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European nations told to sort out 'digital tax' on tech giants by end of year

takno

Physical presence provides an extremely strong drag on being able to go jurisdiction shopping, and companies alter their tax affairs to suit the rules over a number of years. Added to the fact that the companies will be trying to minimise their overall bill rather than their bill for a specific tax and "all economic evidence" gets very murky indeed.

Sure, if you are Luxembourg the potential tax-take from you tiny physical economy is dwarfed by the revenue you can make by undercutting other countries on the world stage, and making sure you continue to match or undercut all other EU countries is certainly going to maximise your tax take, however low that forces you.

If you are the UK you will quite quickly cut the tax take from all the physically-present companies mentioned. Worse, in the slightly longer term you will end up pushing an even larger percentage of your workforce into fake self-employment. The self employment bit may even cover the Corporation Tax losses from the physically present companies, causing Corporation Tax to register an increase and making the policy look like a success.

But hold the champagne... Income Tax and National Insurance will be down. Way down. It turns out that the hopelessly simplistic analysis you bought into wasn't just bad because it made us unpopular tax haven pariahs. It has actually cost us billions of pounds.

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