New plan for taxation of profits in the digital economy is aimed squarely at firms such as Google, Apple, Amazon and Facebook.
A European Commission (EC) proposal for a “fair and efficient tax system” in the Digital Single Market is designed to target the profits of multinationals operating in low-rate tax countries such as Ireland and Luxembourg.
It also targets the Irish 12.5pc corporation tax rate.
The document, addressed to the European Parliament and Council, is being seen as a clampdown on alleged tax avoidance by internet giants such as Google, Apple, Amazon and Facebook.
Specifically, it pushes for the harmonisation of tax rules across the EU under the Common Consolidated Corporate Tax Base (CCTB), a plan vehemently opposed by Ireland in defence of its corporation tax rate.
California tech giant Apple and Ireland are both opposing a €13bn tax bill imposed by European competition commissioner Margrethe Vestager on revenues booked through Apple’s operations in Ireland.
Vestager’s €13bn finding – after a three-year investigation – suggested that Apple benefited from a 1pc corporate tax rate over a number of years.
Both Apple and the Irish Government have vehemently denied there had been any special agreement regarding the former’s tax affairs in Ireland, and both are appealing the decision in the European courts.
Taxing questions emerge over Digital Single Market
“Completing the Digital Single Market could contribute to €415bn per year to Europe’s economy, create jobs and transform our public services,” the document said.
“The EU Digital Single Market needs a modern and stable tax framework for the digital economy to stimulate innovation, tackle market fragmentation, and allow all players to tap into the new market dynamics under fair and balanced conditions. It is essential to ensure tax certainty for business investment and to prevent new tax loopholes emerging in the single market.”
The EC claims that once agreed, the CCCTB will provide a competitive, fair and robust framework for taxing companies in the market.
“The commission continues to believe that the CCCTB provides an EU framework for revised permanent establishment rules and for allocating the profit of large multinational groups, using the formula apportionment approach based on assets, labour and sales that should better reflect where the value is created.
“There is scope within the current CCCTB proposal to examine further enhancements to ensure that it effectively captures digital activities. Discussions are already underway on this in the council under the Estonian presidency and in the European Parliament. The commission stands ready to work with member states in examining these options within the ongoing CCCTB negotiations, to find an ambitious and EU law-compatible approach for the single market.”