New EU plan to raise web giants’ tax bills

Ireland set to resist proposals on Facebook, Google

NEARLY one third of EU states have backed a plan to increase the tax bills of internet giants like Facebook and Google, it has emerged.

EU finance ministers met in Estonia yesterday and nine countries agreed on proposals to tax digital multinationals on their turnover, rather than their profits.

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

‘The digital economy should be taxed as the rest of the economy,’ the EU commissioner for taxation, Pierre Moscovici, said yesterday.

The moves will be strongly resisted by the Government, as Ireland is heavily reliant on the large multinationals basing themselves here.

Our low corporation tax rate of 12.5% is the main incentive for companies like Google and Facebook to remain here.

A report published on Thursday Tax plan: Pierre Moscovici 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 here, had a ratio of 0.1% in the same period, while Luxembourg-based Amazon paid almost nothing as it reported nearly no profits.

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.

French finance minister Bruno Le Maire said yesterday morning 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 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.

The plans will likely face a backlash from smaller countries, such as Ireland and Luxembourg.

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

Estonia, which holds the EU 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 aimed in that direction.

The European Commission said in the coming days it will present 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. The document will be ready for a summit of EU leaders dedicated to digital issues that will be held in Tallinn on September 29, Mr Moscovici said.

Meanwhile, Moody’s yesterday upgraded Ireland’s sovereign credit rating to A2 – otherwise known as ‘stable outlook’.

Finance Minister Paschal Donohoe welcomed the ratings upgrade as ‘an acknowledgement of our continuing economic improvement’.