Published: Thu, March 22, 2018
Money | By Wilma Wheeler

European Union targets the likes of Facebook and Google with tech tax plan

European Union targets the likes of Facebook and Google with tech tax plan

The EU unveiled a plan on Wednesday created to get big U.S. tech companies, including Google, Amazon and Facebook, to pay more tax in Europe.

Under the plan, companies including Google and Facebook with significant digital revenues in Europe will pay a 3 percent tax of their turnover on various online services in the European Union, generating an estimated $6.1 billion a year.

In this rule, a company would be eligible to be taxes if it had more than 100,000 users, and earns more than 7 million euros annually, or over 3,000 "business contracts for digital services" inside the country.

The EU tax would affect revenue from digital advertising, paid subscriptions and from "sale of data generated from user-provided information", the European Commission said.

US objections alone won't scuttle the EC proposals.

The US Treasury secretary, Steven Mnuchin, told the New York Times that gross taxes on internet companies were "not fair", on the sidelines of a debate among G20 finance ministers on taxation in Buenos Aires this week.

Under EU law, firms like Google and Facebook can choose to book their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

The proposals still need backing from the European Parliament and the 28 EU member states.

When expanding into Europe, Silicon Valley's companies have chosen countries with low tax rates, like Ireland, to set up their headquarters, even though they conduct business throughout the continent.

However, the proposal is projected to bring in a mere $6 billion in revenue-weak by the EU's standards. The measure would only apply to companies with global revenues of €750m and €50m in the EU. While unanimity will be hard - Irish prime minster Leo Varadkar on Wednesday called the tax "ill judged" - some countries may introduce their own revenue taxes if the EU-wide initiative ultimately collapses.

This has led many countries to become concerned that their source of tax revenue is shrinking. "But it also requires adjustments to our traditional rules and systems".

On Friday the OECD, which is also working on ways to modernise the global rules of corporate tax to take better account of digitalisation, said it does not recommend the introduction of interim measures by individual countries or groups of states.

This will only be an interim measure until a more "comprehensive reform" has been implemented.

Its implementation will be fiercely fought by the USA 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 lobby group which represents around 700 USA companies operating from Ireland suggested that proposals, which are being discussed today at a meeting of the commission, should be agreed internationally through the OECD.

It noted that nine of the world's top 20 companies by market capitalisation are now digital compared to one in 20 ten years ago.

The European Commission said it wants to introduce new taxes for large technology companies in Europe.

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