We Need to Factor Taxes into the Business Case for Cloud Computing
According to Channing Flynn of Ernst & Young, (discloser: I worked for E&Y in 1997)…“Many CEOs and CIOs have not grasped the full impact on their organizations of this (cloud computing) technology megatrend as they increasingly look to adapt it to their businesses to meet new challenges. One important area of oversight is the potential impact on the global tax position of the company.”
Okay, taxes are boring. I get that. However, as we continue to create business cases for cloud computing, taxes should be considered in the mix. This is where CPA and tax attorneys need to weigh in, considering that some the tax issues around cloud computing are unique.
“Indeed, cloud computing is often borderless, but tax regulations and tax compliance requirements are not. That simple-sounding conflict can give rise to complex and potentially material or significant tax issues, mainly for cloud service providers (CSPs). To date, at least, in the evolution of cloud computing, most jurisdictions view CSPs as the responsible party for tax purposes regardless of any arrangements struck between CSPs and their users.”
Unfortunately, we have some turmoil that will surely arise as we figure this out. Much as we did in the 90s, with the rise of Internet-driven commerce and the tax issues around that rising technology at the time.
The key message here is to make sure to consider taxes in the overall business cases. In many jurisdictions, for many companies, they could remove much of the value in moving to the public cloud.
