Big Tech’s Asian lobby says nations shouldn’t go it alone on tech taxes

Asks if somebody will think of the startups in the wake of new digital services taxes in Indonesia, Vietnam and Philippines

The Asia Internet Coalition, an industry association with members including Google, Yahoo!, Apple, Facebook, LinkedIn, SAP, Amazon and Airbnb, has opined that nations should not devise their own taxation regimes and instead follow global standards.

The Coalition, which bills itself as “an industry association that promotes the understanding and resolution of Internet policy issues in the Asia Pacific region”, scored an op-ed^* by managing director Jeff Paine in the pages of Japan’s prestigious Nikkei newswire.

Paine’s argument is that the global tax system needs reform, which is why the Organisation for Economic Co-operation and Development (OECD) is working on an Inclusive Framework on Base erosion and profit shifting (BEPS) that aims to develop nut out “15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.” The OECD effort has 137 state members and 14 observer organisations.

The managing director also notes “The adverse economic impact of COVID-19 has led to an acceleration in unilateral digital taxation measures by some governments, creating double-taxation and administrative hurdles for companies, and prompting the U.S. to threaten sanctions.”

Nations that have recently added digital taxes are the Philippines, Indonesia and Vietnam. Indonesia explicitly said its effort is designed to raise much-needed funds to bolster its COVID-cudgeled coffers.

Paine then cracks out the “Won’t somebody think of the startups?” argument, writing: “If you are a startup operating across Asia, the cost and complexity of adhering to multiple and inconsistent rules might mean that you think twice about offering services to overseas customers.”

He wraps things up by suggesting that at a time all economies need growth, “Working together to create an enabling and harmonized regulatory environment would go a long way toward achieving this.”

“Going it alone does not lead to a more integrated digital economy for any country, it will likely lead to the opposite,” he concludes.

The Coalition advanced this argument before COVID eroded national tax bases: a 2019 paper [PDF] also advocated staying within OECD reform efforts which emphasise taxing profits.

Both the paper and the new article both oppose value-added-taxes or goods and services taxes, saying they amount to "double-taxation". Which is an odd way of looking at things because such taxes are levied on consumers. They are also ubiquitous around the world.

And Indonesia's digital services tax requires tech companies to collect taxes that consumers would pay if services were delivered locally, rather than taxing the companies themselves.

So, stepping outside the OECD process means tech companies get some extra work to do but will not pay tax themselves. And as more than 20 nations charge similar taxes, chances are that tech giants have already adapted to a similar regime elsewhere.

Indonesia is the world’s fourth-most populous nation but has its fifteenth-largest economy. The Philippines and Vietnam rank 13th and 15th by population, but 36th and 44th for GDP. All three nations were colonised by western powers.

And now big tech is telling all three, and their regional neighbours, that a group of mostly-American companies has their best interests at heart when it says they should wait for the OECD to create a global tax framework. ®

^* Nikkei is paywalled, but often yields a full story if you open one of its URLs as the only open Tab in Chrome’s Incognito Mode.