Review on EU plans to raise tax bill of online giants gather momentum

EU plans to raise tax bill of online giants gather momentum

Nearly one third of European Union states backed a plan to tax digital multinationals on their turnover, France said on Friday, as the EU weighs a range of other measures to increase the tax bill of companies like Google and Amazon.

European Economic and Financial Affairs Commissioner Pierre Moscovici gestures during his meeting with Greek Prime Minister Alexis Tsipras (not pictured) at Maximos Mansion in Athens, Greece, July 25, 2017. REUTERS/Alkis Konstantinidis/Files

TALLINN: Nearly one third of European Union states backed a plan to tax digital multinationals on their turnover, France said on Friday, as the EU weighs a range of other measures to increase the tax bill of companies like Google and Amazon.

The moves are part of a growing campaign in the EU to claim tax revenues that online giants are accused of skirting by routing most of their profits to low tax rate states, like Ireland and Luxembourg.

"The digital economy should be taxed as the rest of the economy," the EU commissioner for taxation, Pierre Moscovici, told reporters upon his arrival on Friday to a meeting of euro zone and EU finance ministers in Tallinn, the Estonian capital.

A report published on Thursday by influential EU lawmaker Paul Tang estimated that Google, which has its EU tax residence in Ireland, paid taxes not higher than 0.8 percent of its EU revenues between 2013 and 2015.

Facebook, also based in Ireland, had a ratio as little as 0.1 percent in the same period, while Luxembourg-based Amazon paid almost nothing as it reported nearly no profits.

Facebook and Google were not immediately available to comment on the proposals when contacted by Reuters.

COMPETING PLANS

Most of the 28 EU states agree in principle with more effective taxation of digital companies, but differences remain on how to move forward.

A plan proposed by France to tax large digital corporations on their turnover, rather than on their profits, is gaining supporters, although still needs technical work.

France's Finance Minister Bruno Le Maire told a news conference on Friday that a total of nine countries "formally joined the initiative". In addition to France, they are Germany, Italy, Spain, Austria, Bulgaria, Greece, Slovenia and Latvia.

A tax on turnover would raise revenues also from companies, like Amazon, that do not report profits, and would be likely applied quickly, a European official said.

However, it would need to be made compliant with EU internal market rules. States could also apply it unilaterally, but that would expose them to a higher chance of legal challenges, the official said.

Opposition from smaller states would need to be overcome, as countries like Ireland and Luxembourg may lose tax revenues from the new framework.

Tax reforms in the EU need unanimity among EU states, a factor that has blocked many overhauls in the past.

Estonia, who holds the EU rotating presidency, is pushing for a more structural approach. It wants the EU to agree that a company could be taxed when it is "virtually" present in a country, through a digital platform for instance.

At the moment, businesses are taxed only in countries where they have a concrete presence, such as a plant.

This change could be introduced in a review of EU rules on the tax base that are under discussion in the Parliament and among EU states. Tang plans to submit an amendment going in that direction.

The European Commission, the EU's executive, said it will present in the coming days a document listing several options for moving forward.

A Commission official said the document could propose five or six possible measures, including the French and the Estonian plans. He warned against risks of diverging taxation in EU states and insisted a compromise on a common set of rules should be the objective.

The document will be ready for a summit of EU leaders dedicated to digital issues that will be held in Tallinn on Sept. 29, Moscovici said.

(Reporting by Francesco Guarascio @fraguarascio, editing by Robin Emmott)

Source: Reuters, http://www.channelnewsasia.com/news/technology/eu-plans-to-raise-tax-bill-of-online-giants-gather-momentum-9222100

Review from Maria S.

The article mainly discussed about the EU's plan in raising tax bill of online companies. It is written that almost a third of European Union states backed a plan to tax digital multinational company on their turnover. The move is part of a growing campaign in the EU to claim tax revenues that online giants are accused of skirting by directing most of their profits to countries with low tax rates, such as Ireland and Luxembourg. In other words, they are some of the tax evaders who hide their income from being taxed high. A plan put forth by France to tax a large digital company on their turnover, not on their profit. The policy is aimed because taxes on turnover will increase revenue also from companies, such as Amazon, which do not report profits. However, the opposition of small countries needs to be overcome, as countries like Ireland and Luxembourg may lose tax revenues from the new framework. Tax reform in the EU requires a unanimous consensus among EU countries. Estonia, which holds the presidency of the European Union wants the EU to agree that a company may be taxed when "almost" exists in a country, through a digital platform for example. Today, businesses are taxed only in countries where they have a concrete presence, such as factories.

Well, such an interesting issue to discuss! I personally agree with the author's view on this issue. As we know, in this modern era, technology plays a big role in everyone's life. Of course, giant online companies such as Google, Facebook, Amazon are generating huge revenues from the services they generate. Although there is a debate as digital companies are not concrete in presence, they are still a profit-making company in many countries. Thus, they must also return some of these profits to contribute to building the country in where they operate.

Moreover, I strongly agree with this program. Through this policy, the company becomes more obedient in carrying out their obligations in paying taxes. If the program is a success, it can be a role model for other companies to be obedient also. Besides, this is also a big step because justice can be upheld. It is ironic to see a small income-earner fulfilling his tax obligations, but giant corporations that make high profits from all over the world do not want to return the favor to the country in which they benefit. Probably, everyone does not like paying taxes because nobody likes their earnings to be cut. Likewise with giant companies that are subject to high tax rates. But, very unfortunate if they avoid paying taxes that have become their obligation, as there is written they’re accused of skirting by routing most of their profits to low tax rate states, like Ireland and Luxembourg. However, before obtaining the right, every person or entity should have complied with their respective obligations. Thus, no one is harmed: the company is profitable, development in the country is also running well.

My comment about Maria’s review :

Hallo, Maria! In this afternoon, I will leave a comment under your review. So, at first I want to give a compliment to you, you are so dilligent, Maria! You accomplished the task incluiding earlier than the others! Congratulations!

Wow, I really like your arguments, Maria! The second sentence of the second paragraph, you told that in this modern era, technology plays a big role in everyone's life. Because this is ‘really’ us, right? We spent almost quarter of our time a day for using a technological advances. And we as a student ussualy using goggle to search for course material, searching for information that we need, download movies or dramas, and more. Everything information that we need, we get from google. So, of course google has a lot of revenue, because people who using Google is not just one person, but many people around the world. In every country.

I wonder why they really don’t want to pay taxes sesuai dengan ketentuan. And at least they only want to pay the taxes with low ratio. Whereas they have a lot of revenue that is large nominal we can’t imagine how much it is. As we know, the tax is progressive. the greater the income earned from the business, the greater the tax to be paid.

And yeah! You are absolutely right that although digital companies are not concrete in presence, they are still a profit-making company in many countries. As we know that, persons or entities residing in a country for making a provit/advantages, will be taxed.

Lastly, your last sentence exactly what I thought, that before obtaining the right, every person or entity should have complied with their respective obligations. Thus, no one is harmed.

I think enough, please forgive me for any mistakes. Good job!