Dr. Simeon Djankov:

The Senator is correct and these are exactly the countries I mentioned already, Korea as well as Brazil, that literally in the past two years have come up with potentially global ways to tax trade and services, either goods or pure services over the Internet. That has made some of the global corporations uneasy.

The companies ask how a country knows how much money they are actually making from that country's market. Therefore, the legislature in Korea came up with an innovative solution which basically gives two options. One option is for a company like Google or Amazon to report every year to the Korean state how much money it made from the Korean market, which currently is not done as there is no such regulation at the global level. Otherwise, if the company does not do that, from January 2017 Korea by law imposed a minimum, which is a percentage of what Korea, based on the analysis of the Korean finance ministry, thinks are the company's sales in Korea. Therefore, from last year, all of the companies we discussed essentially pay the equivalent of a value added tax. They complain but the money is quite significant.