On Monday, ITI is hosting a tax reform conversation and the timing of this event could not be better—tax reform is a hot topic in the nation’s capital. The political alignment of the White House and Congress presents a generational opportunity to confront the deficiencies in the current U.S. tax system, while setting our nation on a course towards future prosperity.
In the tech industry, we welcome this determined focus on reform. The U.S. economy is increasingly data driven and digital, propelled by exciting new technologies that are ever changing how we work and live. But the U.S. tax system has not caught up with this evolution. With rules of engagement crafted in the early 1960s, the United States has both the most innovative companies and old fashioned tax rules that put our companies on an uneven playing field.
It’s why we are calling our discussion Analogue Tax Laws in a Digital World: Why Tech Needs Tax Reform starting at 3:30 pm (ET) on Monday, March 13, at Google's offices in Washington, D.C.
Our conversation kicks off with opening remarks from ITI President and CEO Dean Garfield and launches into a dynamic panel featuring key experts from Congress, the Treasury Department, and the business community to bring attention to the issues facing digital businesses and discuss how tax reform and engagement from the Administration can help position our companies, and our nation’s economy, for success
This conversation will provide helpful insights to the tech sector’s priorities and momentum for reform. While other major economies have moved to lower corporate tax rates and territorial systems where profits are taxed where they are created, the United States is operating on an analogue system from another era that creates distortions at home and abroad with companies limited in how they can deploy their capital. These old-fashioned and arcane rules impact investment decisions and have made the U.S. an outlier in how we approach global commerce.
In fact, beyond U.S. borders, technology companies face increasingly complicated and frequently hostile business environments. After years of work through the Organisation for Economic Co-Operation and Development (OECD) Base Erosion Profit Shifting (BEPS) project to set shared international rules of engagement, the last few years have seen an acceleration of one-sided tax actions often directed towards digital commerce. Through value added tax (VAT), goods and services tax (GST) and diverted profits tax (DPT) regimes, companies are confronting a dynamic and aggressive landscape from the UK to India to Australia (to name but a few jurisdictions).
There are critical steps both the Administration and Congress can take to confront these challenges.
The time for tax reform is now. By working together, policymakers can move ahead with tax reform that lowers the corporate rate, moves to a territorial system in which profits are taxed where they occur, and invests in innovation, which is the lifeblood of prosperity and competitiveness for the American economy. At ITI, we are pleased to see many interesting proposals emerging that embrace this general direction and stimulate a healthy debate about how best to proceed. We believe the most important thing is that our policymakers stay focused on reform.
Beyond the United States, we need the administration’s continued attention to what’s happening in foreign jurisdictions. For years, the OECD, with backing from the G20, provided a forum for a global conversation to push for shared solutions to complex tax matters. Since concluding with the BEPS project, the success of this effort has been called into question as countries have pressed ahead with policies that depart from their shared commitment to multilateral efforts.
Europe alone has engaged in a flurry of such activity (including retroactive penalties such as the $14.5 billion clawback ordered against Apple last summer that captured headlines and rocked national capitals). From the European Commission’s use of “state aid” laws to call into question member states’ tax policies, to the commission’s efforts to create a common tax base, to individual countries’ efforts to tax digital products and services, Europe’s policies are increasingly disjointed, inconsistent with the rule of law--and potentially harmful to the EU’s overall business climate.
Adding to this dynamic, other nations like Australia, India, Russia, and South Korea have taken note and are following a similar playbook. Everyone is looking to see how the United States will engage. Will U.S. policymakers continue to value the OECD and push for multilateral solutions? Or will they distance themselves from that effort?
Which makes our conversation on Monday all the more timely. Specifically, we will explore the following questions:
- What are the tax policy issues facing digital commerce in the United States and other jurisdictions?
- What have we learned from the OECD process?
- What have we learned from subsequent actions from the EU and other jurisdictions?
- How do U.S. policymakers intend to confront these challenges?
- What can the business community do to support efforts to achieve tax reform?
At this time of transition in Washington, it is essential that we gain clarity on the United States’ direction—and we hope you’ll be a part of the conversation. For more information and to RSVP to attend Monday’s event, click here.