France has been pushing American tech giants like Amazon, Google, Apple to be taxed in Europe based on their revenues rather than on profits and many EU countries are following suit.
US multinationals have for a long time been able to avoid paying billions in taxes on their European operations through ‘creative use of tax laws’. These companies have established themselves in low tax countries like Ireland even though most of their revenue come from other EU countries.
For instance, in 2016, Airbnb paid less than €100,000 in France. Amazon paid just £7.4 million on profits of over 7 billion in the UK.
European ministers are proposing a big change for these giants where as their tax will be based on revenue rather than profit. Expressed in a joint letter signed by finance ministers of Europe’s largest economies: France, Germany, Italy and Spain, the issue will be presented to all 28 countries of the European Union by September 15th with no certainty on how other member states will react to this proposal.
The letter by ministers, Bruno Le Maire, Wolfgang Schaeuble, Germany, Pier-Carlo Padoan and Luis de Guindos states “We should no longer accept that these companies do business in Europe while paying minimal tax to our treasuries”. The finance ministers also propose an “equalization tax” that would make companies pay the equivalent of the corporate tax in the countries where they earn revenue.
This is not a new issue and Ministers are fed up with multinational’s tax avoidance. Therefore, the European Commission have been closely looking into the numbers and as spokesperson for Taxation and Customs Union, Vanessa Mock puts it, “As for every business, digital giants should pay their fair share of tax in the countries where their profits are earned.”