Tax directors admitted to ITR that they are
increasingly alarmed both at the prospect of more unilateral
digital services taxes and at their emergence at the forefront
of international politics.
The Ireland-based head of tax for a major US digital company
told ITR that they expected many more unilateral DSTs
to be introduced over the next year. The OECD will struggle to
resolve the issue before its own 2020 deadline, the tax head
said, causing more countries to follow France’s
lead and grab revenue where they can.
Yet, in a sign of their unwillingness to get ready for DSTs
before they have to, tax directors also told ITR that
they are so far resisting doing compliance work for other
countries that are considering introducing a DST.
The head of tax at a Malaysia-based media company told
ITR that, even as they saw different countries
continue to introduce new taxes, they were undertaking no work
whatsoever to be ready to comply, or even calculate how much of
their revenue would be in scope.
There was simply too much uncertainty for them to be able to
justify investing any financial or human resources into getting
ready for DSTs, they said.
Tax is dragged into trade arena
Others spoke to ITR of their fears that DSTs will
drag tax policy into the domain of international trade
One senior advisor at a UK law firm, who has previously
worked at HMRC, told ITR that they expect the
UK’s DST to be "the first thing on the table" in
any post-Brexit trade negotiation with the USA.
After France signed its DST into law on July 8, US President
Donald Trump tweeted: "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." The president, a
known teetotaler, added: "I’ve always said
American wine is better than French wine!"
Trump directed the US trade representative to open an
investigation into whether or not France’s DST
discriminated against US companies and if they merited a US
"The services covered [by France’s DST] are
ones where US firms are global leaders," the office of the
United States Trade Representative said in a statement announcing the opening of the
"The structure of the proposed new tax as well as statements
by officials suggest that France is unfairly targeting the tax
at certain US-based technology companies."
Doubts over tax authorities’ ability to
As the debate over digital tax continues to roil, a source
at the Spanish tax authorities told ITR that Spain
would not actually be able to enforce its proposed DST
The tax is "really, really difficult [to administer]," said
the source, who requested anonymity to discuss the sensitive
issue. "I mean, you need these companies to pay these kinds of
taxes on a voluntary basis. If they don’t want to
pay, they will not."
The source suggested that the proposed EU-wide DST might
have been enforceable because of collaboration between European
countries, but that it would be easy for companies to minimise
their obligations to pay a Spanish DST and hard for
Spain’s tax authorities to challenge them.
"Unilateral measures are hard," they said. "These kinds of
companies are so huge, they will press, they will plan their
operations in a way that, for the tax administration, it will
be impossible to check the correctness of the amounts of this
kind of tax."
Spain’s planned DST was delayed when its
government collapsed, but observers both inside and outside the
tax authorities consider it likely that a new government will
take up the project again.
A spokesperson for the Spanish tax authority said to
ITR: "The position of the government of Spain is to
approve this tax. We are sure of its usefulness. In addition,
when an agreement on the digital tax is reached
internationally, we will adapt the legislation to that
However,it will not reassure those companies hoping to
minimise the disruption and uncertainty from DSTs to know that
even figures within the tax authority of a country threatening
to implement one doubt their own ability to administer