The general and public view of the taxation of the Big Tech giants is that upon their profits made here in Europe they pay no tax at all. Therefore lots of people are in favour of their being taxed by us here in Europe. Thus such things as digital services taxes and so on.
There is also some surprise when the US demurs and starts shouting:
America’s quest for technological supremacy has been mainly focused on punitive actions against China. But European attempts to boost tax revenues from the most successful Silicon Valley companies means this battle is now spreading to its allies.
Many Western countries believe they can overcome Washington’s resistance to taxing tech giants such as Google, Apple and Microsoft because it seems fair and just. But this underestimates the importance of Silicon Valley to Washington’s geopolitical ambitions. The US will not back down and tariffs on European goods are looking more likely by the day.
Silicon Valley behemoths are the front line in America’s battle for technological supremacy in the 21st century. China has already developed equipment for 5G systems that is superior to that produced in the US – and it appears to be getting ahead of Western nations on smart cities and other ways to exploit the “Internet of Things”. America has a fight on its hands.
The US Senate finance committee warned Britain this week that its digital service tax on American technology companies could put a post-Brexit trade deal at risk. However, the toughest action is likely to be taken against the European Union.
This is less than perceptive. For the American taxation system changed back in autumn 2017. Those European profits which pile up in tax havens are now not untaxed inside the United States. Instead they are taxed when earned. At special rates to be sure but they are still taxed.
The importance of this being that for a US corporation its American tax bill is whatever is the righteous amount to be paid minus foreign taxes already paid. So, if the EU, or European countries, or the UK, levies another tax upon the Big Tech companies this then just gets knocked off (not exactly but this is the net effect in the end) that US bill due.
The only purpose of going into politics is to get to decide how to spend great gobs of other peoples’ money. Thus American politicians are more than a little miffed that cash they think they should righteously spend is going to get spent by some bunch of foreigners.
We have no comment - here at least - upon the justice of either the practice or the general complaint. Rather, we just want to point out why the shouting is so intense. This isn’t about, any more, whether those profits should be taxed at all. It’s about who gets to spend the revenue from having done so.
However anyone dresses up their arguments that’s all it is about too. Uncle Sam is threatening a trade war and Tante Europa might well join in over which group of baby kissers gets to spend 0.05% of the economy. We can’t help thinking that there are more useful, let alone important, things for us all to be doing.