Word on the web: Big tech tax tensions

EU reacts to plans for a big tech tax
by Bethan Rees

Big technology firms face paying more tax under plans announced by the EU’s executive arm, writes Viktoria Dendrinou for Bloomberg.  

The tax is a levy on revenue, not profit, and the announcement comes as many EU countries voice concerns that the technology industry isn’t paying its fair share of tax. Companies such as Apple and Amazon have been dealt large fines in the past for taking part in tax-avoidance schemes. The proposed tax would cover ‘big tech’ companies with “annual worldwide revenue above €750m and sales from taxable digital services within the EU above €50m”, that offer advertising services or sell user data, such as Google and Facebook, and companies that allow users to make transactions directly to one another, such as Airbnb or Uber. 

The tax will focus on where the users of the firms are based, rather than where the company is headquartered. Dendrinou explains how this will work: “If Facebook sold an ad based on its users in Brussels, say, it would pay the tax in Belgium. Under the proposed plan, the tax rate would be 3% of digital-services revenue. That could yield about €5bn in new tax revenue a year.”

The digital tax is being viewed as an interim step, until the European Commission proposes a more inclusive strategy. Dendrinou reports that EU leaders prefer a global approach, but some member states have said they will move alone until it becomes more of an international issue. 

Bloomberg article
Irish business group rejects tax Not everyone is on board with the proposed digital tax, writes Simon Carswell for The Irish Times. Irish business representative group Ibec has rejected the European Commission’s idea. 

Danny McCoy, Ibec’s CEO, spoke to The Irish Times in Brussels about France’s EU economics commissioner Pierre Moscovici’s plans: “We have watched all this shape-throwing before. They are always going nowhere but they can be quite damaging before they get revealed as the folly they usually are. They create a lot of noise and uncertainty.”

In a hastily produced report, Ireland in the EU: a dynamic future, Ibec warns about the damaging impact of the proposed 3% tax, writes Carswell. 

Ibec wants the EU to deal with changes through international agreements led by the Organisation for Economic Co-operation and Development, rather than through individual member states. McCoy also warns that a digital tax could be more damaging to the EU than to Ireland, as it would make the UK a more attractive business place for a multinational technology company after the UK leaves the EU. 

The newspaper also reports that tax experts can’t come up with a precise figure for the initial loss to Ireland, but it could be in the low hundreds of millions of euros out of total corporate tax revenue of €8.2bn, based on the Commission’s estimate that the tax would raise €5bn across Europe.

The Irish Times article
The digital tax and BrexitWhile Ireland fears the digital tax could see US tech companies take flight to a post-Brexit Britain, France’s President Emmanuel Macron believes it could fill the hole left in the EU’s finances after the UK leaves on 29 March 2019. He told reporters in The Hague that a digital tax could raise “half of the financial needs” after Brexit, as reported on Naharnet. 

Citing European Commission figures, he added that there might not be a need to boost EU members’ contributions if the digital tax goes ahead. 

Clearly, not everyone is behind this idea. With Ireland wishing to take a more inclusive, international approach to attract and retain multinationals in its jurisdiction, and France and Germany supporting the tax, it could be some time before a consensus is reached. But one thing is clear – the tax practices of multinational tech companies are under increasing scrutiny from lawmakers and the public.   

Naharnet article 

Seen a blog, news story or discussion online that you think might interest CISI members? Email bethan.rees@wardour.co.uk.
Published: 23 Mar 2018
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