As the Pandemic Continues, Countries Search for Revenue Sources

Taxing the Tech Industry

During the pandemic, the flow of capital around the world has been anything but simple. With retail on pause, sports and other entertainment cancelled, and gas prices at record lows, many countries have been strapped for tax revenue. However, certain sectors of the tech industry are thriving, and many countries are trying to figure out how they can earn tax revenue from this relatively healthy part of the economy.

Taxing online industries is tempting for countries who have had to spend enormous amounts of money bailing out citizens and small businesses during the coronavirus pandemic. According to a report from the United Nations Conference on Trade and Development, nearly $26 trillion was spent online in 2018. To put that number in perspective, that’s just about a third of global GDP.

For the United States, however, international taxes on online goods and services are a cause for concern. A huge portion of the world’s tech companies are American. Apple (AAPL), Facebook (FB), Amazon (AMZN), Netflix (NFLX), Google (GOOGL), Microsoft (MSFT), and other American tech companies have been providing services around the world during the pandemic. In the first quarter of 2020, the collective revenue of the companies listed hit $234 billion.

Europe’s Plans

President Trump and Treasury Secretary Mnuchin, are pushing for an international agreement on digital taxes. Before the coronavirus pandemic, that kind of agreement seemed possible. The Organization for Economic Cooperation and Development had promised to deliver on a deal before the end of 2020. Now, however, it’s impossible for representatives from each country to meet in the same room.

Meanwhile, Austria, France, Hungary, Italy, Turkey, and the UK, have said they plan to impose taxes on online services. Six other European countries have also brought up the possibility of a tax. For many of these countries, a tax on online industries would partially relieve the financial burden they are facing due to the coronavirus pandemic. Back in February, the OECD estimated countries could secure up to $100 billion from this sort of tax.

Countries Weigh the Threat of Tariffs

In 2019, when France announced a digital services tax, Trump threatened tariffs on French goods. Now, though, France is severely in need of tax revenue. French Finance Minister, Bruno Le Maire expressed that since tech companies have benefited from the pandemic, it makes more sense than ever to tax them.

Many countries face tough decisions and are wondering if the costs of tariffs could outweigh the potential of huge earnings in tax money from tech companies. As the pandemic continues and government spending does too, countries may opt to tax American tech companies despite the threat of tariffs.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender