Taxation of Digital Firms Needs to be Sensible

23/10/2020

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Bruxelles, October  21, 2020 — Lucio Miranda, President of the U.S.- based consultancy ExportUSA has issued the following statement: 

Digital Services Taxes are a contentious subject in the never-ending trade war between the U.S. and Europe. This issue potentially harms enterprises exporting to the American market in two ways. First, hitting platforms means fewer places where European manufacturers can sell their goods. Secondly, it can worsen an already precarious political dialogue between the EU and U.S., adversely affecting companies that need to export to the United States. 

Some progress has been made. One of the most important is the adoption of Nexus standards by the OECD in a blueprint it published in recent weeks, and in national laws concerning the subject. This means that either the OECD or national lawmakers (or both) think that services must be taxed where they are enjoyed, supplanting the outdated idea of physical presence. 

ExportUSA has been advocating for the adoption of Nexus as a basis for taxation of digital services. Still, the real problem of these taxes is that they hit American companies particularly hard. For example, the Italian DST (like many others throughout Europe) targets companies with global revenues higher than €750 million. Such a high figure is, in our opinion, an evident form of discrimination towards U.S. companies, and, no matter wins the next presidential election, it risks igniting a further setback in transatlantic trade talks. 

To be clear, ExportUSA agrees that firms need to pay their fair share of taxes. But fairness need not come at the expense of innovation and transatlantic cooperation. In fact, there is a silver lining in European tech policymaking. The general impression is that European initiatives in tech policy (taxation and antitrust above all) are an attempt to introduce protectionist measures in Europe, thereby fostering indigenous competitors to American-based tech firms.

Hopefully, the upcoming public hearing at the OECD on the subject will help refine the technical details of digital firms' taxation. In particular, we hope for a system which is not based upon global revenues and with non-penalizing tax rates for big tech American companies. 

We acknowledge that digital taxation is not an easy subject, but given the delicate nature of transatlantic trade relations, it is paramount to sensibly tax digital enterprises. Also, Europe must be fully aware that the U.S. is an importing country. Hence, given the current realignment of supply chains - with a shift of focus away from China - Europe has a lot to offer to America in terms of goods, provided that it's smart enough to ride the crest of a post-COVID recovery.



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