Andreas Hellmann

Norquist: Biden Administration Should Not Sacrifice American Interests In OECD Negotiations

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Posted by Andreas Hellmann on Monday, March 1st, 2021, 3:39 PM PERMALINK

Ahead of the G20 finance ministers meeting, U.S. Treasury Secretary Janet Yellen announced that the Biden administration is no longer insisting on the 'safe harbor' implementation of Pillar 1 of the OECD's reform of global taxation. The 'safe harbor' provision would let some companies opt out of the new global digital tax regime. Countries like Germany, France, and the European Union that strongly opposed the safe harbor provision, cheerfully welcomed the unilateral concession and announced that an agreement could be reached by the summer.

The following statement can be attributed to Grover Norquist, President of Americans for Tax Reform: 

In recent years the world has seen the growing threat of digital services taxes, which --by narrowly defining revenue thresholds and business models--are, designed to target American companies exclusively. These countries are trying to cheat on the existing international rules of taxation by unilaterally laying claim to income that would otherwise be taxed in the United States. Digital services taxes pose unprecedented dangers to tax competition, innovation, American and worldwide economic growth and represent a dramatic and likely irreversible shift for the international tax system.

The OECD process was initiated initially to end these unilateral and discriminatory taxes and prevent a trade war from escalating further. The upcoming meeting of G20 finance ministers is an excellent opportunity for the representatives from France, the UK, India, Indonesia, Canada, Germany, Italy, and other countries that either have already imposed those taxes or have DST legislation in place, to show that they are negotiating in good faith and commit to ending those discriminatory tax measures. 

The Biden administration should insist on the termination of those digital services taxes and other discriminatory measures before an agreement that is fair to the United States, American companies and workers, can be reached at the OECD. It is crucial to keep in mind that big-spending EU bureaucrats are already resorting to regulatory and antitrust tactics like the Digital Markets Act and Digital Services Act to undermine U.S. innovation and make American companies subsidize their never shrinking budgets through fines and restrict their ability to compete in the European marketplace.

Secretary Yellen and the Biden administration should not sacrifice American interests, American technological leadership, American jobs, and the American tax base by making damaging unilateral concessions during this process. 

Photo Credit: European Central Bank


Norquist Urges Biden to Oppose Digital Services Taxes

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Posted by Andreas Hellmann on Monday, January 11th, 2021, 9:21 AM PERMALINK

ATR President Grover Norquist was on CNBC’s Squawk Box to discuss the coming tax hikes when Biden is joined by a Democrat-controlled House and Senate, as well as the important fight against foreign Digital Services Taxes imposed by various different countries. 

“And the other big question we have is where will he (Biden) be on fighting against the European effort to put a Digital Services Tax on America's rather large and successful companies like Google, Facebook, and Apple that Trump people had fought it very hard. Unclear that Biden with his new 'let's get along with Europeans' will continue to try to stop those taxes targeting American companies, not European companies.”

WATCH:

DSTs pose an unprecedented danger to tax competition, innovation, and economic growth. These new taxes represent a dramatic and irreversible shift for the international tax system. While they are imposed on business revenues, DSTs will ultimately end up harming consumers and workers as the costs are passed down. This will result in fewer jobs and lower wages for businesses, especially third party suppliers and sellers that rely on tech companies for their livelihoods.


ATR Leads Coalition Opposing OECD’s Digital Taxation Proposal

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Posted by Andreas Hellmann on Wednesday, December 16th, 2020, 1:53 PM PERMALINK

Americans for Tax Reform Foundation and the Taxpayer Protection Alliance led a coalition of 23 groups that oppose any attempts by the OECD to curb international tax competition and impose a de facto global minimum tax. 

See the letter below and linked to here

 

December 16, 2020

We, the undersigned 23 organizations, representing taxpayers and consumers across the globe, strongly urge you to oppose any and all attempts to curb international tax competition and impose a de facto global minimal corporate tax through the Organization for Economic Co-operation and Development’s (OECD) “Two-Pillar Approach to Address the Tax Challenges Arising from the Digitalization of the Economy.” If enacted, these proposals, which run counter to the OECD’s own advocacy of more efficient tax systems with lower corporate tax rates, would undermine economic sovereignty of nation-states, disproportionally hurt smaller economies, and hinder opportunities for companies to innovate and invest in research and development. It would also prevent developing countries from pursuing policies to boost their economies and lift people out of poverty. In addition, as the world struggles with an international recession due to the impact of Covid-19, increasing the tax burden would significantly prevent nation-states’ abilities to enact pro-growth policies to stimulate and help rebuild their economics. Now more than ever countries need to reduce the tax burden to allow for rapid economic growth and increases in employment, whereas these proposals would do the exact opposite.

The OECD proposals mainly consist of two pillars, which, combined, are estimated to increase global tax revenue by $100 billion US annually. Pillar I covers the reallocation of taxing rights across jurisdictions, and while initially designed to cover digital companies, appears to have significantly expanded to apply to other industries. Pillar II is the specific creation of a global minimum tax on corporate profits. Combined, these two proposals would represent a significant rearrangement of the international corporate tax system, while representing a shift in funds from open economies to countries with large degrees of corruption, state intervention, and violations of human rights such as China, Russia, and Argentina, which, while not members of the OECD, are part of the broader Framework “Base Erosion and Profit Shifting” (BEPS).

 

The entire premise of this two-pillar approach is based on a fundamentally flawed and deeply misguided understanding of international tax competition which posits that tax competition forces rates below optimal levels. The reality, however, is quite the opposite. Per the nonpartisan Tax Foundation: “Tax competition can help to keep taxes closer to their optimal level, constraining wasteful government excess. Taxes will not be driven to zero through competition, as moving capital and labor abroad does come at a cost.” As such, international tax competition is vital for the continuance of a vibrant and dynamic international economy, and in ensuring efficient levels of taxation across member states. Different countries have different approaches to vitalize their economies. Tax competition for countries such as Ireland and Luxembourg is key to their economic strategy and success and applies much-needed pressure to certain high tax countries like Germany and France. This healthy process of tax competition will be minimized if not eliminated following the OECD’s approach. 

 

Despite rhetoric on how tax harmonization as envisaged under these two pillars would create a “level playing field,” this proposal would significantly hurt smaller countries, which do not have the intrinsic advantages and economies of scale that comes with larger population bases. Lower corporate tax rates are the only way in which such nations are able to overcome their competitive disadvantage caused by their smaller size and attract vital investment and compete against countries with larger capital markets. For this reason, high tax jurisdictions are primarily large countries, whereas low taxing jurisdictions are almost exclusively small and open economies. Through the imposition of such a regime, investment would be directed away from smaller countries who will therefore be placed at a considerable relative disadvantage as, in the words of The European Centre for International Political Economy, “the shift in effective taxing powers would undermine small countries’ attractiveness to international businesses and, in addition, induce domestic businesses to relocate to larger countries with the economic gravity of larger market.”

 

In addition to unfairly targeting smaller economies, these proposals would also seriously jeopardize the opportunities for developing countries to pursue a pro-growth agenda and boost their economies, thereby depriving them of the opportunity to increase economic growth and therefore improve living conditions. As the OECD recognizes, “research that compares the experiences of a wide range of developing countries finds consistently strong evidence that rapid and sustained growth is the single most important way to reduce poverty. A typical estimate from these cross-country studies is that a 10 per cent increase in a country’s average income will reduce the poverty rate by between 20 and 30 per cent.” Given that, as noted once again by the Tax Foundation, “Cutting corporate tax rates leads to increased investment, productivity gains, and, in turn, increased economic growth, output, and higher standards of living,” any policy that would hinder developing countries ability to enact such policies would effectively entrench the dominance of highly developed economies and would have significantly greater effects than any additional revenue benefits the OECD posits developing nations may achieve through attempts to limit “profit shifting” under Pillar II. It is noted that the BEPS framework includes 135 countries, and is not limited to OECD members, and as such many will be impacted by this through pressure brought upon them by the OECD. In addition, poorer OECD member states, such as Poland which has a GDP per capita three times lower than richer nation-states such as Germany, would similarly be negatively affected. Doing so is a highly immoral approach and one that would lead to significant levels of poverty that would otherwise be ameliorated. By preventing developing countries from pursuing policies to lift them out of poverty, and put them closer to parity with wealthier nations, these proposals would continue to perpetuate global inequality and further entrench the “north-south” divide.  

 

Furthermore, it is noted that ultimately corporations don’t pay tax, individuals do. Taxes will ultimately be passed down to the consumer level, harming individuals in addition to depressing economic growth further through higher costs leading to lower demand. Similarly, increases in tax rates will also hurt individuals who rely on dividends for retirement savings, with particularly devastating consequences given current global economic uncertainty. 

 

In conclusion, the foundational principles of both Pillar I and Pillar II are based on a fundamental misunderstanding of the operations of international tax competition, and the benefits it brings in ensuring optimal levels of taxation. Not only do these proposals undermine fundamental principles of democratic sovereignty and accountability in member states, through the effective transfer of taxation power from elected legislatures to unelected bureaucracies, but they would also have little impact on their stated goals of improving the global allocation of capital. More disturbingly, these proposals would also have severe negative unintended consequences harming smaller economies and preventing developing countries from boosting their economies and reducing poverty. In addition, they would seriously set back efforts to recover from the Covid-19 pandemic through stifling economic growth, an inevitable consequence of any increase in corporate taxes. As such, we strongly urge you to oppose these proposals in their entirety. 

 

Sincerely, 

David Williams

President

Taxpayers Protection Alliance

Grover Norquist

President

Americans for Tax Reform Foundation

 

Steve Pociask

President / CEO

The American Consumer Institute

 

James Taylor

President

The Heartland Institute

 

Graham Young

Executive Director

Australian Institute for Progress

 

Marko Horg

Global Coordinator

IGO Watch

 

Robert Alt

President & CEO

The Buckeye Institute

 

Andrew Langer

President

Institute for Liberty

 

Scott Hennig

President & CEO

Canadian Taxpayers Federation

 

Seton Motley

President

Less Government

 

John Hinderaker

President

Center of the American Experiment

 

Dr. Jameson Taylor

Senior Vice President

Mississippi Center for Public Policy

 

Andrew F. Quinlan, President

Dan Mitchell, Co-founder

Center for Freedom and Prosperity

 

Paata Sheshelidze

President

New Economic School - Georgia

 

Jeffrey Mazzella

President

Center for Individual Freedom

 

Paul Gessing

President

Rio Grande Foundation

 

Iain Murray

Vice President for Strategy

 Competitive Enterprise Institute

 

Svensk Tidskrift

Chairman

Svensk Tidskrift

 

 

Thomas Schatz

President

Council for Citizens Against Government Waste

 

John O'Connell,

Chair & President

World Taxpayers Associations

 

Jason Pye

Vice President of Legislative Affairs

FreedomWorks 

 

James L. Martin, Founder/Chairman

Saulius “Saul” Anuzis, President

60 Plus Association

 

Federico N. Fernández

President

Fundación Internacional Bases

 

Photo Credit: OECD


Australia Attacks American Tech Companies

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Posted by Andreas Hellmann on Wednesday, September 2nd, 2020, 9:56 AM PERMALINK

The Australian Competition and Consumer Commission (ACCC) has published draft regulation that would force American tech companies like Google and Facebook to subsidize traditional Australian media companies with a portion of their revenue. The ACCC’s mandate is to protect and promote competition, but the Draft Code would do the opposite. The Draft Code functions as a direct tax on innovative companies. 

Americans for Tax Reform and Digital Liberty have submitted comments to the ACCC. 

You can read the full submission here

Photo Credit: U.S. Pacific Fleet


Digital Services Tax to Hit American Companies in Kenya

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Posted by Andreas Hellmann on Thursday, July 23rd, 2020, 4:33 AM PERMALINK

Kenya is targeting American tech companies with its newly introduced Finance Act 2020. This bill signed by President Uhuru Kenyatta, imposes a 1.5 percent tax on the gross transaction value of digital services in addition to the already high 14% VAT on digital goods and services introduced in 2019. 

The Kenya Revenue Authority (KRA) has already set up a new department to track revenues generated by foreign companies from every digital transaction within Kenya and in order to collect tax payments. 

KRA’s deputy commissioner of policy and taxation, Caxton Masudi, uses the same false narrative to justify the discriminatory tax as his French or European counterparts:

“To ensure that the digital market sector pays its fair share of taxes, KRA has set up a dedicated unit to facilitate the taxpayers in this sector in the determination and accounting for taxes.”

The new regulations from the Finance Act 2020 also empowers the Commissioner of Income Taxes at the Kenya Revenue Authority to appoint agents for the purpose of collection of the digital services tax.

Kenya expects to generate $19 million annually through this new tax. The proposed measures are anticipated to come into effect on January 2021. 

Photo Credit: World Trade Organization


ATR Supports USTR's Opposition to French Digital Services Tax

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Posted by Andreas Hellmann on Friday, July 10th, 2020, 11:45 PM PERMALINK

Today, ATR President Grover Norquist sent a letter to U.S. Trade Representative Robert Lighthizer in support of USTR's announcement to impose a 25 percent tariff on $1.3 billion worth of French handbags, cosmetics, and other luxury products in retaliation for the French digital services tax on American companies. The measures are suspended for up to six months. 

 The full text of the letter can be read below, and here

Dear Representative Lighthizer: 

I support and commend your opposition to France’s Digital Services tax and your commitment to address discriminatory and unjustifiable taxation against U.S. companies.

Thank you for your leadership, and for taking strong action, treating this important issue with the severity it deserves. France has unilaterally decided to depart from over 100 years of accepted tax principles to impose a discriminatory tax on U.S. companies based on global revenue. These actions must be rebuffed in the strongest terms possible. 

While we strongly caution against tariff remedies, USTR must undertake all efforts to dissuade France from imposing this discriminatory tax and deter others from following, while also avoiding retaliation on U.S. consumers and businesses.

I also applaud the delay of the imposition of the remedy for up to six months to allow for negotiations that can stop an escalation.

France is trying to cheat the international rules governing tax jurisdictions. It is the dream of every politician to tax people who cannot vote him or her out of office. 2As you know, the French government designed this tax in a way to exclusively target American companies as there is no comparable digital industry in France and the European Union. The tax will impose a huge financial burden on American companies and workers. 

The French Digital Services Tax poses unprecedented dangers to tax competition, innovation, and American and European economic growth. The new tax represents a dramatic and irreversible shift for the international tax system. We hoped that the escalation of this issue could be avoided. The tax damages the transatlantic relationship and could lead to a spiral of retaliation. 

It is of the utmost importance for the United States to make its voice heard on every level and to take stronger action in order to counsel France their unilateral actions. 

Photo Credit: The White House


Norquist on Digital Services Taxes: An Unprecedented Danger to American Growth

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Posted by Andreas Hellmann on Wednesday, June 3rd, 2020, 12:48 PM PERMALINK

Today, ATR President Grover Norquist sent a letter to U.S. Trade Representative Robert Lighthizer in support of the Section 301 investigations into the Digital Services Tax efforts of nine countries and the European Union. The full text of the letter can be read below, and here

Dear Representative Lighthizer:

I support and commend your efforts to initiate 301 investigations into Digital Services Taxes that have been adopted or are being considered by the European Union, India, Indonesia, the United Kingdom, the Czech Republic, Spain, Austria, Turkey, Italy and Brazil.

Numerous countries are violating the international rules governing tax jurisdictions. It is the dream of every politician to tax people who cannot vote him or her out of office.

The already imposed or considered Digital Services Taxes are designed in a way to exclusively target American companies as there is no comparable digital industry in those nine countries listed above and the European Union.

Any Digital Services Tax will impose a financial burden on American companies and workers.

Digital Services Taxes pose unprecedented dangers to tax competition, innovation, and American and worldwide economic growth. The new

taxes represent a dramatic and irreversible shift for the international tax

system. We had hoped that the escalation of this issue could be avoided. These taxes damage the relationships with the United States and could lead to a spiral of retaliation.

It is of the utmost importance for the United States to make its voice heard on every level and to take stronger action in order to counsel

those countries and the European Union to refrain from their unilateral actions that damage American workers.

The focus should now be on multilateral solutions that are being developed by the OECD at a global level, but as always, we strongly caution against tariff remedies.

I thank you again and encourage you to continue this process. Should you have any questions or comments please contact Andreas Hellmann at ahellmann@atr.org

Onward,

Grover G. Norquist

 

Photo Credit: Gage Skidmore

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USTR Launches Investigation Into Digital Taxes That Target American Companies

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Posted by Andreas Hellmann on Tuesday, June 2nd, 2020, 5:20 PM PERMALINK

The Office of the U.S. Trade Representative (USTR) announced that it is launching Section 301 investigations into Digital Services Taxes (DSTs) from nine different countries and the European Union, namely India, Indonesia, the United Kingdom, Czech Republic, Spain, Austria, Turkey, Italy, and Brazil. Some DST's have already been imposed while others are under consideration.

These investigations will determine whether those taxes are discriminatory and unfairly target American companies.

On December 2, 2019, USTR completed a similar investigation into the French Digital Tax and concluded that

France's Digital Services Tax discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. Specifically, USTR's investigation found that the French DST discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon.

As a result, USTR proposed tariffs of up to 100 percent on $2.4 billion of French products. Following the tariff threat from the U.S., and bilateral talks between U.S. President Trump and French President Macron, France agreed to delay the collection of the tax until 2021. 

The countries' Digital Taxes that are now under investigation are very similar in their scope and form, as they are designed to tax revenue rather than income and have the purpose of penalizing certain technology companies for their commercial and innovative success.

After more and more countries have decided to unilaterally impose discriminatory digital taxes targeting American companies it is time to act and put pressure on those countries to stops their efforts. Digital Taxes pose an unprecedented danger to the international system of taxation, innovation, and the digital economy. 

Photo Credit: Gage Skidmore

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Chile Targets American Companies With 19% VAT on Digital Services

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Posted by Andreas Hellmann on Wednesday, May 27th, 2020, 12:33 PM PERMALINK

In June, Chile will start to impose a Digital Services Tax on American tech companies such as Google, Amazon, Netflix, and Uber. The Chilean government introduced a 19% value-added tax on digital and online services provided by foreign companies. Chileans have been benefiting from the expansion of the digital economy for many years. Especially in recent months in response to the COVID-19 pandemic. 

Chile's Finance Minister Ignacio Briones Rojas wants to grab more than 40 million dollars from digital companies annually, but will actually significantly hurt Chilean consumers

Chileans will have to start paying almost a fifth more for digital services such as the video streaming service Netflix in June when the government's 19% value-added tax begins to be applied. Many other digital companies are expected to adjust pricing as well.

With this new digital tax hike, Chile joins the long list of Latin American and European countries that impose taxes on foreign digital platforms and companies, risking a trade war and a worsening of the relationship to the U.S. while hurting their own digital and innovation economy. 

Photo Credit: Rodrigo Vera

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France Proceeds With Discriminatory Digital Tax On American Companies

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Posted by Andreas Hellmann on Tuesday, May 19th, 2020, 10:35 AM PERMALINK

France is pushing ahead with its digital tax. An effort to impose a discriminatory levy on American companies like Google, Apple, Facebook, and Amazon.  Despite an earlier agreement between French President Macron and U.S. President Trump to hold off on unilateral actions and wait for an international tax reform effort to find a solution.

French Finance Minister Bruno Le Maire said to Reuters:
"Never has a digital tax been more legitimate and more necessary. In any case, France will apply as it has always indicated a tax on digital giants in 2020 either in an international form if there is a deal or in a national form if there is no deal."

France tries to blame the coronavirus outbreak for its surprising move to abandon the agreement with the U.S. reached earlier.  However, Bruno Le Maire is wrong: Now is not the time to impose a discriminatory tax on digital companies, especially as people are staying at home and are relying on digital innovation and products more than ever. 
A U.S. retaliation will be strong, badly hurt the already tanking French economy, and greatly damage the transatlantic relationship. 

Initially, the so-called GAFA tax ( Google, Apple, Facebook, Amazon) was proposed in December of 2018 and would apply 3% on revenue generated by digital companies in France. 

Photo Credit: OECD

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