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European Union proposes 2 to 6 percent tax on big tech revenue

by on 4th March 2018

In a newspaper interview, French Finance Minister Bruno Le Maire announced the European Union is considering plans to tax technology corporations like Google and Facebook on revenues rather than profits.

The French Minister told Le Journal du Dimanche that “[the tax rate] will be closer to 2 percent than 6 percent.”

Le Maire’s announcement borrows from a European Commission report seen by Reuters in February which announced plans to tax technology corporations based on the location of its customers rather than where it is headquartered.

Tech firms in Europe are often criticized for paying too little tax. For example, Google UK Limited reported profits of £148.8 million for year end June, 2016, on total revenue of £1bn. At a rate of 20 percent corporation tax, Google’s total bill was £29.8 million.

It was subsequently accused by journalists and politicians of complicated accounting practices and generating significantly more profit in the UK than it claims. Alphabet Inc., Google’s parent company, reported Q4 revenue of $32.3 billion for 2017.

Apple has also been a high profile target for criticism. In a decision on the 20th August 2016, the European Commission deemed Ireland’s tax benefits to Apple to be illegal under EU state aid rules.

The Commission demanded Ireland recover 13 billion euros of back taxes. After Ireland failed to comply with the set deadline (January 2017), the European Commission referred it to the European Court of Justice.

Ireland described the decision as “extremely regrettable.” It deems the Commission’s decision to be unjustifiable however it has agreed to collect the money.  Apple agreed to begin depositing the money in Decemeber 2017 and both Ireland and Apple plan to continue to appeal the decision.

A common cause for complaint among critics of the tax system is large tech corporations shifting profits to low tax countries like Ireland and Luxembourg. A shift towards taxing revenue rather than profit is deemed one way to get around the problem.

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