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Europe’s Effort to Raise Tax Bill on Google, Amazon Gains Momentum

September 15, 2017, 9:26 PM UTC

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 EUfinance 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% of its EU revenues between 2013 and 2015.

Facebook, also based in Ireland, had a ratio as little as 0.1% 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.

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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.