ABSTRACT: The reason why countries consider levying taxes is that technological giants transfer taxable profits to countries with low tax rates, resulting in domestic tax losses. But opponents argue that a "digital tax" could lead to double taxation, which would have a significant negative impact on companies and would also be detrimental to international trade and investment.
Author: Huang Daiyu
In 2018, it seems unfriendly to technology companies, first with frequent data leaks, and last week with unexpected earnings from tech giants like Amazon and Google, which triggered a sharp drop in U.S. stocks, there will now be a wave of "digital taxes".
Multinational countries consider "digital tax".
On Monday, Oct. 29, the Wall Street Journal reported that several countries are studying new taxes on technology giants such as Facebook and Alphabet, Google's parent company.
The media pointed out that South Korea, India and at least seven other Asia-Pacific countries were studying new taxes, inspired by the EU proposal to levy taxes on technology companies'revenues rather than profits. Mexico, Chile and other Latin American countries are also considering new tax policies aimed at increasing tax revenues from foreign technology companies.
Pang Hyo-chang, an Information Technology professor who writes a digital tax report for South Korea, said: "The European Union has provided a model for a large number of Asian countries and we can follow it."
Malaysia's deputy finance minister, Datuk Amiruddin Hamzah, also said at a recent event that "if we ignore this, the country will lose revenue," after experts pointed out that Malaysia is planning to introduce a new tax program called "digital tax" into the 2009 budget plan issued on November 2.
The French finance minister, Bruno Le Maire, believes that all countries in the world should levy "digital taxes". At present, Le Maire is lobbying in Europe to levy digital taxes. He said that this involves fairness.
Philip Hammond, the chancellor of the exchequer, also said earlier this month that he was drafting a plan to impose a new digital tax on advertising revenue that would have an impact on Google and Facebook, but a relatively small impact on Amazon.
Hammond is expected to make these recommendations in the subsequent budget. But if an international agreement is reached with the IMF in advance, these plans could be cancelled.
At a meeting of EU finance ministers in September, EU countries made progress in their negotiations on taxing large multinational Internet companies, with the goal of reaching agreement by the end of this year.
In March, the European Commission announced a proposal to impose a temporary tax of 3% on large Internet companies with annual global revenues of more than 750 million euros and annual revenues of more than 50 million euros in the EU. The proposal is expected to affect 150 of the world's largest technology companies, including Google, Facebook and Amazon.
Under the new legislation, any member of the European Union could levy a tax on profits arising from Internet operations occurring in its territory. And if the EU member states levy a unified science and technology tax, the total annual revenue will increase by 5 billion euros.
At that time, countries including Austria, France, Spain, Italy, Germany, etc. all planned to push forward the 3% tax plan. These European powers believe that millions of euros of tax losses have been caused by Internet technology giants shifting taxable profits to low-tax countries, and hope to come up with solutions as soon as possible.
However, strong reservations were expressed by Ireland, Sweden, Finland, Denmark and Malta. These countries are generally small, low-tax countries, and because they have large US multinational companies in their territory, they hope that EU reforms can be combined with global science and technology tax reforms, which have been discussed for years and have so far been fruitless.
Voice of opponents: "digital tax" will lead to double taxation.
On Friday, the Information Technology Industry Council, which represents many technology companies, warned that a "digital tax" could lead to a double taxation that would pose a "real and significant threat" to companies in all sectors.
Opponents of the digital tax, including multinational corporations and big exporters, say new tax policies will hurt the interests of SMEs. They said these measures could lead to a double taxation of corporate profits, thereby curbing international trade and investment.
However, the Wall Street Journal also noted that Google and Facebook currently do not comment on the "digital tax".
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