New EU plan to raise web gi­ants’ tax bills

Ire­land set to re­sist pro­pos­als on Face­book, Google

Irish Daily Mail - - News - news@dai­ly­ By Daily Mail re­porter

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’.

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