Personal income taxes in the Internet era

Some time ago I published an article related to taxation on offshore online services and products, where I analized the Pandora box that has opened with the initiative, in many countries, to tax sales of Google Adwords to local residents, be people or corporations. Since that tax referred to sales related with ICT, I wrote it in my ICT blog. Here, in my Knowledge Society blog, I will write about yet another taxation aspect that the Internet will bring around: the personal income tax.

 The world wide web has fostered and triggered the knowledge society. One of the main features of the Knowledge Society is that the best jobs are knowledge-oriented jobs. And knowledge oriented jobs may increasingly be donde from any country with a good bandwith. Therefore, well paid freelancers and hired people could decide where to live. And one variable in the balance could clearly be the taxation over incomes. Why stay in a country which takes away, say, 40% of all income when he or she could be living in a fiscal paradise in the Caribbean, only hours away from HQ by airplane?

If governments of small pretty countries are smart enough, they could proactively attract knowledge workers around the world - with their earnings attached. Therefore, they could build a bigger GDP not by attracting investments, but by capturing personal incomes.

The same could apply to corporations, specially if they produce and sell services or intangibles. Why stay in a country where they pay more taxes? They can have their HQ where less taxation resides and have their employees scattered all over the world - wherever they want to live.

Work has become liquid, therefore personal income has become liquid - and taxation of personal income follows.

I would love Governments around the world competing to attract knowledge workers with lower tax rates and bigger quality of life!

Alfredo Barriga