The Strategist

Europe to change taxation scheme for tech giants

09/12/2017 - 13:56

Leading technology concerns, such as Google and Apple, pay very low taxes in Europe, and so finance ministers of the largest European countries decided to correct this situation. In the future, amount of tax to be paid will be calculated on the basis of sales volume.

Anthony Quintano via flickr
Anthony Quintano via flickr
This is stated in a joint written appeal of German Finance Minister Wolfgang Schaeuble and his colleagues from France, Spain and Italy. Other European countries such as Ireland and Luxembourg have set very low corporate tax rates. Large corporations from the technology sector established European headquarters there and use loopholes that allow them to minimize tax payments in other European countries.

The finance ministers of the four largest EU countries are calling for a new law that will oblige Internet companies to pay tax in the country where they make money, not where they are registered. It is assumed that the tax will be calculated according to the company's digital presence in the country, rather than the physical one.

The question of taxation in Europe was raised after a series of stories related to the fact that foreign companies, conducting business in the EU countries, try to avoid mandatory cash payments in various ways.

Last year, it became known that the French authorities suspect Google of tax evasion for 1.6 billion euros. In May 2017, the authorities raided Paris headquarters of the American Internet giant.

As a result, the French Ministry of Finance demanded that Google pay 1.6 billion euros of unpaid taxes. Later, the fine was reduced. In June this year, for the first time there were reports that the corporation could avoid these payments.

The State representative in the Paris Administrative Court explained this possibility by the fact that Google does not have a permanent representative office in France. According to him, in this regard, the country's tax services have no right to recover the shortfall in taxes from the company, since Google is not obliged to declare its incomes in the country.

According to France Press agency, Google paid only 6.7 million euros in the form of corporate taxes in France in 2015. The company transferred data on its revenues to a subsidiary in Ireland, where the tax level is significantly lower.

This spring, Google agreed to settle allegations of Italian authorities in tax evasion in pre-trial order. The company decided to pay € 306 million ($ 334 million) in compensation for taxes unpaid in the period from 2002 to 2015. This was reported in the Tax Service of Italy.

In August, media wrote that the authorities of France and Germany jointly intend to close the "tax loopholes" that allowed the largest technology concerns, such as Alphabet, Apple, Facebook and Amazon, to occupy a significant part of the European market to the detriment of local companies.

In mid-September, at a meeting of EU officials in Tallinn, France will propose introducing more understandable and simple tax rules for companies from the technology sector. This was announced by French Finance Minister Bruno Le Maire. He also added that France and Germany will soon submit a joint project, according to which the amount of taxes to be paid in Europe by Google, Amazon, Facebook, Apple, will be calculated not from the amount of their profits, but from the amount of revenue in the EU countries.


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