Multiple European finance ministers, led by France are pushing for a change in the tax structure of the EU. This change will see tech companies taxed according to their revenue rather than profits.
According to a report by Reuters, the finance ministers of some European nations, led by France have put forward a joint letter requesting for a tax on the revenue of tech firms. The letter which was signed by the respective finance ministers of France, Germany, Italy, and Spain, has been sent to the European Union’s President and Commissioner.
The finance ministers disagreement with the current tax structure stems from tech companies being taxed according to the profits recorded by subsidiaries in low tax nations such as Ireland, despite generating revenue from other EU member countries. Various reports have surfaced online in the past few years about tech companies being investigated for tax avoidance in various European nations for taking advantage of this tax arrangement. Examples such as Apple’s case in Italy, Microsoft’s case in Denmark, and Google’s case in France instantly spring to mind.
Consequently, the tax issue led to legal action against Google in France, in which a French court ruled that Google was not required to pay “back taxes ” of $1.3 billion because it did not have a “permanent establishment” in France and that its operations were carried out from Ireland. Moreover, the issue also gained prominence in the UK, when UK Chancellor, George Osborne, proposed new tax rules aptly nicknamed the “Google tax”.
The finance ministers in the letter, which was viewed by Reuters, said that: “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries.” Accordingly, the ministers requested a new tax structure be implemented, an “equalization tax” as it was called, which would have the companies taxed on their turnover at a rate that reflected the corporate tax in the country where their revenue was earned.
Regardless of the stance of member nations on tax havens, at the request of the finance ministers, the EU president has scheduled the topic of “permanent establishments” for discussions at the next EU meeting to be held on September 15th-16th in Estonia which is where the current presidency of the Union is located.
Source: Engadget, Reuters
