How should internet companies be taxed

"If anyone taxes these companies, it should be their home country"

The OECD is supposed to find an international solution in the dispute over digital taxes for market rulers

Since this week, the US trade representative Robert Lighthizer has officially examined the imposition of punitive tariffs against Austria, the Czech Republic and Italy. The reason for this is the so-called "digital taxes" with which the governments of these countries want to skim off the revenues of large American Internet companies such as Google and Facebook. In the Czech Republic they have to pay seven percent of their advertising sales, in Austria five and in Italy three.

Macron put digital tax on hold

In absolute terms, however, the income expected from it is not very high: In the Czech Republic, the finance minister expects 196 million euros in the first year, his Austrian colleague calculates only 20 to 25 million euros. With amounts this low, it could be very easy for the financial damage from American punitive tariffs to exceed digital tax revenues.

That could be one of the reasons why the French government is not collecting its three percent "Taxe GAFA" from Google, Amazon, Facebook, Apple and about 25 other companies (see France adopts national digital tax) for the time being. French President Emmanuel Macron officially justified the moratorium with what he called an "excellent discussion" with US President Donald Trump after Lighthizer had presented a $ 2.4 billion package of French export hits such as champagne, cheese, cosmetics and fashion (see USA are planning billions in tariffs against France's digital tax).

OECD instead of EU

Before that, the French government wanted to enforce the tax on "digital activities" through the EU, in which the two and a half decade long attempt to adhere to a status quo ante Internet out of consideration for the representatives of copyright and other intellectual property rights resulted in the emergence of a large one Internet companies are not necessarily promoted (see EU plans GEMA levies on cloud computing and EU Parliament votes for actual upload filter obligation).

The EU Commission, which first advocated a digital tax, is now relying on its new Trade Commissioner Phil Hogan (who is now coming from the European Facebook base Ireland) on an "international solution within the framework of the OECD" - the organization for economic cooperation and development. It has not only 27 but 37 members, including the United States.

Washington and Brussels see each other being taken advantage of

The position taken by the latter on the digital tax question was summarized by its president last year in the following sentence: "If anyone taxes these companies, it should be their home country." Washington is - unlike Brussels - not of the opinion that the corporations disadvantage the Europeans in favor of the Americans, but that it works the other way round. Facebook, for example, accuses the American federal tax authority IRS that the company with constructions such as the Dutch Sandwich and the Double Irish (see How "intellectual property" and tax havens are related) taxes profits in Europe at 12.5 percent instead of 21 percent in the USA ( See US tax authorities suing Facebook: a nine billion dollar fine is imminent).

In its coalition agreement of 2018, the German federal government agreed "to take measures for an appropriate taxation of the digital economy", but has not yet followed the path of France, Austria and the Czech Republic. In the three parties that make up it, there are also voices that explicitly oppose such a move. Carsten Linnemann, the chairman of the SME Union, told the Westfalenblatt this week that anyone who "wants to abolish the permanent establishment principle and collect taxes where the sales are made" "needn't be surprised if the other countries then also react "and if" our successful, export-oriented medium-sized companies would then be hit with full force.

"The bottom line," Linnemann estimates, "would be less tax [with a system like this] in Germany." In his opinion, "for fair competition it is not at all decisive [...] where taxes are paid, but rather that taxes are paid at all". That is why "global minimum taxation" is needed instead of a digital tax. Other voices suggest that most of the digital tax burden will indirectly hit domestic companies if they pass the big corporations on to their advertisers. And still others fear that the currently dormant twenty-five percent American punitive tariffs on German automobiles would very quickly be put back on the table if Berlin or Brussels concretized plans for a digital tax. (Peter Mühlbauer)

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