forefront of a growing global problem, in which powerful corporations play national tax systems against each other to shelter their wealth and profits. And it’s a problem no country is going to be able to solve on its own.
Specifically, what France just passed is a 3 percent tax on the total domestic French sales of certain companies. To qualify for the tax, a company will need to make a global annual revenue of at least 750 million euros ($844 million in U.S. dollars), with at least 25 million euros ($28 million U.S.) generated in France specifically.
The idea here is that tech companies in particular are able to avoid paying much corporate tax in countries where they do a lot of business — through digital ads, selling user data, and providing platforms that link up customers with other businesses — simply because they don’t have a large physical presence there. Instead, they adjust where they’re headquartered on paper in order to pick and choose the lowest tax rates for themselves. “The European Commission estimates that on average traditional businesses face a 23 percent tax rate on their profits within the [European Union], while internet companies typically pay 8 percent or 9 percent,” the BBC reported.
The tax is projected to hit around 30 companies based in a number of different countries, from India to China to Britain. But given that America is the center of global capitalism, most of the firms will be American. And that’s what caught the White House’s ire.
“[Mr. Trump] has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce,” U.S. trade representative Robert Lighthizer announced. If he determines the answer is “yes,” the law would allow Trump to retaliate with tariffs.
This is a destructive response in several ways. France is fighting a problem that bedevils the U.S. as much as anyone. Apple, for example, used Ireland as a tax haven to hide about $128 billion in profits from the American government, accumulated roughly between 2007 and 2017. And while France is going after the tech sector specifically, plenty of more traditional companies also indulge in the practice when they can. …read more
Source:: The Week – Business