There has been a global consensus for nearly a century that countries should tax multinational companies in the jurisdictions where they create value, not where they generate sales. But that consensus has begun to fall apart as digitalization has made it easier to serve regional markets remotely and Internet companies have successfully capitalized on the opportunity. A growing number of countries, from the United Kingdom and France to Chile and Australia, are now looking to impose “digital services taxes” (DSTs) on a select few of these Internet companies—mostly American—on the dubious theory that users are creating a significant share of their value, so their profits should be taxed where their users reside. Rob and Jackie discuss the dangers of this approach—and how policymakers can protect U.S. firms—with trade expert Clete Willems, partner at Akin Gump Strauss.

Mentioned:

• Clete Willems, “Digital taxes are an even bigger threat to the US economy during the pandemic,” CNBC, May 27, 2020.
• Joe Kennedy, “Digital Services Taxes: A Bad Idea Whose Time Should Never Come” (ITIF, May 2019).
• Robert D. Atkinson, Nigel Cory, and Stephen Ezell, “Stopping China’s Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation” (ITIF, March 2017).

Related:

• Joe Kennedy, “Comments to the U.S. Trade Representative Regarding Section 301 Investigations of Digital Services Taxes” (ITIF, June 2020).