European Union Continues Push for Digital Tax

European Union Continues Push for Digital Tax

At a G20 meeting held in Argentina earlier this week, the European Union’s finance ministers continued their push to implement a digital tax on major US tech companies.
 
As reported by Reuters’ Daniel Flynn and Luc Cohen, the EU ministers issued a communiqué in which they vow “to address the impacts of the shift to a digital economy on the international tax system by 2020.”
Pierre Moscovici, the European Commission’s Head for Economic and Financial Affairs, said these major tech companies have “to pay their fair share of tax, because basically what we are talking about here is fairness.”
Another official, who chose to remain anonymous, commented, “We cannot accept that our SMEs (small and medium enterprises) have a level of taxation 40 points higher than the level of taxation of Internet giants.”
 
This move clearly shows Europe’s willingness to stand up “united and strong” against the Donald Trump administration.
 
Fortune’s David Meyer writes, “Allthis demonstrates how Trump’s trade war is sucking a variety of issues into its orbit. Just on the subject of the digital economy, the EU’s taxation proposal falls into in a long-running and urgent discussion about how to levy taxes fairly when dealing with highly globalized, competition-slaying online giants.”


Summarizing Europe’s Digital Turnover Tax

The European Commission laid out its plans for this turnover tax earlier this year with two proposals to tackle tax avoidance by large US tech giants.
 
According to Diginomica’s Stuart Lauchlan, the first “is the more wide-reaching, proposing that larger digital companies should be taxed across countries where they do business, not just where they’re headquartered.”
 
Lauchlan writes, “This would apply where a vendor has revenues of €7 million or more than 100,000 users in the country in question of over 3,000 contracts for digital services with businesses in the member state.”
 
The second proposal, says Lauchlan, “applies to large companies with worldwide revenue of at least €750 million and revenue within the EU of at least €50 million and would see such firms revenues taxed at a rate of 3%.”
“At present, firms are taxed on their profits and as such can end up paying little or no tax if their accountants ensure they report losses in individual countries,” he concludes.
 
Moscovici expects this turnover tax to be set in motion on an interim basis by the end of 2018.


Europe’s Digital Tax: Criticisms & Challenges Raised at G20 Meeting

Several challenges or criticisms were brought up during this meeting with regards to the EU’s decision to pursue this digital or turnover tax.
 
Hubert Fuchs, a European Council G20 Representative, said, “One of the big challenges is that taxation of the digital economy is mostly of course a taxation of American companies - because they are the key players in the world - so the United States feel that this is an attack concerning their digital economy, which it isn’t really.”
 
Furthermore, Fuchs said, “Taxation should be where the moneymaking is and if the digital economy is making the money all over the world it doesn’t really make sense if they only will declare their income in the United States.”
 
As reported by Flynn and Cohen, Australia also expressed its concerns over the methodology behind the digital tax as its difficult to pinpoint “how to measure for tax purposes the value of the data users of social media services like Facebook create outside of the countries where those companies are based.”
 
Scott Morrison, Australia’s Treasurer, said, “We’re not convinced at this point about the efficacy of those interim measures - which is basically a sales tax on digital advertising. It is more important to focus on those technical issues rather than the pot-of-gold approach, which is how much revenue can be raised.”
 
To have a look at the full communiqué following the G20 meeting, click HERE.
 
What are your thoughts on this digital tax? Is it a pipe dream? Let us know with a comment!
We use cookies to help us understand and serve you better. Take a look at our Cookie Policy.