Tech Giants, Taxes, and a Looming Global Trade War

Dramatic tax shortfalls are inflaming governments’ resentment about tech companies’ soaring profits.

by

and

Luminita Enache

by

and

Luminita Enache

August 24, 2020

Rob Atkins/Getty Images

Summary.

Negotiations about how digital giants — Google, Apple, Facebook, and Amazon — pay local taxes to foreign governments have been derailed by the Covid-19 pandemic. The timing couldn’t be worse: Governments are facing historic shortfalls and digital companies are doing exceedingly well. This all sets the stage for a global trade war. The authors explain how we got here, and what type of cooperation will get us through it.

Pre-pandemic, you might remember, the U.S. government threatened to impose 100% tariffs on French goods, including champagne and cheese, in retaliation for France’s planned 3% tax on revenues generated by large digital companies in its territory. France agreed to postpone these taxes until the end of 2020 to avoid a trade war, while hoping that the Organization for Economic Co-operation and Development (OECD) would come up with a multilateral solution by then.

Vijay Govindarajan is the Coxe Distinguished Professor at Dartmouth College’s Tuck School of Business, an executive fellow at Harvard Business School, and faculty partner at the Silicon Valley incubator Mach 49. He is a New York Times and Wall Street Journal bestselling author. His latest book is Fusion Strategy: How Real-Time Data and AI Will Power the Industrial Future . His Harvard Business Review articles “Engineering Reverse Innovations” and “Stop the Innovation Wars” won McKinsey Awards for best article published in HBR. His HBR articles “How GE Is Disrupting Itself” and “The CEO’s Role in Business Model Reinvention” are HBR all-time top-50 bestsellers. Follow him on LinkedIn.
vgovindarajan
Anup Srivastava holds Canada Research Chair in Accounting, Decision Making, and Capital Markets and is a full professor at Haskayne School of Business, University of Calgary. In a series of HBR articles, he examines the management implications of digital disruption. He specializes in the valuation and financial reporting challenges of digital companies. Follow Anup on LinkedIn.
Hussein Warsame is a Professor of the Accounting and CPA Fellow in Taxation at Haskayne School of Business, University of Calgary. His research interests are in taxation and financial accounting.
Luminita Enache is an associate professor at Haskayne School of Business, University of Calgary. She investigates financial disclosures of new-economy firms. Follow Luminita on LinkedIn.

Tech Giants, Taxes, and a Looming Global Trade War

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