As the EU contemplates imposing a tax on US internet firms, is this a step backwards?

Should business conducted in a country be subject to all the taxes in that country? (Source: Getty)

Charlotte Bowyer, digital policy researcher at the Adam Smith Institute, says Yes

Europe is lagging far behind the US in terms of digital innovation. The US’s technology policy champions experimentation and risk, with the presumption that entrepreneurs should be able to try new things without first seeking permission.

In Europe, the opposite is the case. The proportion of people engaged in entrepreneurial activity is also far lower, and even successful startups tend to be smaller and slower-growing. If the EU is serious about challenging America’s tech dominance, it should cut red tape and taxes, resist the urge to regulate more, and champion entrepreneurship.

Clobbering successful foreign firms that contribute billions to Europe’s economy may raise revenue, but it will do nothing to address countries’ underlying uncompetitiveness. And while some digital firms may be able to handle a higher tax bill, it’s hard to see why they’d put up with such a petulant host. The EU’s politics of envy isn’t just ugly – it’s destructive too.

David Brown, chief executive of e-commerce conversion company Ve, says No

When online retail first came to the fore, one of the reasons it was celebrated was that, suddenly, there were no borders impeding trade. However, this notion has slowly been undermined, predominantly by issues around tax. Business can be weakened by firms in other territories if different taxation practices are adopted.

The EU use of the MOSS system, which dictates tax due based on where the consumer lives, has attempted to tackle this problem head on. But it currently only covers certain sectors. A UK business, for example, can struggle when competing with a US firm selling in the UK but declaring profit offshore. This is clearly an unfair advantage and flies in the face of transfer pricing laws adopted around the world.

Business conducted in a country should be subject to all the taxes in that country and the internet should be no exception. It is indicative of the problems in the current system that the only internet IPO market in the world with any liquidity is the US.

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