the #potential #unintended #consequences of a well-meaning #tax #choice

maybe you noticed- in Europe, there is a review of multinational tax arrangements that allow, say, Apple to sell in Italy and Spain for billions, and pay peanuts

the simplest choice? let be the income tax on that turnover be applied where the value added tax is “appended” to the price, i.e. the final destination

so, a 2000 EUR computer sold in Italy would generate income revenue in Italy, not, say, in Ireland

side-effect? a non-tariff barrier: if I have to bother with the niceties of each tax system around the world, I would do that only if a) I am large enough to afford that cost b) that market is worth enough c) that tax system “volatility” is minimal

a non-tariff barrier that will make smaller entities have to work with a local distributor- as not even sales via Internet (the usual trick-of-the-trade) could go around that taxation approach, now that any form of financial transaction is increasingly traced

consequences1: LIMITATION OF CONSUMER CHOICE as making differential prices by market to cover the “local distributor fee” would be obviously not feasible (as e.g. German car makers saw years ago, with their intra-EU price-by-country), smaller entities could actually start adding “not available to customers in …” to their products, if the volatility of the tax system makes impossible to avoid a local entity

consequences 2: TAXATION CONVERGENCE at last, there could be a convergence on a smarter, simpler taxation globally, instead of having Byzantine schemes where sometimes rules change on a quarterly (or, in the past in Italy, monthly) basis

consequences 3: LOBBYING FOR TINY MULTINATIONALS smaller entities could create the market for international virtual “company consolidation agencies” that double as lobbying entities to streamline tax systems (look for Amazon, after entering even the personal services market and adding its own financial transactions processing unit, i.e. retaining the cash-flow within its own “ecosystem”, to offer that too as a service- more about this later)

consequences 4: INCREASE IN VIRTUAL BRANCHES some larger companies could consider that it makes sense to offset that tax bill by adding local operations that generate costs (e.g. R&D)- having a team working globally on a project (a “virtual team”) is just a matter of management approach

so, in the end… it will be a lobbying battle 😉

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