Unveiling the Secrets of Homeless Income: How Multinationals Exploit Global Tax Treaties

This is an AI generated podcast of a 2014 paper written by Professor Bret Wells and Cym Lowell titled: “Income Tax Treaty Policy in the 21st Century: Residence vs. Source”

Why this is important:

The Trump administration recently proposed (as part of the “OBBB”) a provision that would impose tax penalties on residents of countries that had DSTs (“Digital Services Taxes”). The U.S. objection to DSTs is largely based on the provisions in tax treaties which give the “source country” (where the profits are generated) the right to tax those profits only if the corporation as a PE (“Permanent Establishment”) in that country. Of course, Google, Microsoft, et al do NOT have a “permanent establishment” in Canada, UK, India, etc. As a result many countries (because they cannot tax the income of U.S. multitionals) have enacted DSTs which are a tax NOT income but rather on revenue.

Yes, the standard tax treaties (which are 100 years old) deny the source country taxing rights (absent a PE). But, why is this? Does it make sense in 2025 to deny the source country taxing rights over income?

I came across a FANTASTIC article written by Professor Brett Wells and Cym Lowell which provides some historical perspective on this issue:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2380241