Digital Profits Tax: Special Brief
The best way to effectively tax the global tech giants is through a multi- lateral agreement for reform of the entire global corporate tax system. However, current efforts to achieve this are failing. In response, governments are adopting unilateral approaches, based on directly taxing certain revenue streams (rather than profits) of large digital companies.
Unilateral action is necessary, but these approaches will raise relatively little tax and are regressive as costs will be passed onto consumers. They will also be difficult to implement, subject to legal challenges and trade retaliation and may undermine political and public support for more fundamental reform in future.
A different form of unilateral action is needed based on countries taxing an allocated proportion of the global profits, dependent on genuine economic activity in each country. A unilaterally applied digital profits tax can achieve this. This shared brief by Public Services International (PSI) and CICTAR outlines an alternative approach to taxing global digital companies.
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