by WorldTribune Staff, March 21, 2018
The European Commission, the executive arm of the European Union (EU), announced on March 21 it was bringing its tax rules “into the 21st century” with the unveiling of a new tax on digital companies.
Though the EU said the digital tax is not aimed at any country or company, the move is seen as squarely aimed at U.S. tech giants such as Facebook and Google.
The EU tax plan includes an interim measure which will target mainly U.S. companies with worldwide annual turnover above 750 million euros ($924 million), such as Facebook, Google, Amazon, Twitter, Airbnb and Uber.
The interim measure would impose a 3 percent tax on revenue generated from the digital activities of companies meeting the 750 million euro threshold. The tax includes online advertising and the sale of user data.
“It is not an anti-U.S. tax,” said EU Economics Affairs Commissioner Pierre Moscovici. “It is just about taxing properly those companies who generate value through digital activity in Europe.”
The Commission estimates that digital businesses pay an average effective tax rate of 9.5 percent, compared with 23.3 percent that traditional businesses pay.
“The amount of profits currently going untaxed is unacceptable,” European Commission Vice President Valdis Dombrovskis said in a statement. “We need to urgently bring our tax rules into the 21st century.”
The Commission said its “preferred long-term solution” is a tax on digital profits where they are generated, even if companies do not have a physical presence in the country.
Under EU law, firms like Google and Facebook can choose to book their income in any member state, and many companies choose low-tax nations like Ireland, the Netherlands or Luxembourg. Amazon operates across the EU, but is headquartered in tiny Luxembourg, which has offered sweetheart tax deals that have allowed the firm low effective taxes.
U.S. Treasury Secretary Steven Mnuchin said last week that “The U.S. firmly opposes proposals by any country to single out digital companies.”
Smaller European digital start-ups and companies, such as Netflix, which depend on subscriptions will be spared from paying the EU’s digital tax.