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  • Secretary of the Treasury Janet L. Yellen’s Call with United Kingdom Chancellor of the Exchequer Rishi Sunak

    From home.treasury.gov

    Earlier today, Secretary of the Treasury Janet L. Yellen spoke with United Kingdom Chancellor of the Exchequer Rishi Sunak. During the call, Secretary Yellen highlighted their shared priorities, including cooperating to end the pandemic and support a strong global recovery, fighting inequality, and forcefully addressing the threat of climate change. They also discussed the need to find multilateral solutions to many of the issues facing the global economy, including addressing the tax challenges of efficiently and equitably taxing the income of multinational firms. The Secretary noted the importance of the ... (full story)

forcefully addressing the threat of climate change
Confucius: the man who broke the mountain was the same man who started ...
".. equitably taxing the income of multinational firms." (aka Big Tech)
This a major issue for 2021 both for UK and EU, particularly in context of the economic costs of C19 from which predominantly US digital platforms have disproportionately benefited to cost of domestic enterprise.
But from data flows to antitrust, the EU+UK and the US are fundamentally divided on tech.
Warning: A Dangerous Subversive: 1% of comments CoCed
The easiest solution would be to tax at point of sale based on the users geographic location.

I stick my hands up though I haven't thought this through in any great depth.
Quoting Steamroller
The easiest solution would be to tax at point of sale based on the users geographic location. I stick my hands up though I haven't thought this through in any great depth.
I would say you are on the right track for VAT - which is point of sale. I believe that any multinational company should be taxed proportionally to the gross revenue of that country - so that no transfer pricing exercises can come into play. I.E. Amazon's global sales were c. £280bn with a net profit of $11.6bn . In the UK Amazon's sales were $17.5bn - which is about 6% of global sales. Therefore they should be taxed on 6% of the global net profit for corporation tax in the UK (so 20% tax on $690m). The same should be applied to other multinationals that do not pay proportionally the correct tax - ie Starbucks etc,
Agree!!
WE all seem to be in agreement in broad principle here, so one wonders why it isn't a straightforward process and why politicians dither on it. What are the negative aspects of a Sales Tax? Does it induce further inequality, indirectly? Is it just that every country in the world has to agree to it, which would probably be like pushing water up a hill, as every country would look to have a competitive advantage? Does it just drive the black market and encrypted digital business? Anyone know of any good economic research in this area?
Quoting DaJoWaBa
WE all seem to be in agreement in broad principle here, so one wonders why it isn't a straightforward process and why politicians dither on it. What are the negative aspects of a Sales Tax? Does it induce further inequality, indirectly?
When you as a nation are a tax paradise and you created a complete industry around it, the last thing you want is a Sales Tax. So these initiatives will be blocked right away. It's that simple really.
Quoting Steamroller
The easiest solution would be to tax at point of sale based on the users geographic location. I stick my hands up though I haven't thought this through in any great depth.
Great point, VPNs might make it tough to implement depending on the service but the ideas is sound.
Quoting The Doji
{quote} I would say you are on the right track for VAT - which is point of sale. I believe that any multinational company should be taxed proportionally to the gross revenue of that country - so that no transfer pricing exercises can come into play. I.E. Amazon's global sales were c. £280bn with a net profit of $11.6bn . In the UK Amazon's sales were $17.5bn - which is about 6% of global sales. Therefore they should be taxed on 6% of the global net profit for corporation tax in the UK (so 20% tax on $690m). The same should be applied to other multinationals...
Disagree. Percentage of global sales does not equal percentage of global profits. The pre tax profits for each nation must be figured. Then whatever tax rate, VAT or not, that nation imposes is up to them. Sales taxes btw are regressive. This of course leaves the potential of cost shifting which is where international standards and cooperation are needed. That is competition.
Quoting gat
{quote} Disagree. Percentage of global sales does not equal percentage of global profits. The pre tax profits for each nation must be figured. Then whatever tax rate, VAT or not, that nation imposes is up to them. Sales taxes btw are regressive. This of course leaves the potential of cost shifting which is where international standards and cooperation are needed. That is competition.
I completely agree that global sales does not necessarily equate to equivalent percentage of global profit however it is a pretty good indicator and, as stated, cost shifting - aka transfer pricing, can to some extent be minimised. Btw - I did not mention sales tax, only VAT and Corporation tax.
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  • Posted: Jan 28, 2021 4:22am
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     Newsstand
    Category: Fundamental Analysis
    Comments: 10  /  Views: 2,249