Wednesday

1st Apr 2020

EU big four push to tax internet giants

  • “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries,” the ministers said (Photo: Derzsi Elekes Andor)

The eurozone's four main countries are pushing to tax internet giants on their turnover rather than on their profits, in an effort to prevent them from taking advantage of low tax rates in some member states.

In a letter to the Estonian EU presidency and the European Commission, the finance ministers of France, Germany, Italy and Spain ask the EU executive to design an "equalisation tax" on turnover, so internet companies can pay tax where they make money rather than where they registered.

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At the moment, companies such as Google, Apple, Facebook and Amazon - the so-called Gafa - can pay minimal taxes in Europe thanks to subsidiaries in low tax rate countries like Ireland.

Their profits are reported where the subsidiary is, even if revenues are generated in other countries.

Earlier this year, French judges said that Google was not required to pay over €1 billion in taxes on revenues made through its AdWords service, because it has no "permanent establishment" in France.

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the ministers say in their letter.

They insist that the issue is a question of "economic efficiency," as well as justice and sovereignty.

France's Bruno Le Maire, Germany's Wolfgang Schaeuble, Italy's Pier-Carlo Padoan and Spain's Luis de Guindos will present their proposal at an informal meeting of finance ministers in Tallinn later this week.

The idea was pushed by Lemaire over summer, with Germany reluctant to follow. Schaeuble eventually joined his French colleague and they were followed by Padoan and de Guindos.

Their letter follows an Estonian proposal last week to tax internet companies in countries where they make profits, not only where they are registered.

The proposal would take into account their digital presence rather than physical presence in countries.

The discussions come ahead of a digital summit in Tallinn on 29 September, where EU leaders will discuss how the digital sector can boost the EU's economy in the long term.

Questions of innovation, but also cybersecurity, e-governance and taxation will be on the table.

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