Reliance on digital to boost the top line means the digital bottom line is about to get a little lighter.
Reuters reported news on Friday (March 16) that big players in the tech space that get a significant portion of their top line from digital activities — think Google and Facebook, for example — may face a tax from the European Union (EU) as high as 3 percent of turnover.
The tax is part of a proposal from the European Commission, said the newswire, which has seen the draft. In terms of timing, the proposal is likely to be adopted next week, and yet changes may still be made: Earlier drafts had proposed taxes levied at a rate of between 1 percent to 5 percent.
The proposed tax would focus on firms that have annual sales, globally, of at least €750 million, with at least €50 million coming from the European Union. That €50 million level had been raised from an initial €10 million level, with an eye on exempting startups and relatively smaller companies.
The services subject to taxation include digital advertising (Google). The tax would also extend to companies that offer “intermediation services” — which would hit companies like Uber. The newswire noted that companies like Amazon, which tend to post losses, might be “hit hard” by tax on turnover.
The proposed tax, which would need approval from all 28 member countries, would be applied by the countries where the companies’ digital users are based. In other terms of allocation, the EU would look at the number of times an advertisement has been displayed across devices.
As expected, some criticism was lobbed at the proposal: “Taxing revenues is the wrong approach to addressing some legitimate questions regarding cross-border tax policies,” contended Josh Kallmer, who serves as senior vice president at the Information Technology Industry Council, which represents Google and Facebook, among others. Kallmer’s statements came to Reuters in an emailed statement.