The European Commission wants to change how big tech firms are taxed on their revenues.
Massive tech companies such as Amazon, Google and Facebook could end up paying higher rates of tax if the EU gets its way.
According to a draft European Commission (EC) proposal seen by Reuters, the tax bills of these firms could be set to increase. Some of the companies have been accused of not paying enough tax by rerouting their EU profits to countries with lower tax rates, such as Ireland and Luxembourg.
EC gunning for tax reforms
Small countries will likely be concerned by this news as they may worry that multinational firms will be less likely to choose them as a base.
The document said that companies with global revenues above €750m and EU digital revenues of at least €10m a year should be subject to the new tax rates of 1-5pc. The EC also wants the companies to be taxed based on the location of their user base as opposed to where they are headquartered.
The publication of the new proposal is expected in the latter half of March and some of the work is still ongoing to determine final figures. Twitter, Google, Facebook, Airbnb and Uber were among the companies name-checked in the draft proposal.
The new tax regime would “entail additional reporting requirements so that the tax authorities of member states can calculate how much tax is due in their jurisdiction”, the document said.
In terms of online advertisers, the tax should be levied where the advertisement is displayed as well as where the users “having supplied the data which is being sold are located”. For e-commerce, the tax would be collected in countries where the user “paying for being able to access the platform (or to conclude a transaction within the platform) is located”.
A temporary solution
This tax change would only be a temporary measure, according to the EC. The organisation is still trying to develop a more comprehensive approach to fair digital taxation.
Every EU state would need to approve the proposal once it is finalised but there is likely to be some objection to the plans, particularly in Ireland and other countries with large tech presences.
Last year, both the French and German governments led calls for changes to existing tax rules, asking for an overhaul of national tax codes to include an ‘equalisation tax’ for tech companies that would collect levies based on national turnover.
Major tech firms have long angered some EU officials for taking advantage of the disparate tax codes within the bloc in order to pay less tax in countries where their revenues are notably large.
The Irish Government voiced its opposition to these plans at the time, with Minister for Finance Paschal Donohoe, TD, saying that it was difficult to ascertain how the implementation of such a plan would work.
The Dublin Docklands, home to several major tech firms. Image: faithie/Shutterstock