The Digital Service Tax Emerges as a New Threat to American Innovation
Beyond the tidal wave of clickbait about COVID-19 and the latest President Trump bombshell, some European Union countries, namely France, have been considering levying an international tax called the “Digital Services Tax” (DST). This tax presumes to collect revenue by taxing gross revenue streams of digital companies. American government officials and industry representatives have alleged that this tax discriminates against American companies, specially Amazon, Facebook, and Google.
The argument follows: the digital economy allows certain companies to avoid a physical presence in high-tax countries. Due to globalization, digital companies may seek to shift some of their physical presence away from high-tax jurisdictions to lower-tax jurisdictions. Politicians in high-tax countries then view this behavior as “unpatriotic” or “unacceptable.” In order to recoup “lost government tax revenues,” these politicians want to implement a tax that undermines international legal norms.
A broader overview of the digital economy paints a far more challenging picture. Globalization, advances in digital technology, more competitive trade, and decades of tax competition have allowed multinational corporations (MNCs) to operate from all corners of the globe. Fewer barriers to trade and digitalization have continued to…
