European Union plan for turnover tax on Amazon, Google and other web giants


France is leading the push to clamp down on the taxation of such companies, but has found support from other countries - including Germany, Italy and Spain - also frustrated at the low tax they receive under current worldwide rules.

According to a letter signed by the four countries' finance ministers and addressed to the European Union presidency, the initiative aims to tax digital giants on total outcomes in order to stop them "doing business in Europe while paying minimal amounts" to local treasuries.

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries", the four ministers wrote in a letter seen by Reuters and Agence France-Presse last week.

Now such companies are often taxed on profits booked by subsidiaries in low-tax countries like Ireland even though the revenue originated from other European Union countries. That has encouraged companies like Apple, Dell and Google to choose to be resident in low-tax Ireland, and to pay corporate taxes there, rather than high tax France or Germany.

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The ministers now want to propose an "equalization tax", so the companies' tax rates are back in line with normal corporate rates. These frequently base their operations in countries with strong tax incentives, like Ireland, to dramatically reduce the taxes they pay in Europe and beyond.

The plan seeks to apply an "equalisation tax" of around two to five percent to tech firms like Amazon, Google and Facebook on the basis of their national turnover. Various reports have surfaced online in the past few years about tech companies being investigated for tax avoidance in various European nations for taking advantage of this tax arrangement. About Laws and regulations with tags Europe.

It comes at the same time as the European Union looks to tax companies where they supposedly "create value", rather than where they choose to be resident in the EU. It has also called for anti-monopoly measures to break the hold of Google, Facebook, Amazon and others over certain segments of the tech industry.