Context :
Debate
heats up over how countries tax Big Tech companies /
Outlook / 27 Jan 2021
Extract :
Ø An international debate over how
countries tax big US technology companies such as Google, Amazon and Facebook is heating up, presenting a challenge for new President Joe
Biden''s administration.
Ø There's a mid-year deadline for talks on a global deal that aims
to defuse trade disputes with France and other countries that are imposing
go-it-alone taxes the US sees as discriminatory.
Ø France has imposed its own 3 per cent tax on digital revenue for
large tech companies — in effect singling out the US tech giants — but has said
it would withdraw the tax in favour of an international solution being negotiated under the
auspices of the Organisation for Economic
Cooperation and Development, a Paris-based international
organization of 37 advanced economies.
Ø Experts and officials say time is getting short. Manal Corwin, a tax
principal at professional services firm KPMG and a former Obama administration
Treasury official, said that digital taxes multiplying outside
the OECD process “are threatening to trigger a trade war.”
Ø US trade officials have called unilateral digital taxes unfair
and threatened trade retaliation against French goods, but have held off
imposing sanctions.
Ø Finance officials from 37 countries are convening online
Wednesday to resume negotiations over how best to
make sure multinational companies don''t avoid taxation by shifting activities
and profits among countries.
Ø One key question is how to appropriately tax multinationals —
such as tech firms — that may have no
on-the-ground presence in a country but nonetheless do substantial business
there in the form of digital activities such as online advertising, sale of
user data, search engines, or social media platforms.
Ø The talks are about how to allocate part of a company's revenue
to the country where its services are used, so that government there could
benefit from the taxes.
Ø The pandemic has only put a sharper edge on the issue of digital
taxation: the virus outbreak has accelerated digitalization through remote work and contactless activities, and
in some cases led to strong profits for digital companies; meanwhile,
government budgets have been put under strain through added spending and less
tax revenue.
Ø Most participants want an international agreement rather than
runaway unilateral measures, she said, “but the politics and the fiscal demands
are creating an inability to wait much longer than June.”
Ø There is no agreement on several key areas. Concerns have been
raised that the proposed rules are too complicated and would saddle companies
and tax administrators with expensive red tape.
Ø And should “technology” companies be singled out, since digital
technologies are spreading throughout the economy?
Ø Barbara Angus, global tax policy leader for professional services
firm EY, said the question of exactly whom the
new digital tax applies to was “the single
biggest political issue to be resolved” in the talks.
Ø Karan Bhatia, Google''s vice president for government affairs
and public policy, said in a blog post that the need to update the
international tax system “isn't limited to the technology sector. Almost all multinational companies use data, computers and internet
connectivity to power their products and services.”
Ø Bhatia said Google “strongly supported” the OECD''s work and
opposed “discriminatory unilateral taxes."
Ø Facebook''s Mark Zuckerberg has said the company wants the OECD
process to succeed “so that we have a stable and reliable system going
forward.”
Ø "And we accept that may mean we have to pay more tax and
pay it in different places under a new framework.”
Ø Amazon said in a statement that “we continue to strongly and
consistently support and contribute to the OECD''s work" and called for a
broad international agreement that would limit “distortive unilateral
measures."
Ø Separately, the OECD talks also aim to establish that multinationals pay at least a minimum amount of tax. That part of the talks appears less controversial.
===================================================
In a hot desert, you see an
image of a river of cool water flowing a few miles ahead of you. So, you rush
towards that image, only to find there is no cool water – just hot sands – and the
river-image has just moved away further
You are chasing a mirage
What 37 countries of OECD
are trying to achieve is something similar. By the time they think they are close
to a “ tentative agreement “, following would have happened :
Ø Beyond
GAFA ( Google - Apple – Facebook – Amazon ), hundreds of new companies would
have started minting huge amount of “ revenue / profit “ by selling PRIVATE /
PERSONAL DATA of its users to online Advertisers
Ø Today,
Google / Facebook / Twitter / Instagram etc are only earning from ads inserted by
their advertising client companies. Within a few months, they will morph into
full-fledged E Commerce entities ( like Amazon – eBay – Flipcart etc ) by enabling
users to “ search / sort / compare / add to Shopping Cart – enter Credit Card details in embedded app – give delivery
instructions – check order / delivery progress etc “ , - AND , they will start earning huge amount of
money from USERS / MANUFACTURERS as well !
Ø Before
long, everything that sells ( goods or services ), will have one or more of the
above-mentioned “ processes – interactions with customers – transactions “ carried out digitally ONLINE. Will that make
every SELLER ( employing one or more DIGITAL PROCESS ), a TECH
COMPANY , big or small ?
Ø Any
COMPANY has following,
BUSINESS STRUCTURE :
# Domestic vs Foreign
Multinationals
·
# Single
Product vs Multi Product
# Marketplace vs Inventory-based
·
# FDI vs Domestic
Investment
# Selling
from own web site vs from someone’s web site
· # Related
Entities vs Non-related Firms
# Vendor vs Platform
· # How
much can be sold by one
Vendor vs Unlimited Sale by any Vendor
# Preferential treatment vs Equal treatment
· # Private Labels vs Public Labels
# Single Person owned / Partnership / Private Ltd
/ Public Ltd / Co-
operative etc
BUSINESS PROCESSES
#
NATURE
( a “ physical “
product vs a “ virtual “ service )
· # GEOGRAPHIC
SPREAD
( “ within a State ” vs “
across India ” vs “ across entire World ” )
· # SUPPLY
CHAIN / INTERMEDIARIES
( Mfr > Distributor >
Dealer > Retailer > Buyer )
· # ORDER PLACEMENT AND ACCEPTANCE
( Shop / Store / Office / Factory /
Home / Web site / Mobile App / SMS
/ Email / Phone / Video Conference for a Service )
· # DELIVERY
( Personal pickup /
Delivery Boy / Drone / Self 3D Printed at home
)
· # PAYMENT
( Cash /
Cheque / Credit-Debit Card / Payment Wallets – Gateways / Bank
Transfer / Barter )
Ø Each TECH COMPANY ( big or small ) would have
these “ Processes “ spread across the entire World, in different countries
Ø Each such company would earn “revenues” from
their SELLERS and BUYERS , located in different countries
Ø Each such company would be incurring “ business
expenses “ in different countries
Ø Hence each company would earn different “
Profits ( Revenue less Expenses ) “ in different countries
Ø These, REVENUES – EXPENSES – PROFITS , are
constantly undergoing changes , making it almost IMPOSSIBLE for OECD to
determine “ how much tax “ these companies must pay to each of the 37 countries
!
Ø Without waiting for outcome of OECD
discussions, France and Australia have gone ahead and imposed their own TECH
TAX
Ø Other countries ( OECD or non-OECD ) are under
tremendous pressure to raise their revenues by hook or crook, and are bound to
announce their own versions of TECH TAX before long . If that happens CHAOS
will prevail, since each country will frame its own RULES-METHODS to figure out
how much did a FOREIGN e-Commerce company “ earn “ in their county . And
there could be thousands of MULTINATIONAL e-commerce companies, operating in a
HUNDRED countries ! A TRADE WAR is inevitable !
MY TAKE :
Ø This is too complicated to see the “ light of
the day “
Ø More than that, this is a WRONG APPROACH, where
a national government first finds a way / method , to earn money by taxing a
few BIG TECH ( only foreign ? ) companies and then ( if successful ) , spend
this money for the benefit ( raising income / reducing personal Income Tax ? ) of
its citizen
Ø Why should any Government act as an “
Intermediary – Middleman “ between the BIG TECH and their Users ( country’s
citizen ) ?
Ø Why not devise a MECHANISM whereby, BIG TECH
companies bypass the Country’s government and DIRECTLY PAY its users ?
Ø If such a MECHANISM is devised, there will be
no need for countries to fight with one another(Trade-War )
Ø This can be a GLOBAL / UNIVERSAL platform whose
broad / conceptual framework is described at :
# Digital Dividend from Demographic Data [
4 D ]……………[ 14 Feb 2019 ]
# SARAL (Single Authentic Registration
for Anywhere Login) [ 10 Feb 2019 ]
Dear Shri RaviShankar
Prasadji,
In case you have any doubts about the FEASIBILITY of my
proposal, I urge you to invite expert opinions from,
# Shri Nandan Nilekani ( nandan@nandannilekani.in )
# Shri Amit Ranjan
( iSpirt
Team / amitranjan25@gmail.com
)
# Shri Pramod Verma ( IndiaStack Team / pramodkvarma@gmail.com
)
# Sir Tim Berners-Lee ( Inrupt
/ timbl@w3.org )
# Mr John Bruce ( Inrupt / John.Bruce@gmail.com )
With regards,
Hemen Parekh / hcp@recruitGuru.com / 28
Jan 2021
