I read about an African country planning to tax tech and social media companies which did not have their headquarters in the country, then I thought of it; could this be corporate tax?
The answer is no! you can’t charge a company which is not in your country a corporate tax but most tech giants are virtually in all countries even though they do not have an office in the country and by doing so, they make money from the countries. So what type of tax could the governments of this country be looking to implement, it is called the digital tax.
What is digital tax?
Companies like Amazon which make money connecting the real store and the consumers together online, companies like Google, Facebook, Microsoft which make money from adverts and using consumer data to influence advertisement thereby making money. Several countries have target. It is no doubt that this has been implemented in countries like France where the company pay 3% digital tax on revenue made online if the company makes a revenue of $840 Million annually and made about $28 million from France. With digital tax, the consumers aren’t the target but the companies which make money from the companies and do not have physical presence in the country or cannot the taxed because the company headquarters aren’t in the country.
Should Tech companies get digital tax?
If a grocery store will be opening branches in different countries, it will have to pay taxes (corporate tax) in those countries because the products are physical and can be monitored but for tech companies, it is really difficult to tax them as most big tech companies are in the US and the US only tax corporate federal tax and other taxes based on income in the US. Do you think it is right to make money from other countries but not pay taxes in those countries because you do not have a physical location?
What will happen if countries start to tax tech companies?
The majority of the top 10 billionaires in the world are into tech and their net worth is determined by the number of shares they own in respect to the companies valuation, which means that the largest companies in the world are tech companies, so it won’t be wrong to pay digital taxes but what now happens to the customers?
There is a possibility that customers might end up paying more charges for services as companies will not want to get into loss as different countries will be setting different tax percentage.
Questions
What is your take on digital taxes on tech companies in different countries?
Do you think the companies or the consumers will be affected more?