Daily Management Review

To Stem The ‘Bags Of Money’ Lost To Loopholes, EU Seeks A Digital Tax


09/19/2017




To Stem The ‘Bags Of Money’ Lost To Loopholes, EU Seeks A Digital Tax
With the aim of raising money from an industry that they say provides less than it should to public coffers, the European Union finance ministers are developing a new way to tax digital companies such as Amazon.com Inc. and Facebook Inc.
 
The bloc should agree to a tax on revenue -- rather than profits -- of the digital industry by mid-2018, French Finance Minister Bruno Le Maire told colleagues at a meeting in Tallinn, Estonia. The initiative is backed by ten countries, including Germany, Italy and Spain. Companies are allowed to skirt traditional levies as they’re concerned that taxing profits is too complicated under international rules.
 
“We are responsible to our taxpayers to deal with it, we can’t just watch how bags of money are transferred elsewhere,” Slovak Finance Minister Peter Kazimir said in an interview. “I favor imposing immediate levies, similar to sales tax, but only as a temporary solution before we reach a global agreement.”
 
While digital companies have sought to take advantage of loopholes created by uncoordinated European regulation, an industry where value added tends to be virtual rather than material, traditional taxation practices have failed to capture business.
 
But with Danish Finance Minister Kristian Jensen saying, “this is an area where we should be very careful”, the path forward is fraught with difficulties even as national governments accept that the current taxation system needs to be altered. Customers could be pushed to products outside of Europe and they could be discouraged from digital use by a new levy, the Danish minister warned.
 
“You need to know what the impact is and if it’s going to change a whole system of taxation,” Maltese Finance Minister Edward Scicluna said on Saturday. “One has to look at it globally rather than partially, because it involves the U.S., it involves China.”
 
Before passing that outline on to the Organisation for Economic Cooperation and Development, a group that advises its 35 members on policy, for a more comprehensive fix, the current discussions only apply to a temporary solution, proposed Austrian Finance Minister Hans-Joerg Schelling.
 
Saying Dublin illegally slashed the iPhone maker’s obligations to woo the company to Ireland, the battle has intensified since the European Commission last year ordered Apple to pay as much as 13 billion euros ($15.5 billion) plus interest in back taxes. The decision is being fought by Apple and the Irish government. After a court rejected claims the search-engine giant abused loopholes to avoid paying its fair share, Google in July won is battle against a 1.12 billion-euro French tax bill in another case.
 
Calling to mind French President Emmanuel Macron’s hard-fought election victory over populist Marine Le Pen in May as a reason to accept the reform, Le Maire invoked the EU’s need to counter anti-European political movements in his campaign for the tax.
 
“Citizens in Europe are outraged by the situation,” Le Maire said at a press conference in Tallinn following a meeting of EU finance ministers. “They cannot understand that such huge companies are not paying their share of tax when small companies are obliged to pay.”
 
(Source:www.bloomberg.com) 






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