Willie Sutton’s famous but apocryphal explanation for why he robbed banks — “because that’s where the money is” — is also why the US is doomed to failure in its latest antic against the rules-based international economic order.
Washington has called for a halt to talks about reforming the system for taxing multinational corporations. It has also threatened to retaliate against European countries that introduce their own unilateral levies on the turnover of (mostly American) global digital companies. But with government budgets everywhere bleeding money, US objections to other countries casting their tax nets over the world’s Googles and Facebooks should fall on deaf ears.
The existing system for avoiding double taxation of cross-border corporate activity was designed for a world that no longer exists. Bilateral tax treaties from half a century ago allocate taxable profits to the country of a company’s legal residence. But the ease with which residence can be moved to the lowest-taxed jurisdictions, especially after the rise of the internet economy, means that the old tax treaties’ purpose of no double taxation has too often delivered opportunities of double non-taxation.