EU states propose revenue-based tax to end tech giants’ escapism

11 Sep 2017


US tech giants like Google, Amazon, Apple and Facebook, which do business in the European Union, have long avoided paying billions in taxes by using low-tax European countries like Ireland for parking funds. Now this might come to an end, under a proposal by a group of European Union member countries led by France.

The finance ministers of France, Germany, Italy and Spain have sent a joint letter to the presidency of the EU (now held by Estonia) as well as the European Commission, saying the companies need to be taxed on total revenue rather than profits.

''We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries,'' the letter read. ''The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax,''

It proposed an ''equalisation tax'' which would bring the companies' tax rates in line with the level of corporate tax in the country where the tax was earned.

It also calls for ''permanent establishment'' of a tax regime which will make it possible to tax companies where they create value rather than providing them tax havens where they have their tax residence.

Currently, EU treaties require tax proposals to have the unanimous support of all member countries, meaning any such measure would need to win over the countries doing the tax sheltering, like Luxembourg and Ireland. Cut-rate corporate tax rates are a way for those countries to attract revenue, though the end result is that large, profitable tech giants and other multinationals are able to pay next to nothing or even nothing in taxes in some of their markets.

Authorities believe the new approach could finally force the tech companies to shell out.

A French government official said that a turnover tax, even levied at a low percentage, had the potential to deliver a tax take that was ''orders of magnitude'' higher than what European governments had managed to collect so far. It is envisaged that the tax could be set at somewhere between 2 and 5 per cent of turnover, the official said.

The Guardian reports that this summer, Google's parent company Alphabet managed to avoid paying a €1.11 billion ($1.27 billion) tax bill in France, after courts determined its use of an Irish subsidiary was legal. Apple was not so lucky in 2016, when the EU ordered it to pay some €13 billion in back taxes originally saved by routing the money through Ireland, but it said it would appeal the decision.

The Times noted that rental app Airbnb paid less than €100,000 ($120,000) in taxes last year throughout all of France, which might have set the tone for a wider crackdown on people using the service to rent out residences in Paris this summer.

In August, it was revealed that Amazon paid just £7.4 million in taxes in the UK in 2016, despite in 2015 making an estimated £7 billion in UK sales - though the low total was partly due to issuing shares to employees.

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