‘The #AmazonWashingtonPost, sometimes referred to as the guardian of Amazon not paying internet taxes (which they should) is FAKE NEWS!” @realDonaldTrump’
President Donald J. Trump is at it again.
Overnight he hit out at Amazon [NASADAQ:AMZN] and accused it of not paying taxes.
The irony was not lost on some in the Twitter-verse.
‘Doesn’t that make them smart?’ was one reply, quoting Trumps own words against him.
Others responded by pointing to a bizarre Trump practice of distributing mocked up ‘Time’ magazine covers.
These ‘fake news’ magazines are apparently distributed around Trump owned clubs and resorts.
But back to the heart of the matter.
Technology companies with their global operations, low tax structures and financial strength are fast becoming a political target.
And such moves by the US will embolden our government too.
In Australia, moves are afoot to reduce the $1,000 threshold under which imported goods are GST exempt.
The so called ‘Amazon tax’ was due to start this year. However, it has been deferred to July 1 2018, as the government work out how to enforce the tax cheaply.
But for other international companies like Netflix [NASDAQ:NFLX], the new law is due to be implemented on July 1 2017.
The tax law change here relates to applying GST to suppliers of digital products and services. So products like music streaming service Spotify will be similarly affected.
Netflix are planning to increase prices in Australia by around 20% in response.
Snapchat [NASDAQ:SNAP] shares are down, avocado prices are up and now Netflix prices are going up.
Poor millennials can’t seem to catch a break…
Some will be happy though.
Australian retailers such as JB Hi Fi [ASX:JBH] and Harvey Norman [ASX:HVN] will welcome a narrowing of the price advantage that online retailers enjoy.
And it puts further doubts on the predictions that Amazon will ‘destroy’ local companies.
At a deeper level though the future looks bleak.
Under Trump, the biggest advocate of free markets, America, is changing decades of progress.
Increasing taxes on its most successful companies, talks of implementing tariffs on big trade partners such as Mexico and China…
Such strategies have never created long term wealth for any country in the past.
Whilst a fair system of taxation is essential for proper competition, the piecemeal and arbitrary way current populist governments are going about it are likely to cause more problems than they solve.
Analyst, Money Morning