The European Commission is gearing up to propose new rules later Wednesday (March 21) that would require digital companies to pay more taxes — and the rules could include U.S. technology companies Google and Facebook.
Citing a draft of the rules, Reuters reported that the European Commission is expected to call for companies that have a lot of digital revenue in Europe to pay a 3 percent tax on turnover at the company. If it got the approval of the EU states and lawmakers, it would be for companies that have annual revenue around the globe that is more than $919 million and taxable EU revenue of around 50 million euros, reported Reuters. The news service noted it’s not a slam dunk that the new tax requirement will be approved. It needs the backing of the European Parliament and the 28 EU member countries. The members and lawmakers are divided on the idea, but in order for it to become a rule, it needs the support of all the member states.
The bigger EU state members contend the large tech companies don't pay enough in taxes because they move the profits to low-tax countries within the European Union, including Ireland and Luxembourg. Meanwhile, the smaller countries are worried that the tax law would make them less attractive to multinational companies. Ireland, noted Reuters, said the idea may not result in more taxes — while some think the smaller companies should also be taxed.
The proposal, which Reuters said was a short-term fix as it seeks a way to tax the profits of companies, could also impact Airbnb, Amazon and Uber if it goes through. The tax is expected to focus on digital advertising and online platforms that provide “intermediation services,” reported Reuters. The tech companies based in the U.S. argue they pay taxes that meet national and international laws and that the tax should be paid in the U.S. when it brings profits back into the country. The tax proposal would result in the tech companies being taxed wherever the digital users are based, noted Reuters.