Wednesday, 17 October, 2018

Proposed EU laws crack down on tax-avoiding tech giants

Proposed EU laws crack down on tax-avoiding tech giants Proposed EU laws crack down on tax-avoiding tech giants
Michele Schwartz | 26 March, 2018, 02:36

The commission estimates that member states could raise around €5bn each year with the tax - an amount that "could increase in time", according to European Union tax commissioner Pierre Moscovici.

The Commission said the system will be used exclusively as an interim measure, until the wider reform has been implemented "and has inbuilt mechanisms to alleviate the possibility of double taxation". "The current legal vacuum is creating a substantial shortfall in the budgetary revenues of our member states".

"Our pre-Internet rules do not allow our Member States to tax digital companies operating in Europe when they have little or no physical presence here", said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs. It's worth noting that this would only apply to large companies, with revenues that exceed 750 million euros worldwide and 50 million euros inside the EU.

The Commission explains that current tax rules were not created to cater to those companies that are global, virtual or have little or no physical presence.

European Union 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.

European Trade Commissioner Cecilia Malmstrom, who will lead negotiations on behalf of the 28-state European Union, said it was not clear from her talks with US counterparts this week what would satisfy the ultimate arbiter in the White House. It is meant to establish "a real link between where digital profits are made and where they are taxed".

Smaller European digital start-ups and companies, such as Netflix, which depend on subscriptions will be spared from paying the EU's digital tax. But until that happens the EC thinks it's fair enough to slap a 3% tax on revenues (not profits, mind) on online advertising, the sale of user data and digital platforms that facilitate interactions between users.

The UK has, for example, announced a number of back-dated agreements to secure more tax from individual firms as it battles for new rules on a global level.

In a rare joint statement, France, Germany, Italy, Spain, and Britain welcomed the commission proposal. He said that "between 120 and 150" firms would fall under the proposed rules, that the proposal "doesn't target any company or country".

The EU's Mr Moscovici sought to reassure that "these proposals are neither a response to a French request nor a response against the United States".

Citing national security, Trump on Friday imposed duties of 25 percent on steel and 10 percent on aluminum while granting a five-week waiver to the EU, Canada, Mexico, Brazil, Argentina, Australia and South Korea.

EU Commissioner for trade Cecilia Malmstrom met yesterday with Lighthizer and USA commerce Wilbur Ross in Washington to try and secure an exemption.

Latvia has already said it will make expulsions, EU President Donald Tusk said more steps were expected as early as Monday and German Chancellor Angela Merkel said further coordinated actions were "necessary" to respond to the attack.

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