The European Commission is proposing a 3 per cent tax on turnover for tech companies as an answer to their perceived profit tax avoidance through choosing low tax countries for all their billing no matter where the sale. The EC estimates the move would raise over €5 billion a year.
The proposal would affect firms with global annual revenues above €750 million and taxable EU revenue above €50 million. Obviously Google, Apple, Facebook and Amazon would be affected.
EU economics affairs commissioner Pierre Moscovici said the “current legal vacuum is creating a serious shortfall in the public revenue of our member states”. According to the Commission, top digital firms pay an average tax rate of just 9.5 per cent in the EU – far less than the 23.3 per cent paid by traditional companies.
Moscovici says the move is not anti-American but his figures are disputed by the big tech firms, which have called the tax proposal “populist and flawed”.
EU members including the UK and France have accused firms of routing some profits through low-tax EU member states such as Ireland and Luxembourg. The Commission said it wanted to tax companies according to where their digital users are based.
The tax would also only apply to certain online revenue streams – such as from online advertising in search engines or social media, online trading, or the sale of user data.