Worldwide: Trade War. Huh! What Is It Good For?

The signs are growing that the UK's planned Digital Services Tax (which I covered here last November) will have some interesting ripple effects. The Government is seeking to tax some of the value generated by multinational tech giants in the UK market (a lot of which will be ad revenues). And a lot of those tech giants happen to be US-based. Which puts us directly in the firing line of everyone's favourite stable genius Donald Trump. France is seeing that right now, as Macron's similar proposals for a digital tax move forward.

The reasons for some kind of digital tax like these are sound, in theory. The current global tax system is hugely weighted towards taxing profits where the physical business that generates them is supposedly based rather than where those profits are earned (i.e. where their customers are based). A workable principle in the early twentieth century maybe, but one that looks out of date now that businesses are less and less dependent on their physical premises. Interestingly the US itself has a nifty way of apportioning business profits between its own states that takes multiple factors into account, including sales.

There's no sign of an international consensus emerging that would allow for a harmonised approach, so lots of countries have decided to go it alone and introduce their own tax on digital businesses. That leads to international friction and - in these febrile times - the real risk of trade war with the US.

So now that Macron has had a blast of Trumpian invective, how long before the British Government comes under fire for the same reason?

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