International Economics: IB Economics

And yet, is everything what it seems? The head of Tax Watch argues that the headlines about the global minimum tax rate are designed to disguise the fact that tech firms are still going to be able to repatriate their profits. 

Why on earth do you think that the US is backing the current scheme? He argues that in return for agreement on this, the UK and other EU countries that have proposed digital sales taxes are, effectively, being bought off. How cynical of him.

The OECD has spoken out, suggesting that there's a need for consensus regarding a digital tax, and its absence makes a trade war ever more likely. 

The fear is that the Americans argue that this is an unfair tax on US tech giants, and have retaliated by threatening tariffs on French produce in particular. 

The Head of the OECD has called for nations planning to introduce digital technolgy taxes - such as France and the UK - to hold fire. For now.

He wants there to be global agreement about the nature of such taxes - but given the vested interest of the United States, it's tough to see what form a solution would take. And even the vested interests argument is complex: tech companies themselves seem willing to pay an "appropriate amount" of tax; the President, however, may see things in another light.

The tit-for-tat nature of tariffs is highlighted in this BBC article that notes that the US will retaliate with a 25% tariff on selected goods if the UK introduces a digital sales tax on US tech giants. The US argues that such a tax would be "unreasonable, discriminatory, and burdensome".

Correct. But there's a fundamental difference between the two goods - in the case of the UK goods they are sold in the US and the consumer will be paying indirect taxes on such goods to the US Treasury Department. The tech giants, however, will be selling their services in the UK - such as advertising - and using tax avoidance chicanery to pay any tax in much lower tax environments. I''d like to hope that overtime the latter comes to be seen as morally, and ultimately legally, indefensible.

The Guardian with another interesting insight into the proposed tech tax, suggesting that such a tax is desirable for a number of reasons, not least bringing them into line, and sharpening the focus of multinational corporations as regards tax avoidance. 

Proof that bullying sometimes works - in this instance, France is delaying the introduction of its digital sales tax on the big tech companies, to avoid US retaliation via the introduction of tariffs on French goods and services. 

The unilateral French action has aroused President Trump's ire: although longer-term, this issue will need to be addressed. It strikes me that the tech companies are adept at tax avoidance, and avoiding regulatory interventions, in a way which might reduce economic welfare.