Tuesday, 18 September, 2018

European Union proposes strict new taxes on large technology companies

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Jean Garcia | 22 March, 2018, 01:51

On Friday the European Commission formally published a 10-page document listing proposed products, including corn, which could become subject to a 25% counter-tariff should the USA go ahead with its plan.

With this rare tax move, Brussels is upping the ante in its longstanding battles with Silicon Valley and Washington.

The next step will be submitted these proposals to the Council for adoption and to the European Parliament for consultation.

The plan also includes an interim measure that would allow countries to tax at a rate of 3 percent companies with total annual revenue of 750 million euros and revenues in Europe of 50 million euros.

"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", Pierre Moscovici, Europe's commissioner for economic and financial affairs, taxation and customs said.

Under EU law, firms like Google and Facebook can choose to book their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

Digital companies would fall into the net if they make €7 million or more each year in the relevant country.

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"Our proposal doesn't target any company or any country", he said. The Frenchman did not name any companies.

Tech industry groups have complained that it is wrong to tax revenues as that would unduly hit companies.

The proposals unveiled Wednesday also support the argument that Europe is the world's most prominent regulator of technology and digital services. The dominance of Silicon Valley in the industry has, however, spurred criticism that European regulators are too harsh on USA businesses, an allegation officials in Brussels strongly reject. That means the big fish: Facebook, Twitter, and Google, among others.

Under the plan, companies including Google and Facebook with significant digital revenues in Europe will pay a 3 percent tax of their turnover on various online services in the European Union, generating an estimated $6.1 billion a year. Officials added that the Commission opted to pursue this technique, as "there is legally no other way to do it".

To deal with this problem, the Commission has also proposed a wider reform of corporate tax rules, so that profits are registered and taxed where businesses have significant interaction with users through digital channels. The European Commission estimates that up to 150 companies could be affected, around half of them from the U.S.

"The US firmly opposes proposals by any country to single out digital companies", Mnuchin said.

It's not clear how far down this new proposal reaches. That condition could prove challenging for the short-term tax on revenues. "We need to urgently bring our tax rules into the 21st century by putting in place a new comprehensive and future-proof solution", said commission vice president Valdis Dombrovskis. "But current tax rules were not created to cater for those companies that are global, virtual or have little or no physical presence".

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