Washington – U.S. Trade Representative Ambassador Katherine Tai gave remarks this week, casting doubt on whether, as a matter of trade policy, the U.S. government should support U.S. companies in facilitating strong digital exports –even appearing to invite trading partners to tax U.S. companies.
In a conversation February 12 at the Council on Foreign Relations, Ambassador Tai questioned whether large technology companies can even be considered American, and whether U.S. government advocacy in combating discriminatory policies abroad is warranted. Motivating her question was uncertainty on where these firms were headquartered and where they paid taxes. While moving one’s headquarters abroad to benefit from lower taxation was a common strategy in some industries some years ago, no leading U.S. technology company participated in such schemes.
In reality, the largest technology companies are all headquartered in the United States, pay the overwhelming bulk of their taxes in the United States and are among the highest corporate taxpayers in the country, according to several analyses. In fact, in 2023, based on publicly available data, the top five technology companies paid over $60 billion in corporate income taxes; and of the top 10 corporate taxpayers in the United States, those five technology companies accounted for 53% of payments. It is further alarming that Tai appears supportive of reducing the U.S. tax base by inviting foreign countries to impose new taxes abroad.
Ambassador Tai’s remarks are below:
“From a tax perspective… How many of our big tech companies are actually, for tax purposes, headquartered in other places and actually paying taxes there as opposed to paying taxes here? If that’s the definition of an American company, I’ll have to ask you and others, how many of these American companies are actually really American companies? And how does that inform the discrimination conversation?”
The following can be attributed to Jonathan McHale, Vice President of Digital Trade at CCIA:
“U.S. technology firms pay substantial taxes in the United States, contributions made possible through access to foreign markets. Any reluctance to address barriers to that access threatens billions of dollars in taxes and R&D spending, millions of jobs, and is inconsistent with USTR’s statutory mission to support U.S. export strength.”
“How tax status ‘informs the question of discrimination’ from a trade standpoint should be obvious: it is in the U.S. national interest to ensure that major contributors to the U.S. economy, headquartered in the United States, are treated fairly in foreign markets.
“Ironically, one of the few areas where the Biden Administration has engaged in combating discrimination, with key support form the Department of the Treasury, has been with respect to tax discrimination—digital services taxes—where foreign countries have sought to undermine cross-border trade by unilaterally extracting tax revenues from U.S. firms, and thus undermining the U.S. tax base. Unfortunately, comparable engagement in the myriad other areas where U.S technology firms face barriers, often erected to protect local rivals, are few and far between.”