European Union proposes strict new taxes on large technology companies
European Union proposes strict new taxes on large technology companies
The EU wants to raise taxes for giant tech companies in Europe
26 March, 2018, 02:35
The proposed plan includes an interim proposal and a long-term reform plan.
On the other side, countries like Luxembourg and Ireland, where taxes are low and many tech companies are based, oppose the idea and argue for a global move within the G20 or the OECD, a rich countries' club.
On one side, a group of member states led by France are calling for a better European Union taxation of digital companies, which now often bypass rules by locating headquarters in a select few low-tax countries.
The proposal is envisaged as a short-term measure before Brussels finds a way to tax the profits of companies on the basis of where they are doing their business.
The Commission proposes that a digital platform should be deemed to have a taxable "digital presence" or a virtual permanent establishment in a member state if it fulfils one of three conditions. The proposal came as Facebook faced official probes into how data from 50-million of its users ended up in the hands of Cambridge Analytics, a company with a close relation with USA president Donald Trump and his 2016 campaign bosses.
The plans are aimed at bringing the rules up to date, as digital businesses face accusations of avoiding tax in countries where they operate but may not have a physical presence. In addition, it's proposing an unorthodox interim tax that would apply to revenue, rather than profit generated inside the EU.
The tax, designed as a short-term measure before the European Union finds a more comprehensive way to tax profits based on where they do business, could also encompass other high-profile US firms such as Airbnb and Uber [UBER.UL]. The Commission said that this is created to help to ensure that smaller start-ups and scale-up businesses are not affected by the new rules.
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"We agree with the fundamental thesis of the European Commission: today's tax systems do not reflect that today's economy is digital".
Its implementation will be fiercely fought by the US commerce and treasury departments and the American companies - Facebook, Alphabet (owner of Google), Amazon and Twitter, among them - that dominate the digital commerce industry in Europe and around the world. The Commission estimates that it could bring in €5 billion a year for member states if set at a rate of 3%.
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"Several EU countries are already taking unilateral action, creating inconsistencies and loopholes in the Single Market and making it a legal minefield for companies", it says.
"The OECD is already working on the issue, and the United States is around the table", another diplomat noted, wondering if it would be "judicious" to make the discussions more hard with a "unilateral" tax. "Worldwide consensus is going to be hard to reach but double taxation is likely to result if the system is not changed in a coordinated way", Catherine Robins said.
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