Tackling international tax problems requires an international solution

France’s 3% tax on the income of global technology companies with revenue of more than €750 million of which more than €25 million is generated in the country, introduced on July 25, has managed to unite Google, Facebook, Amazon and others with President Donald Trump, who has ordered an investigation into the levy, promising “substantial reciprocal actions” on French imports. Other countries planning similar measures such as the United Kingdom, Spain, Italy or Austria could be next.

In June, Google called for a new international tax agreement that, for example, would prevent it from moving some $23 billion through a tax haven like Bermuda: under current legislation, these types of companies can take advantage of tax engineering to minimize their tax payments to maximize shareholder returns.

Amazon, which in 2017 and 2918 paid exactly zero dollars in federal taxes on the $11.2 billion profits it made in the United States, is even more pragmatic: it has decided to compensate for the new rate imposed by the French government by raising seller fees by 3% on French suppliers that sell through its platform.

All this shows that getting the global tech giants to pay their fair share of tax requires a concerted international effort and that individual countries can do little on their own and are more likely to end up in lengthy legal disputes that lead nowhere. EU member states could act collectively, perhaps encouraging other large trading blocs to join it. The only way to stop someone like Trump and some companies in a position to take advantage of every possible legal loophole is by showing determination to deal with the problem globally, and thus avoid tit-for-tat boycotts.

The challenge here is that while money now flows freely across borders, thanks in part to a borderless internet, individual countries are still applying legislation within their own frontiers. The solution, whether tax, legal or environmental, is not to try imposing restrictions on the internet, but instead to eliminate or minimize the effect of previously existing borders through efficient global legislation. Until we act on that basis, there is little to be done.

(En espa?ol, aquí)

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