Unilateralism in Digital Tax and Trade - a Self-Interested Race to the Bottom

Like the late 19th and early 20th Century Scramble for Africa, the unilateral scramble for digital tax revenues by jurisdictions (including as an arguably intuitive response to the immediate economic pressures of the Covid-19 fallout) poses a dangerous threat to international trade.

Whilst our primitive urges (perhaps awakened and heightened by the severity of the situation at hand) may re-actively drive us to seek ways of securing our own positions, as the below article submits, with the potential of digital tax measures spilling over into a wider digital trade war (with countries potentially then seeking to tariff e-commerce more generally) this could spark a cross-border tit-for-tat (that may even include non-digital trade) which could wreak havoc on the global economy.

Concerted, coordinated efforts must find a way to prevail, despite the additional challenges posed by social-distancing that the OECD must additionally face in order to meet their end of 2020 timeline (for the general negotiation of new digital taxation proposals) with a view to staving off the chaos that may otherwise ensue.

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This pandemic has shown how quickly chaos can arise and how fast policy norms can change. Some leaders around the world are doubling down on unilateral digital taxation just at the time where multilateral forums are unable to meet to potentially forestall chaos in international tax and trade. The challenge is for countries to recognize the global risks; something that the OECD should be allowed to highlight through its impact assessment. Without knowing the costs of unilateralism, individual countries will continue to act in their own interests by erecting tax and trade barriers that will hurt the global economy during one of its weakest moments. taxfoundation.org/...