International Economics: IB Economics

Disney becomes the latest tech company to announce sizeable job losses - with Bob Iger responding to a loss in subscriber numbers by announcing that 7,000 jobs are to go. Presumably none of them are players at Portsmouth FC, given Michael Eisner, the former Disney chairman's ownership of the club, 

This Guardian piece looks at the implications of the newly agree global minimum corporation tax rate (15%) for the Irish economy, with most of the tech giants having their European HQs there.

However, despite the move meaning that the tax rate will go from 12.5% to 15%, most people don't expect it to have much of an effect, not least because most of these companies have an effective tax rate that's quite a lot lower. 

It seems that we are on the verge of agreement between G7 nations about the need for, and nature of a tech tax. However, until a deal is concluded, there are still grounds for caution. 

Could an unintended consequence of President Biden's expressed desire to amend global corporate tax rules so as to establish a minimum level be lower levels of US investment in Ireland?

Certainly it seems likely: Ireland's current corporate tax rate of 12.5% is one of the lowest, if not the lowest in the developed world and it has attracted a lot of inward investment, particularly from the tech sector. 

The tit-for-tat nature of tariffs is highlighted in this BBC article that notes that the US will retaliate with a 25% tariff on selected goods if the UK introduces a digital sales tax on US tech giants. The US argues that such a tax would be "unreasonable, discriminatory, and burdensome".

Correct. But there's a fundamental difference between the two goods - in the case of the UK goods they are sold in the US and the consumer will be paying indirect taxes on such goods to the US Treasury Department. The tech giants, however, will be selling their services in the UK - such as advertising - and using tax avoidance chicanery to pay any tax in much lower tax environments. I''d like to hope that overtime the latter comes to be seen as morally, and ultimately legally, indefensible.

It's not been a great end to the year for Big Tech companies, with the news that ten American states are accusing Google of illegally maintaining it's monopoly on online advertising. 

Has the tide turned? It seems that competition authorities around the world have become keener to challenge the tech giants. 

The Head of the OECD has called for nations planning to introduce digital technolgy taxes - such as France and the UK - to hold fire. For now.

He wants there to be global agreement about the nature of such taxes - but given the vested interest of the United States, it's tough to see what form a solution would take. And even the vested interests argument is complex: tech companies themselves seem willing to pay an "appropriate amount" of tax; the President, however, may see things in another light.

Here we go again - no doubt the President will hit out at French attempts to introduce a digital tax on US tech giants - highlighting the fact that the bullies doesn't like people standing up to them.

And it raises wider issues of tax avoidance, and the impact it would have on the global economy. 

Mohammed El-Erian argues that the tech giants are driving a paradigm shift in policymaking, suggesting that such is their ability to persistently drive down prices that this present policymakers with new problems.

However, he also warns that this might not be a permanent effect - and that tight labour markets and declining levels of competition in certain markets might yet see inflation return.

Competitor wants large rival broken up.

Apparently that's news - however, Australian media giant Newscorp wants to see Google's search engine and advertising platform split up. But it would, wouldn't it?

Despite the introduction of the UK digital services tax in the latest Budget, it seems that the EU is struggling to do the same. And this should be no surprise, given the difficulties of co-ordinating the different member states.

Three of Scott Galloway's"The Four" have announced 40,000 job losses so far this year. If ever you want an indication of the future direction of travel in the global economy, then perhaps this is it. This time it's Google parent company, Alphabet shedding 12,000 workers, around 6% of their global workforce. 

The BBC's take on the proposed minimum global corporate tax rate. 

Are G7 nations likely to reach agreement on tax avoidance, and the use of tax havens, particularly by the tech giants, in the run up to this summer's Cornish G7 summit? 

Certainly, this Guardian article suggests this possibility. 

Little to disagree with here - and it makes me wonder once again, why we lionise the entrepreneurs who made it happen to such a degree, and why we have such a positive view of philanthropy when it is financed by tax avoidance. 

I have relatively little to say about this, other than: it's about time. 

The big tech firms have, it is true, brought an awful lot of benefits. However, they've been able to free ride on technological developments generated by the public sector, harvest data at zero cost, in a way that discriminates against consumers and avoid tax to a ridiculous degree. 

Instead of lionising Sergei Brin, Larry Page, Mark Zuckerberg et al shouldn't we be vilifying them for not paying their dues to society? 

The recent pandemic has put tech firms in the spotlight, and led to renewed calls for an international digital services tax. It's interesting that the Chancellor has spoken out in favour of such a move - it's something that the US will not be in favour of.

The OECD is looking at a way of taxing multinational tech giants, via a global digital services tax, in the hope of giving governments greater power to regulate them.

However, for all the good intentions, I'll believe it when I see it.

A question of tax avoidance or protectionism? The French would argue the former, the US the latter. 

I suspect that, as ever, the truth lies somewhere between the two.

Another call for tech firms to pay more tax - from the head of the IMF, Christine Lagarde. Build it and they will come, apparently.

Perhaps not in this case - when there are seemingly advantages from not levying taxes on these companies. However, it might be argued that not taxing them is akin to offering some of the world's most powerful firms sizeable government subsidies. 

The first part of this - about the need for a digital tax is well worth a read, and, I think, not at all unreasonable.