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EU proposes online turnover tax for big tech firms

Discussion in 'The NF Café' started by RavenSupreme, Jun 13, 2018.

  1. RavenSupreme Well-Known Member

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    BRUSSELS (Reuters) - The European Commission proposed rules on Wednesday to make digital companies pay more tax, with U.S. tech giants such as Google ( ), Facebook ( ) and Amazon ( ) set to foot a large chunk of any bill.




    However, many EU leaders, who will debate the issue of how to claw taxes from the elusive new digital economy at a Brussels summit on Thursday, oppose the executive’s proposals. Despite support from big powers Germany and, especially, France, that risks making it very hard to turn the idea into European law.

    Under the Commission’s plan, companies with significant digital revenues in Europe will pay a 3 percent tax on their turnover on various online services in the European Union, bringing in an estimated 5 billion euros ($6.1 billion).

    EU Economics Commissioner Pierre Moscovici brushed off accusations that he was going after rich American tech companies to enrich EU coffers at a time when the bloc is at odds with the Trump administration over trade and taxation issues.

    “This is neither a GAFA (Google, Apple, Facebook and Amazon) attack nor an anti-U.S. attack proposal that will target any company or any country,” he told a news conference.

    The tax would apply to large firms with annual worldwide revenue above 750 million euros ($920 million) and annual “taxable” EU revenues above 50 million euros.

    The legislation comes as the United States unsettles Europe with its own tax reform and the threat of a trade war along with reports that Facebook user data was accessed by a consultancy to help President Donald Trump win the 2016 election.


    EU antitrust authorities have also been busy investigating the business practices of Amazon, Google and Apple, leading to accusations, which the Commission denies, that it is targeting Silicon Valley.

    While some smaller EU states such as Ireland and Luxembourg fear the proposed tax would undermine their ability to attract multinationals to base themselves in their jurisdictions, others see the measure as more likely to shift taxes toward bigger countries in the bloc rather than raising more revenue in Europe overall.

    Irish Prime Minister Leo Varadkar called the measure “ill judged” and urged Brussels to wait and take its lead from global proposals planned by the OECD group of industrial states.

    The tax, designed as a short-term measure before the EU finds a more comprehensive way to tax profits based on where they do business, could also encompass other high-profile U.S. firms such as Airbnb and Uber [UBER.UL].

    It is designed to apply to activities in which users play a role in value creation - whether via online advertising, such as in search engines or social media, via online trading or in the sale of data about users.

    DEEP DIVISIONS
    The Commission said that top digital firms, whose average revenue growth of 14 percent far exceeded that of other multinationals, faced an effective tax rate of 9.5 percent, less than half the level of traditional companies.

    The proposals require backing from the European Parliament, where there is considerable support. But tax reforms also need the backing of all 28 member states to become law.

    Large EU states have accused the tech firms of paying too little tax in the bloc by routing some of their profits to low-tax member states such as Ireland and Luxembourg.

    U.S. tech companies themselves have said they are paying tax in line with national and international laws and, in some cases, that the tax should be paid in the United States on profits repatriated there.

    The proposal is to tax companies according to where their digital users are based.

    EU diplomats predicted it would be hard to push through the legislation, among the most important for the bloc, because of deep divisions between larger countries set to gain more tax income and smaller ones set to lose.

    Commission Vice President Valdis Dombrovskis said that the EU would prefer globally agreed rules, but that the amount of profits currently going untaxed was unacceptable.

    The tax would apply to online advertising sales, which would bring in companies such as Google and Facebook, to platforms offering services such as interaction with other users or online sales and to those selling data generated from users.

    The tax would be collected in countries where the users are located.

    Tech industry groups have complained that it is wrong to tax revenues as that would unduly hit companies. Some companies however could feel less pain than others.

    Amazon declined to comment. The proposed tax is likely to have only a minimal impact as the company already posts revenues and pay taxes in Germany, France, Italy, Spain and Britain where it has dedicated country websites since 2015.

    Facebook, which also declined comment, changed its accounting last year to record local advertising revenues in the countries where it is present instead of its Dublin base.

    The Information Technology Industry Council, whose members include Amazon, Google, Facebook, eBay ( ) and Dropbox ( ), warned that the EU plan may drive away investments and harm global trade.

    The Association of Chartered Accountants (ACCA) was similarly skeptical that it would be temporary.

    “Over the years many ‘temporary’ or transitional tax measures have in fact become embedded into the economy, and negotiating changes to that status quo are far more troublesome than it would have been to implement a better solution from scratch,” Chas Roy-Chowdhury, ACCA’s head of Taxation, said.



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    This is slowly becoming a topic in the media here, as it would be a massive action, comparable if not exceeding, the "tariffs on cars" Donald Trump is proposing.

    The thing is: While Trump always talks about having a trade deficit with the EU, this only measures goods and industrial products.

    In the service department (Apple, Google, Microsoft, Amazon - the big ones) its actually the completel opposite, with the US having a massive surplus of 167 Billion dollar (which Trump or the supporters for tariffs never mention somehow).

    Would such a proposal actually be passed, tech giants who basically make 50% of their turnover in Europe would be hit with a tidal wave - and a massive left swing in terms of trade war.

    It was really quiet about this for a long time. But recently it gets mentioned a lot more and moves from a fancy idea to "show Trump what the EU can do so he backs off" to an actual debated topic.

    What are your thoughts on it?
     
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  2. Roman Chariot

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    Well this is slightly surprising. The EU is more hellbent on destroying the internet than the FCC. But at least with this, I'm sure that whatever measures the EU wants to implement will be met with great opposition from the people they least want opposition from.

    Hint: they're less interested in pissing off businesses than they are in pissing off the masses.
     
  3. wibisana still newbie

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    Poland
    How can you tax foreign company lol. It always boogle me. So if this just like tariffs means it is lesser free market
     
  4. Roman Chariot

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    Google has offices in Europe as well. I imagine their branches there will be subject to local taxes, similar to any multinational company.
     
  5. stream Do something, Naruto!

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    The issue they have is that big internet companies are really aggressive in reducing their tax bill. For instance, every ad that Google sells in Europe is technically sold from Ireland, so France and UK (in particular) are really pissed off that Google has hundreds of employees in their country, makes billions in their country, and pays a tiny tax bill in their country because all the Google employees do in their country is technically just administration and development stuff which is not very profitable. Ireland has low taxes, and some very interesting loopholes that make it very profitable for companies to declare their revenue there.

    In a sense, it's their own damn fault. They created themselves the unique market, ensuring that a small company in one European country can sell over the whole continent, without going through the hassle of declaring their tax revenue separately in every country. In my opinion, UK totally hoped that all big international corporations would do exactly what they are doing, but from the UK, since they have a relatively low corporate tax compared to Germany and France. They just never saw Ireland coming. I'm not sure if the others were idealists or naively thought that corporations would not shop around for the lowest tax system.

    In a sense, it's not very different from the US states that were complaining about Amazon not collecting sales tax in their state, and that changed their laws and added various weird taxes until Amazon gave up and started paying.
     
  6. wibisana still newbie

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    Why cant VAT be enough? I.e. European Danone put a billion dollars advertisement in europe Google. Just slap 10% (or any %) VAT on that deal.
     
  7. stream Do something, Naruto!

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    Countries are used to being able to charge VAT, and tax the profits :maybe
     
  8. Undertaker elect the dead

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    Well, Ireland had a good run in the right time when digital economy was new and on the rise. But I don`t see them winning against EU in the long term.
    Some important details
     
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