Amazon, Google face new tax from EU states

World
Europe

Digital multinationals like Amazon and Google may soon be taxed on their revenues, not profits, if France, Germany, Italy and Spain have their way, their finance ministers said in a joint letter recently.

France is leading a push to clamp down on the taxation of such companies, and it has found support from other countries also frustrated at the low tax they receive under current international rules.

Currently, such companies are often taxed on profits booked by subsidiaries in low-tax countries like Ireland even though the revenue originated from other EU countries.

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the four ministers wrote in a letter.

The letter was signed by the finance ministers, Bruno Le Maire of France, Wolfgang Schaeuble of Germany, Pier-Carlo Padoan of Italy and Luis de Guindos of Spain, and was addressed to the EU’s Estonian presidency with the bloc’s executive Commission in copy.

Google's logo /Reuters Photo

They urged the EU Commission to come up with a solution creating an "equalization tax" on turnover that would bring taxation to the level of corporate tax in the country where the revenue was earned.

"The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax," the ministers said in the letter, first reported on by the Financial Times.

They wanted to present the issue to other EU counterparts at a Sept. 15-16 meeting in Tallinn.

The EU’s current Estonian presidency has scheduled a discussion at the meeting about the concept of "permanent establishment," with the aim of making it possible to tax firms where they create value, not only where they have their tax residence.

France has stepped up pressure for EU tax rules after facing legal setbacks trying to obtain payments for taxes on activities in the country.

A French court ruled in July that Google, now part of Alphabet, was not liable to pay 1.3 billion US dollars in back taxes because it had no "permanent establishment" in France and ran its operations there from Ireland.

Source(s): Reuters