Apple Magazine - - Summary -

Tech­nol­ogy com­pany chiefs have warned that a dig­i­tal ser­vices tax pro­posed by the Euro­pean Union would hin­der in­no­va­tion and hurt eco­nomic growth.

In a let­ter to fi­nance min­is­ters of the 28-na­tion Euro­pean Union, lead­ers of 16 tech com­pa­nies in­clud­ing Spo­tify, Book­ and Za­lando say the pro­posed tax would un­der­mine the EU’s goal of a dig­i­tal sin­gle market and “harm the very busi­nesses that are the cat­a­lysts for eco­nomic growth and em­ploy­ment in the Euro­pean econ­omy.”

Jo­hannes Bahrke, spokesman at the EU’s ex­ec­u­tive Com­mis­sion, de­fended the pro­posal Tues­day, say­ing it aims to cre­ate a “level play­ing field” for com­pa­nies whether they are based in or out­side the EU.

“Our pro­posal re­mains fully grounded on the most ba­sic prin­ci­ple of cor­po­rate tax­a­tion which is that prof­its should be taxed where the value is cre­ated,” he said.

How­ever, Bahrke added that the com­mis­sion would pre­fer an in­ter­na­tional agree­ment to a new EU law.

The Euro­pean Com­mis­sion un­veiled its plan in March, in­sist­ing that EU mem­ber coun­tries should be able to tax firms that make prof­its on their ter­ri­tory even if they aren’t phys­i­cally present.

The pro­posal was seen as a way of mak­ing tech giants like Google and Face­book pay more taxes.

Brus­sels ar­gues that cor­po­rate tax rules haven’t kept up with the emer­gence of the bor­der­less dig­i­tal mar­ket­place that al­lows some com­pa­nies to make huge prof­its in Europe yet pay very lit­tle tax.

In the EU, for­eign com­pa­nies like Ama­zon, Google and Face­book pay what tax they owe in the coun­try where they have their re­gional base — usu­ally a low tax haven like Ire­land.

Bri­tain, which is sched­uled to leave the EU on March 29, an­nounced its own tech tax this week.

Trea­sury chief Philip Ham­mond said the pro­posed tax would tar­get U.K.-gen­er­ated rev­enues of spe­cific dig­i­tal plat­form busi­ness mod­els. Ham­mond, like the EU, said he would pre­fer an in­ter­na­tional so­lu­tion.

In their let­ter, tech CEOs warned that the EU pro­posal “will have a dis­pro­por­tion­ate im­pact on Euro­pean com­pa­nies, re­sult­ing in un­fair treat­ment.”

They also said the tax will be dif­fi­cult to im­ple­ment, could re­sult in dou­ble tax­a­tion for some busi­nesses and might trig­ger re­tal­ia­tory mea­sures from other coun­tries.

Ad­dress­ing EU fi­nance min­is­ters ahead of a Nov. 6 meet­ing, the let­ter urged them “not to adopt a mea­sure which would cause ma­te­rial harm to eco­nomic growth and to in­no­va­tion, in­vest­ment and em­ploy­ment across Europe.”

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