Technology Enterprises Taxation to Overcome the Economic Crisis
Following the outbreak of coronavirus and the introduction of social distancing, the number of online purchasing and internet operations has dramatically increased. The US International online markets such as Amazon and eBay and technical service providers like Facebook and Google have widened their range of influence and have reached financial prosperity. Approximately 80 % of Americans use online services to do their shopping (Lissitsa & Kol, 2016). Since e-commerce has no actual presence in its customer’s country borders, it does not charge any tariffs for performing its operations. Due to the current trend in the business world, there is a debate about whether big technology firms’ taxation should be adopted.
International negotiations at the Organization for Economic Cooperation and Development (OECD) took place on Monday, October 12, regarding this topic, but the countries could not come to an agreement. To be precise, France, Britain, Austria, Spain, and Italy have been actively taking part in implementing taxes on digital services. However, the USA government has responded negatively to the proposal since the organizations which will be charged are mostly American companies (Tankersley, 2020). Trump has warned that the US will impose taxes on imports from the previously mentioned countries to accept taxation agreements (Tankersley & Swanson, 2020). As a result, the decision is postponed due to the unresolved conflict. Moreover, the issue is predicted to remain a hot topic in the next year.
The provided article shows to be a credible source that illustrates reasonable arguments against and pro the tax agreement. It also contains opinions and perspectives of different experts in the sphere of economy. According to the article, the intention of European countries is quite questionable. They are suffering from the economic crisis caused by the COVID-19. There is a risk that the pandemic will inflict an overall increase in taxes, which will deploy the global financial situation. Digital trading free of extra tariffs was not of a big concern until the monetary downfall due to the world’s current condition. It seems some countries are trying to use tech companies to solve their economic issues. The OECD estimates that the world economy will lose up to $1 trillion per year if the negotiation on technological companies’ taxes fails (Tankersley, 2020). Thus, imposing tariffs on giants such as Google, Apple, and Facebook can save the affected countries’ budgets. The question is whether it is right to seek the regulations on taxes on online marketing to regain the financial loss brought by the pandemic. “As nations try to rebuild their economies from the coronavirus pandemic, it would inflict a very serious setback,” said Angel Gurria, the secretary-general of the Organization for Economic Cooperation (Tankersley, 2020, para 3). In my opinion, digital services have no physical transactions and have been neglected as a full-scale retailing method. Nonetheless, electronic trade plays a significant role in the market, and governments should regard treating it similarly to physical trading.
This issue affects the whole online business industry, which is developing at high speed. There is a risk that the taxation system will soon target all kinds of e-commerce after charging international companies. It is worth noting that many businesses focus on internet marketing nowadays. If a political agreement is made, they will be at a disadvantage. What is more, an online sales platform is an accessible way of exchanging goods between different countries. The practical trade among them may vanish upon the taxation of the market. Despite this, high-tax states and countries with a low economy will benefit from the agreement. For that reason, it is crucial to carefully examine the proposed taxation system without overlooking each side’s perspective.
One way to compromise the situation is to let digital organizations decide whether to be taxed by the global tax system as proposed by the American treasury secretary, Steven Mnuchin (Tankersley, 2020). In this case, however, countries will have to rely on the decency of the companies. Another method is to discuss the details on when the companies will be taxed for their services. This was the goal of the recent negotiation at the OECD, which was partially achieved. For instance, there was a presentation of the documents about paying taxes to countries of customers’ location and minimal tax regulation. So far, France was able to approve the implementation of 3% taxes from the annual revenue on the services provided to French customers by multinational tech firms (Tankersley, 2020). Manal Corwin, the current president of the Washington national tax practice at KPMG, explained that countries should look at all the taxation system’s specificities and details to reach the final agreement (Tankersley, 2020). Thus, a thorough examination of the regulation is required to reduce objection.
To sum up, there is a controversy concerning tech enterprises’ taxation among the US and leading European countries. The digital economy is now a considerable part of the sales market, and that is why it cannot be neglected in the commerce world. Governments appear to compensate for their loss caused by the pandemic by introducing extra tariffs. Even though the reason may seem unreasonable, the countries with low income will raise their economy with the new taxation approval. All the detail regarding the cases and size of tax should be thoroughly discussed to achieve fair treatment of tech industries and peaceful negotiation.
Lissitsa, S., & Kol, O. (2016). Generation X vs. Generation Y – A decade of online shopping. Journal of Retailing and Consumer Services, 31, 304-312.
Tankersley, J. (2020). Global talks on taxing tech firms will slip into 2021. The New York Times. Web.
Tankersley, J., & Swanson A. (2020). Trump administration escalates global fight over taxing tech. The New York Times. Web.