A new period of global tax wars is possibly on the cards as the Australia is contemplating imposing a tax on the turnover of large digital companies in line with that of Europe. However it has chosen to see the actions taken in this regards by other countries before making the plunge.
Imposing taxes on the revenues generated by companies instead of on their profits is a new taxation approach and a deviation from the conventional one but here are concerns that greater cross-border disputes could result because of this new approach.
Australian government have been long warned that the large mining companies of the country could face attempts at counter taxation by other countries is Australia attempts to unilaterally impose new taxes on foreign companies – including those from the United States China.
The Federal Government had, "concerns about proposals that are basically a souped-up sales tax and the potential for that to lead to retaliatory taxation in Australia", said Prime Minister Scott Morrison recently.
Before introducing any measures, the Australian government would prefer to wait the outcome of the a multilateral plan on taxing the digital economy which is being worked upon by the OECD and the G20, said the Australian Government Treasurer Josh Frydenberg.
While the new taxation plan is scheduled to be drawn up by the OECD and presented next year, experts expect years to pass before it is globally adopted and implemented.
This uncertainty has prompted France to implement its own tax on large digital companies while some other countries are also considering similar new taxes. Large digital companies that generate more than 25 million euros in revenue from France and more than 750 million euros globally were imposed a 3 per cent tax on revenues generated from France in July. It I snow widely known as a GAFA tax because the major digital companies targeted by the tax are Google, Apple, Facebook, and Amazon.
According to the argument of France, large digital companies book their profits on revenues generated from Europe – including France, in low tax countries, and therefore end up paying very little tax to the countries of operations. According to French government officials, about 30 large tech companies – which mostly include large US based multinational firms, come under this new tax regime.
However this tax has angered the United States president Donald Trump.
“France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”, Trump had tweeted some time back.
The US was "very concerned" the French tax unfairly targeted American companies, said US Trade Representative Robert Lighthizer.
Additional uncertainty around the OECD's efforts would be created because of the taxes imposed by France, said Daniel Bunn, director of global projects at the Tax Foundation.
"As a tax on gross revenue rather than income, the tax will function very much like a tariff, and discriminate between domestic and foreign firms," he said. "Such uncertainty can lead to delayed investment decisions and be a drag on economic growth," he added. "The current trade war has already been costly for Americans and could become even more so," Bunn said.
(Source:www.abc.net.au)
Imposing taxes on the revenues generated by companies instead of on their profits is a new taxation approach and a deviation from the conventional one but here are concerns that greater cross-border disputes could result because of this new approach.
Australian government have been long warned that the large mining companies of the country could face attempts at counter taxation by other countries is Australia attempts to unilaterally impose new taxes on foreign companies – including those from the United States China.
The Federal Government had, "concerns about proposals that are basically a souped-up sales tax and the potential for that to lead to retaliatory taxation in Australia", said Prime Minister Scott Morrison recently.
Before introducing any measures, the Australian government would prefer to wait the outcome of the a multilateral plan on taxing the digital economy which is being worked upon by the OECD and the G20, said the Australian Government Treasurer Josh Frydenberg.
While the new taxation plan is scheduled to be drawn up by the OECD and presented next year, experts expect years to pass before it is globally adopted and implemented.
This uncertainty has prompted France to implement its own tax on large digital companies while some other countries are also considering similar new taxes. Large digital companies that generate more than 25 million euros in revenue from France and more than 750 million euros globally were imposed a 3 per cent tax on revenues generated from France in July. It I snow widely known as a GAFA tax because the major digital companies targeted by the tax are Google, Apple, Facebook, and Amazon.
According to the argument of France, large digital companies book their profits on revenues generated from Europe – including France, in low tax countries, and therefore end up paying very little tax to the countries of operations. According to French government officials, about 30 large tech companies – which mostly include large US based multinational firms, come under this new tax regime.
However this tax has angered the United States president Donald Trump.
“France just put a digital tax on our great American technology companies. If anybody taxes them, it should be their home Country, the USA. We will announce a substantial reciprocal action on Macron’s foolishness shortly. I’ve always said American wine is better than French wine!”, Trump had tweeted some time back.
The US was "very concerned" the French tax unfairly targeted American companies, said US Trade Representative Robert Lighthizer.
Additional uncertainty around the OECD's efforts would be created because of the taxes imposed by France, said Daniel Bunn, director of global projects at the Tax Foundation.
"As a tax on gross revenue rather than income, the tax will function very much like a tariff, and discriminate between domestic and foreign firms," he said. "Such uncertainty can lead to delayed investment decisions and be a drag on economic growth," he added. "The current trade war has already been costly for Americans and could become even more so," Bunn said.
(Source:www.abc.net.au)