UK Discusses Digital Taxation
Taxpayers in Brazil might have been a little alarmed when they read the headline “UK Chancellor mulling Amazon tax.” Brazil has a complicated enough tax regime already, as the International Monetary Fund observed again earlier this month, without other countries adding their two cents to the already mind-bogglingly complex equation.
Obviously, Philip Hammond was talking about Amazon the company, not the Amazon river (although both share the distinction of being extraordinarily large). Nevertheless, given the subject matter and the UK Government’s intent, his words would have reverberated globally, perhaps even as far as the upper reaches of the Amazon. The river, that is. Though no doubt the upper reaches of Amazon’s management structure are well aware that governments and tax authorities the world over are circling, hungry for a piece of the pie.
Indeed, in Amazon’s home country, states have quickly capitalized on the landmark ruling by the US Supreme Court earlier this year in the Wayfair case, which has provided them with a firmer legal basis to apply new tax nexus rules on remote sales. You can’t blame them for not looking a gift horse in the mouth I suppose, when revenue generation continues to be a challenge in many state capitols. Jurisdictions beyond the US are also chomping at the bit for a much more substantial bite of Amazon’s sales and profits.
Of course, this isn’t all just about Amazon, or the handful of other large tech companies that make up the so-called “GAFA” group (Google, Apple, Facebook, and Amazon). As the OECD has repeatedly pointed out, the digital economy is increasingly the economy itself, which is probably why it is so determined to avoid the unleashing of half-baked digital tax measures on the global economy. However, in a very trend-driven international tax environment, the worry is that Hammond’s words might encourage other jurisdictions to do just that.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look