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The Americans have reason to be upset over tech company taxation

Summary:
We have long argued - in common with a substantial portion of the economic research on the subject - that there should be no taxation of corporations. There’s only us people here to carry the burden of a tax, all taxes are paid by live humans beings, don’t disguise who is being taxed by claiming that some fiction of a legal intermediary is carrying the weight. While correct this view has less political traction that it ought.The actual rule is that a corporation - or any other activity - should be taxed where economic value is added. Quite clearly the bulk of the value of the Google search engine, say, is created where the engineers who write the Google search engine are. Thus the taxation should be in California, or the US at least.The complaint has long been that this hasn’t actually

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We have long argued - in common with a substantial portion of the economic research on the subject - that there should be no taxation of corporations. There’s only us people here to carry the burden of a tax, all taxes are paid by live humans beings, don’t disguise who is being taxed by claiming that some fiction of a legal intermediary is carrying the weight. While correct this view has less political traction that it ought.

The actual rule is that a corporation - or any other activity - should be taxed where economic value is added. Quite clearly the bulk of the value of the Google search engine, say, is created where the engineers who write the Google search engine are. Thus the taxation should be in California, or the US at least.

The complaint has long been that this hasn’t actually been happening. Offshore profits not taken into the US tax net were, for US corporations, never taxed. This was, apparently, an abomination. That’s the argument in favour, or the one used, to tax the tech giants differently. At which point America is complaining:

The US will retaliate if European officials attempt a tax raid on Silicon Valley, the tech industry has warned. Plans by a number of countries to propose new taxes on Google, Facebook, Apple, Airbnb, Uber and Amazon are being closely monitored in Washington, with the UK and France’s new digital services tax highlighted as a barrier to trade by the United States Trade Representative in a recent report.

France’s proposed technology tax, the details of which will be known in July, have annoyed trade officials and that the US might come down hard on the country in an attempt to deter other countries from doing the same.

Within the terms of the current argument they’ve a right to complain too. Because America has already changed its corporate taxation system. Those global profits are now taxed in the US, just as they should be given the value creation there. These arguments in favour of digital taxes are not, now, about profits going untaxed. They’re instead catfights over who gets the revenue. And if the people who host the value creation don’t gain that revenue then what’s the justification for the taxation in the first place?

This isn’t an argument about justice or righteousness, it’s one about which politician gets to spend the cash. As ever, pigs have more manners at troughs.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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