How Tech Taxes Became the World’s Hottest Economic Debate


Mr. Mnuchin expressed frustration on Thursday in Davos that a digital sales tax had become such a focus of discussion at the World Economic Forum. Setting a minimum tax for companies around the world, to prevent them from hiding profits in tax havens, will make a much bigger difference, he said.

“From my perspective, that is by far the more important,” he said.

There is a chance the talks could devolve into a “Wild West” array of separate tax regimes on digital activity around the world.

“It’s a big old mess,” said Jennifer McCloskey, vice president for policy at the Information Technology Industry Council, a trade group that represents companies including Apple, Oracle and several other American tech leaders. “But,” she added, “that’s to be expected.”

Companies that operate across borders have long paid taxes where their profits are booked. Calculating that sounds simple enough, but it has grown increasingly complicated in recent decades. To reduce their tax bills, corporations have shifted profits — and in some cases their headquarters — on paper to low-tax countries like Bermuda and Ireland. O.E.C.D. countries like the United States have agreed to measures meant to discourage such shifting.

Such efforts did not resolve some countries’ complaints about Facebook, eBay and other companies that offer online services to their residents but have little or no physical presence within their borders. Those governments, along with leaders of the European Union, say large tech companies are avoiding paying their fair share of taxes.

“They’re looking for new ways to raise revenue,” said Nicole Kaeding, an economist and the vice president of policy promotion at the National Taxpayers Union Foundation, which opposes the digital tax push by countries and states. “These are all wrapped up in the questions of how do we adjust a tax system that is a hundred years old in order to tax the digital economy?”

Kimberly Clausing, an economist at Reed College in Portland, Ore., who specializes in international taxation and has pushed for additional measures to tax corporate profits around the world, said the digital tax effort exposed political and economic tensions in wealthy nations.


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