Bloomberg Tax recently chatted with Francois Chadwick, the global head of tax for Uber, about the state of digital taxation worldwide.
Chadwick leads a team of more than 200 employees around the globe. He is part of a team helping to shape global tax and accounting policy for the company. He has previously worked for KPMG LLP and the European Commission in Brussels. He also launched a tax tech startup.
In February, Uber forecast that the company would deliver a quarterly profit by the end of the year. But those forecasts have been altered because of the pandemic.
Bloomberg Tax: What has it been like to work on tax while we’re in the age of Covid-19?
Chadwick: What you saw with respect to the way policy discussions were going in sort of late February into early March and into April, a lot of those things have slowed slowed down, because every tax authority, every government, and rightly so, started to focus on Covid-19 tax relief packages. And that was by far, you know, absolutely necessary and needed to be done. So any other policy discussions during that timeframe was slowed down. I think a lot of those policy discussions have now started up. I think we’re going to see, if you look at the OECD on what they’re doing work around, changing the international tax landscape. Those things definitely have been slowed down for a month or two, because all of the members of the inclusive framework, were more focused on their local, national needs around Covid, but they’re picking up again now.
Every company should be thinking about picking up their policy efforts and focusing, not just on the local needs but the global names and the national needs as well.
There is going to be a greater discussion around taxes and how to raise taxes and raise revenue for governance. And our view is that, it’s then incumbent upon companies to be very involved in those discussions and have a seat at the table. That’s something we do, we do all the time.
Bloomberg Tax: What is Uber’s stance on the OECD digital tax project? What would you really like to see?
Chadwick: There is an increasing amount of unilateral digital service taxes that are popping up. You’ve already seen the ones in France; the UK implemented theirs in the beginning of April; India has an equalization levy; Indonesia has talked about one that they’re going to introduce.
The number is ballooning, it’s north of 30 right now. And also a big player is obviously EU. A lot of these countries and the EU are saying they want to see something in place by the end of 2020, otherwise they may go alone and do their own thing. And frankly, our view is a patchwork quilt of unilateral actions across the globe is far from the best thing.
And we do need a global approach, and we believe the best player in town to bring about a global approaches is the OECD. As such, we’re very much in support of the OECD, and we’ve actually suggested, and discussed with the Secretariat a phased-in approach, a phased-in approach with a strict calendar. So in other words, what we would look at is in 2020, just address in automated digital service companies, because that is one where there seems to be a lot of social and political pressure, but then with a conviction and an agreement that in 2021, the OECD will tackle the consumer-facing businesses and other parts of the ADS (automated digital services) under Pillar 1.
Bloomberg Tax: Is there a way for the United States to work together with Europe, what are the biggest hurdles right now?
Chadwick: You know, they said they want no ring-fencing. And I know that for U.S. Treasury that that may be something that they want to stick with. So there’ll be no ring-fencing, so there’s going to be some pressure on whether or not the phased-in approach could actually work. When I’ve spoken to Treasury and others, my conversation is very much the same, please keep talking closely with the OECD, stay at the table, and look to see as best as possible, if there’s something that can be done in 2020 to alleviate the unilateral measures across the world.
Bloomberg Tax: How can Congress help this process?
Chadwick: I think they can help the process by continuing to ensure that the U.S. Treasury stays at the table, stays talking to the OECD, and potentially includes a little more flexibility around a calendar to get these things done.
Bloomberg Tax: Do you have an opinion on the U.S. Section 301 trade investigations and is that affecting Uber?
Chadwick: The 301 investigations were put forward…in an attempt to, you know, address this potential growing amount of unilateral digital measures. I think it actually does also put a little bit more pressure on the OECD discussions and coming to a solution and conclusion as quickly as possible.
Bloomberg Tax: There are some real questions on whether the U.S. wants to stay at the table. What could be the results of this impasse?
Chadwick: We’re spending time internally to model out what the most recent developments in this negotiation mean under various scenarios. The reality is that the technical work on Pillar 1 and 2 need to continue. We fully intend to continue the work we’ve been doing with the goal of coming to a global consensus later this year and avoiding further proliferation of unilateral digital taxes.
Despite the U.S. recently calling for a pause in the negotiation during the pandemic, Uber will remain engaged and will continue to provide input in these discussions.
Bloomberg Tax: There are lots of state digital taxes popping up in the U.S. How do you see that evolving?
Chadwick: This is sort of an extension of what we’ve seen at the international level. And we would look to continue addressing them in the U.S.—looking at the various principles, like ‘What is a principled way to tax these activities?’
These are taxes if these are taxes that are levied on net, as opposed to gross based revenue, and that they apply across as many industries as possible so they’re not trying to ring fences and aspects.
But also, whenever they bring in the idea and notion of any new taxes, two things to be mindful of: one, understanding the tax so that every company can have certainty. When I go to talk to my CFO, my CEO, or anyone on the board, they want to understand, “Francois what certainty do we have around that tax? What can you tell me, because then we then we can do more planning around it.”
The other thing is to make sure that it creates a level playing field across all businesses in a similar space. So, some businesses, their core function may be something that’s caught by this new tax; other businesses, it may be peripheral to what they actually do. Now, is that peripheral part of their business to be caught? Technically that answer should be yes, because that would be a level playing field.
When it comes to actually implementing the taxes, there’s a lot there that we can give advice on because we’ve seen the good, we’ve seen the bad. We know what works. For example, don’t ask for tax returns to be filed one day after the month of the quarter end because digital companies, we are digital companies, but it still takes us a little bit of time to collate the information to be able to file a return. So there’s some practical aspects that we bring to the table when we’re talking to tax authorities and state tax authorities around the world.
Bloomberg Tax: So what have you been reading while working from home? What has kept you going?
Chadwick: I read biographies of bands, music bands. I am reading one right now from New Order, the band out of Manchester (U.K.), which is my home town. And it’s written by the bass guitarist called Peter Hook. I read that, sort of, in my wind-down and leisure time.
I’m also very fortunate I have a tool shed. I go and build things in my tool shed. Right now I’m building a mirror. Prior to that I built a little library, a little library where you put it at the front of your house and we leave books and take books and so that’s what I do in my spare time.
Bloomberg Tax: Are you a Manchester City person or Manchester United person?
Chadwick: Coming from Manchester, when I was growing up in the 70s and 80s, you were a Manchester City fan. Now, my nephew, Henry, is growing up in Manchester right now, I think he is about 13 years old. It’s changed. And I believe, now if you’re in Manchester you support Manchester United, but I’m definitely a Blue, Manchester City.