The dawning of digital taxation
“Companies will need time to make the most tax-effective transition from where they are today to where they will have to be in late 2015 to 2016.”
In all likelihood, multinational technology companies are going to see significant upward pressure on their global tax rates in 2016 — some of them, even sooner. This stark conclusion is not arrived at lightly; it is the product of several inexorable changes occurring as policymakers worldwide usher in digital economy taxation.
From the outset, technology companies have been in the vanguard of globalizing new digital business models that challenge sovereign borders. As such, they have also found themselves in the crosshairs of policymakers and the media as tax issues have risen to new prominence. Pressures on the technology sector to restructure tax planning are correspondingly high.
Among early corporate adopters of digital economy tax structures, a trend is emerging toward “onshoring” certain key assets and activities within their global tax bases.
Countries around the world are beginning to adopt new tax laws or dramatically change the way they interpret existing laws and bilateral tax treaties for an increasingly digitized, globalized economy.
Tax change is on the horizon — and approaching fast — but uncertainty about its timing and scope continues to keep many technology companies’ tax departments from taking action. Some have the false sense that change is farther out in time. Others — particularly in the US — continue hoping for rescue from higher taxes by a government-proclaimed tax holiday or some kind of inversion (a once-fashionable cross-border acquisition and restructuring strategy that was stringently reined in last year by the Obama administration). Some may mistakenly expect they will automatically get a foreign tax credit for any overseas tax increase.
Yet others may simply be unaware of forthcoming requirements, such as disclosing more information about their global value chains to more authorities around the world.
To stay ahead of the curve download the report on digital economy taxation here.