Home Business Seriously Folks, Tech Company Taxation Is A Problem That's Solved Already

Seriously Folks, Tech Company Taxation Is A Problem That’s Solved Already

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It would be interesting if the pages of our national newspapers were less than four years out of date. Well, obviously, they’re allowed to have archives there of what they were getting wrong four and more years ago but the things they publish today, it might be useful if they weren’t.

This being something the business pages of The Times is not achieving:

In 2012 when Joe Biden was a mere stripling of 70, the world’s developed economies began exploring ways to squeeze more tax from the likes of Google and Apple.

The arguments for reform had become overwhelming. Technology companies had mastered the art of siphoning profits to tax havens and there was little tax authorities could do to stop them. Tax collectors had to rely on weapons created in the 1920s, when convertible cars and water skis were the acme of sophistication.

This is a problem that was solved in 2017 with the Trump tax reforms.

Mr Biden must decide if he wants to proceed with this threat. The US trade representative’s office has confirmed it viewed digital services taxes as discriminatory but suspended the decision on tariffs. That leaves the ball in the new president’s court. He’ll need to make up his mind quickly. France has already started demanding millions of euros from US tech firms and Britain will start collecting its digital services tax this year.

Seriously, get with the program here. Or even, don’t get with the fashionable program and try observing reality instead.

Then old situation was that if profits could be inveigled out of Europe tax free – which, routing through Ireland and the Netherlands they often could be – then they could mature, forever, on some Caribbean isle without having to pay tax. True, the American Big Bad Tech company couldn’t actually take them into the US corporation, for to do that would trigger the US tax bill of 35%. E-Bay actually did this one year. But those profits could sit there with a rum punch, getting a tan, forever untaxed.

At which point the assembled governments of the world started to look a tad lasciviously at those untaxed profits. Hmm, OK.

So, what’s the solution here? One is to make sure that those profits cannot be inveigled out of Europe tax free. Another is for the Americans to tax those profits even while they’re in Bermuda. Either system works. The profits would be taxed.

So, the Trump tax reforms of 2017 did this. Profits that sit on odd islands without ever coming into the US now pay US corporate income tax. They’re taxed, that is. There are no pots of untaxed Big Bad Tech profits left.

Further, American tax law – like most others – says that your domestic tax bill is the domestic tax rate on what is being taxed minus any foreign taxes you’ve already paid on that pile o’cash. So, the EU taxes Big Bad Tech. Cool – makes no damn difference to the company because that payment just comes off their American tax bill. Might piss off Uncle Sam of course.

But the important point here. Taxation of the profits of Big Tech is a problem that’s already solved. No more need be done.

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1 COMMENT

  1. I think you have misunderstood the problem. The problem is not that there are untaxed profits – that’s just an easy way of presenting it. The real problem is that there is money that people want.

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