Andreas Hellmann

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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List: International Tax Cuts & Emergency Plans Due to COVID19 Outbreak

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Posted by Andreas Hellmann on Wednesday, March 18th, 2020, 3:38 PM PERMALINK

Due to the COVID-19 outbreak many countries around the world are enacting tax cuts and emergency plans to support their struggling economies. 

Below is a list of examples of emergency tax cuts, plans, and suspensions from all over the world. We will be continuously updating this collection.  If you have another example to add, please send it to ckazakou@atr.org.  

You can also find a list of how the US is suspending Rules and Regulations due to COVID-19 here

Emergency Tax Cuts and Plans list:

Italy enacts tax relief to cushion Coronavirus emergency
 

Italy’s Economy Minister, Roberto Gualtieri, announced that the government will adopt measures costing EUR 3.6 billion (USD 4 billion) to help the economy. Specifically, a tax credit will be granted to companies that suffer a 25% fall in revenues. Additional funds are also provided to Italy’s health service.

Indeed, the decree provides, among other measures, to increase the guarantee fund for small and medium businesses with a priority, for 12 months, to grant a credit to businesses operating in red zones, encompassing the agri-food sector. - MNE Tax (03/02/2020)

Japan – Extended Tax Filing Deadline, Other Government Steps Due to COVID-19
 

The National Tax Agency has released the announcement that filing and payment due dates for individual income tax, individual consumption tax, and gift tax for 2019 will be extended by one month to April 16, 2020 due to the spread of Covid-19. - KPMG (03/02/2020)

Greece Moves to Help Business in Coronavirus Affected Areas

Greece will suspend for four months the payment of sales tax amounts that were to due to be paid by the end of March, Finance Minister Christos Staikouras announces in Athens. Suspension also for four months of payment of outstanding debt obligations. Next week’s Eurogroup meeting must immediately take concrete initiatives to tackle the negative effects of the virus on growth and public finances - BloombergTax (03/09/2020)

Germany Moves to Slow Virus With Empty Stadiums, Furlough Pay
 

Merkel’s coalition to invest 12.4 billion euros until 2024. Aid for furloughed workers to be expanded until end of 2020. Should Germany enter a serious crisis, its response would dwarf a proposed cut in the so-called solidarity tax by 5 billion euros ($5.7 billion) this year, Scholz told RND newspaper consortium.- BloombergTax (03/09/2020)

Denmark Grants $20 Billion in Tax Breaks to Firms Hit by Virus

Denmark’s government will grant tax breaks to businesses affected by the coronavirus as part of a series of measures worth $20 billion. - BloombergTax (03/10/2020)

Thai Cabinet Approves Phase One of Covid-19 Stimulus Package

The package includes 180b baht ($5.7b) of soft loans from Government Savings Bank and the Social Security Fund, Finance Minister Uttama Savanayana says in a briefing in Bangkok. 
- A cut in the withholding tax to 1.5% from 3% during April to September
- Doubling the tax benefit for investment in long-term mutual funds -- so-called super savings funds to 400,000 baht.
- BloombergTax (03/10/2020)

UK Government announced tax deferral measures

The government announced tax deferral measures and freezes on business property taxes for retail, leisure, and tourism to reduce the economic impact of the coronavirus.

The budget also contained promises to: Keep the corporate tax rate at 19%. Reduce the lifetime limit of entrepreneurs’ relief—which allows business founders to pay 10% capital gains tax, less than the usual rate, when they sell their businesses. Freeze fuel duty for the 10th consecutive year. Get rid of value-added tax on digital reading materials and female sanitary products. Freeze all alcohol duties. Make it easier to access tax-free child care.- BloombergTax (03/11/2020)

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Indonesia Eases Tax for Individuals, Cos to Counter Virus Impact

Government will waive income tax for individuals for six months as it seeks to boost purchasing power and counter an economic slowdown worsened by the coronavirus outbreak. - BloombergTax (03/11/2020)

Coronavirus: Macron announces drastic measures in France

When it comes to employees, the French leader announced the implementation of an “exceptional and massive mechanism of partial unemployment”. For companies, it will be possible to postpone “without justification, without formality, without penalty [the] payment of contributions and taxes due in March."- Euractiv (03/13/2020)

Spain closes tax office on coronavirus epidemic

Spain has announced VAT and other tax payment holiday for small businesses who apply for relief for the coronavirus (Covid-19) outbreak. The scheme is not available for large businesses (above €6m turnover) or if the Value Added Tax due is above €30m. - Avalara (03/15/2020)

UK Extends Property Tax Relief for a Year to Virus-Hit Sectors
 

The UK government is extending business property tax waivers to all companies in the retail, hospitality, and leisure industries as part of a multi-billion pound rescue package for businesses affected by coronavirus. - Bloomberg (03/17/2020)

Norway may cut 12% reduced VAT rate to 8%

The Norwegian government is said to be considering a cut to the 12% reduced VAT rate to 8% for the duration of the coronavirus crisis. The rate applies to cinema admission, public transport, hotel accommodation services, entrance to cinemas, museums and amusement parks. - Avalara (03/17/2020)

Belgium delays VAT filings & payments on coronavirus worries

The Belgian authorities have confirmed that they will allow companies to delay the filings by over two weeks and payments by two months. It had already offered an application process for companies needing delays due to COVID-19 outbreak. - Avalara (03/18/2020)

Netherlands COVID-19 VAT reliefs

The Dutch tax agency has published details of a range of Value Added Tax easements for businesses during the coronavirus epidemic. Other taxes will have similar easements. Dutch VAT easements include:Businesses may apply for delayed VAT payments if they can show hardship as a result of the crisis. The tax office may cancel any penalties or interest for any late payments. This is done as soon as the application is received. Late penalty interest will be reduced from 4% to 0.01% from 1 June if found delay not related to crisis. Open VAT assessments will be amended if it appears VAT should be less due to the pandemic. Extra VAT relief on customer bad debts will be granted if related to crisis. - Avalara (03/18/2020)

Photo Credit: Riley Kaminer

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UK Digital Services Tax Purposefully Targets US Companies

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Posted by Andreas Hellmann on Thursday, March 12th, 2020, 5:15 PM PERMALINK

The UK Treasury announced in its budget report that it is going to impose a 2% Digital Services Tax on British revenues of American companies starting in April.  

This tax will result in double taxation, less innovation, negative economic growth, and will lead to higher costs for British businesses and price hikes for British consumers.

The design of the British tax is very similar to the French, and other unilateral European Digital Services Taxes. It will levy an estimated £2 billion and will be imposed on companies with at least £500 million in global revenue and £25 million in UK revenue. This tax is discriminatory as it is exclusively targeting American companies like Google, Facebook, Amazon, and Apple. 

This launch comes as a surprise as the UK is preparing to negotiate a post-Brexit trade deal with the United States. After fierce opposition from the Trump administration, many European countries are backing down from their Digital Services Tax efforts to avoid a trade war and instead wait for an international solution through the OECD negotiations. 

The Trump administration should make this a deal-breaker during the upcoming trade negotiations with the UK.   

Photo Credit: UK Parliament

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Czech Republic Expected To Reduce Digital Tax Under U.S. Pressure

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Posted by Andreas Hellmann on Thursday, February 27th, 2020, 2:32 PM PERMALINK

With a 7% Digital Services Tax (DST), the Czech Republic plans to impose the highest DST on American companies in the European Union. Under pressure from the Trump Administration, the Czech government is now expected to reduce the tax significantly or even postponing it to a later date.

Per Bloomberg reporting Czech Finance Minister Alena Schillerova said: "I asked the prime minister to schedule a debate at the coalition council about a potential change of the rate from the current 7% to 5%." She also mentioned that postponing the date when the tax comes into effect would also be an option. 

Czech Prime Minister Andrej Babis backed the French push for an EU-wide levy from the beginning, quickly proposed a Czech Digital Tax after the European proposal did not reach unanimous support and failed. 

This move from the Czech government shows that President Trump's strategy to put pressure on countries that impose discriminatory taxes on American companies works, especially after French President Macron has recently folded on his Digital Services Tax plans. 

Now it is of the utmost importance that the Trump administration further steps up its opposition as Digital Taxes in Austria, Italy, and Turkey are about to be implemented next month. 

Photo Credit: Chambre des Députés


Digital Taxes Target American Companies Around the World

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Posted by Andreas Hellmann on Monday, February 24th, 2020, 2:36 PM PERMALINK

France has been in the headlines in recent weeks due to its Digital Services Tax (DST) that mainly hits American companies such as Google, Amazon, and Facebook. Though the US and France agreed to a ceasefire on the DST last month, internationally, Pandora’s box is still wide open.

France isn’t the only country that has chosen to impose or signaled its intention to impose a DST. After the European Union scrapped its plans for an EU-wide DST, 19 countries have decided to take unilateral action in what will ultimately end in a complex web of varying tax rates and applicability requirements. As the maps show, countries around the world, have either implemented or plan to implement a DST on their own instead of waiting for an international consensus.

You can find the map of the global digital tax landscape here

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