Rowan Saydlowski

EU to Tax US Tech Companies Despite Biden’s Global Tax Capitulation

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Posted by Rowan Saydlowski on Wednesday, September 1st, 2021, 4:28 PM PERMALINK

The European Union recently announced that it will be imposing a digital services tax (DST) in the bloc’s long-term budget under a new label of a “digital levy”.

The announcement was revealed this week by EU Budget Commissioner Johannes Hahn, who said the DST along with several other new taxes will be implemented to help Europe cover the cost of its massive government spending, effectively trying to make the United States pay for Europe’s COVID relief in addition to our own. Digital services taxes are discriminatory taxes that unfairly target large American technology companies that do business abroad and transfer American wealth to foreign governments.

The Trump Administration had opened an investigation into the European Union’s plans to implement a DST last year, but President Biden’s U.S. Trade Representative Katherine Tai ended the investigation shortly after she was appointed as trade chief in March. All other investigations into similar digital taxes concluded that they are discriminatory. In place of the investigation, the Biden Administration entered into negotiations at the Organization for Economic Cooperation and Development (OECD) that they claimed could eliminate DSTs from other countries while implementing a global minimum corporate tax rate instead.

The United States agreed to this global minimum tax––which would ban countries around the world from lowering their corporate tax rates below 15%––with no enforcement mechanism set in place to ensure that DSTs would not arise. Sure enough, Europe appears to already be reneging on their pledge to eliminate their digital tax plans in return for a global tax agreement. In a further attempt at obfuscation, European officials changed the term “digital tax” to their new term “digital levy” in order to argue that their DST is not actually a violation of the global agreement.

Brussels isn’t the only trading partner implementing DSTs now that the U.S. is wrapped up in the OECD’s global tax agreement. Tanzania also recently decided to implement a DST of their own, which will hurt U.S. companies operating in the African country. The dominoes certainly won’t end with Europe and Tanzania; more digital services taxes are likely to be crafted in countries around the world as American jobs and wealth are shipped abroad unimpeded by the Biden Administration.

It was a tremendous mistake for President Biden to enter into the destructive global minimum tax agreement that harms Americans without an enforceable method of preventing digital services taxes from arising or any clear benefit to the United States. The Biden Administration and Congress should reject the global tax agreement and OECD deal and renew their fight against DSTs to ensure that this mistake does not endure.

Photo Credit: Thijs ter Haar

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With Lapse of TPA, Biden Rejects Bipartisan Calls for a Taiwan Free Trade Agreement

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Posted by Rowan Saydlowski on Thursday, August 5th, 2021, 11:10 AM PERMALINK

The Biden Administration recently let Trade Promotion Authority lapse, making any type of comprehensive trade agreement impossible. Just days before, his administration received a bipartisan letter from 42 senators calling on the U.S. Trade Representative to pursue a Free Trade Agreement with Taiwan. A trade agreement with Taiwan, the UK, or even to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is now all but impossible.

Instead, the Biden-Harris administration will resume a limited executive-level Trade and Investment Framework Agreement (TIFA) with Taiwanese officials. As an executive agreement, the TIFA will be nonbinding and avoid any reduction in tariffs or other commitment that would require implementation legislation.

The narrow scope means American workers will be missing out on the massive benefits that free trade with allies like Taiwan has to offer. A bipartisan group of senators say the TIFA talks don't go far enough and they're calling for U.S. Trade Representative Katherine Tai to pursue a real Free Trade Agreement with Taiwan instead.

In a letter to Ambassador Tai at the end of June, the group of 42 senators led by Senator Marco Rubio (R-Fla) and Senator Mark Warner (D-Va) requested that the administration "take steps to begin laying the groundwork for negotiation of a free trade agreement... with Taiwan." This letter follows a previous letter by 50 senators in late 2020 calling for a free trade agreement with Taiwan and a letter by 161 members of Congress in 2019 calling for the same. Taiwanese President Tsai Ing-wen also stated her own desire for a free trade agreement with the United States last year, and Taiwan's chief trade negotiator John Deng reiterated this desire to U.S. officials last month.

While the United States does not have formal diplomatic relations with Taiwan, it shares deep economic ties with the island nation. Taiwan is the U.S.'s ninth-largest trading partner in the world, and the U.S. exports more to the island than to France or Italy. The island is particularly important for American farmers as the seventh-largest destination for agricultural exports from the United States.

Taiwan is a strategic technology partner as well, home to companies like Taiwan Semiconductor Manufacturing Company (TSMC), the global leader in high-end chip production. A trade agreement would incentivize greater technological exchanges between countries and could seal in rules on how to deal with state-owned enterprises, like those found in the USMCA, that would prevent a Chinese takeover of the industry.

Previous free trade talks between the United States and Taiwan had stalled due to trade barriers from the island government, in particular those on U.S. meat exports. As of January 2021, however, Taiwan lifted its restrictions on American pork and beef, showing an open willingness to negotiate and make concessions in order to get a larger deal.

In addition, USTR has previously identified numerous trade barriers from Taiwan that remain today, such as those restricting imports of rice, ground beef, certain animal byproducts, and genetically modified foods. Additionally, Copyright Piracy was one of Taiwan's worst-performing subcategories on the 2020 International Property Rights Index. While Taiwan has made recent progress on combatting copyright infringement, US-Taiwan negotiations could result in robust enforcement for intellectual property belonging to American companies. Without TPA, the Biden Administration ensures these barriers stay intact.

The Biden Administration must shift its focus away from bloated international tax cartels that will harm American workers and toward Free Trade Agreements that will lower trade barriers to provide an economic boost for all countries involved. Taiwan would be a great place to start.

Photo Credit: Pixabay

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ATR Partners on International Tax Burden Index, USA Ranks Second-Best

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Posted by Rowan Saydlowski on Friday, July 23rd, 2021, 3:45 PM PERMALINK

Americans for Tax Reform Foundation partnered with the Paris-based free-market think tank Institut Économique Molinari for the publication of the first edition of "The Tax Burden of Global Workers: A Comparative Index," published by James Rogers and Nicolas Marques of the Institut Économique Molinari.

In the index, South Africa and the United States had the lowest tax burdens, while European Union member states took the bottom 25 spots in the 34-country ranking. The 34 countries studied represent 58.2% of the global economy. The annual study calculates a "tax liberation day" for each country, indicating how many days' worth of work compensation is extracted from workers by their governments each year. The amount of taxes extracted were calculated as a combination of income taxes and social security contributions by both the employee and employer for an average worker in each country.

The governments of three countries (Austria, France, and Belgium) were found to extract more money than the worker himself or herself receives; for example, in Austria, the government receives $1.35 for every $1.00 that the average worker receives in take-home pay, for a total real tax rate of 54.76%. Meanwhile, in the United States, the government only receives $0.41 for every $1.00 that the average worker takes home, for a total real tax rate of 27.11%.

According to the index, Austria and France share the latest tax liberation day (July 19th), while South Africa has the earliest day (March 7th). American workers can celebrate their tax liberation day on April 9th this year.

The study notes that this year the overall average "real tax rate" throughout Europe decreased as a result of small policy changes and pandemic relief measures, though different European countries saw differing effects. 2021's tax liberation days arrive earlier in 10 European countries, later in 8, and on the same day in 10 as compared to last year, according to the authors.

"We are excited to partner with the Institut Économique Molinari to analyze tax burdens from major countries around the world," said Grover Norquist, President of Americans for Tax Reform. "While the United States fortunately performed well in this ranking, U.S. officials must remain wary to not fall into the burdensome taxation trap implemented by many of their European allies. Lower tax rates allow workers to keep more of their own hard-earned money and provide an environment for innovation to thrive. We need to stop the $2.9 trillion USD tax increase proposed by the Biden-Harris Administration, otherwise we will end up with the same level of taxation burden as European Union workers."

"Expanding our research to include all continents reveals a sharp contrast between the European Union and the rest of the world when it comes to taxing the salaries of workers," said James Rogers, co-author of the study and Research Fellow at Institut Économique Molinari. "Workers outside of the EU, with the exceptions of tiny Malta and Cyprus, get to keep significantly more of their earnings. American workers celebrate their 'tax liberation day' earlier than any of their European counterparts and enjoy the third-highest take-home pay around the world––while the cost of hiring them, thanks to the relatively labor-friendly tax rates, is cheaper than in 10 European countries."

"Through 12 years of study, the correlation between payroll taxes and the unemployment rate is clear in many European Union countries," added Rogers. "Looking at the global picture, this is generally the case, with low-tax countries such as Australia, Ireland, the U.S. and the U.K. experiencing lower unemployment than the EU average."

The full study can be found here:

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