Large companies with significant digital revenues in the EU, such as Google and Facebook Inc, could face a 3 percent tax on their turnover under a draft proposal from the European Commission seen by Reuters.
The proposal, expected to be adopted next week and still subject to changes, has been modified from an earlier draft, which would have set the planned corporate rate at between 1 and 5 percent.
The tax, if backed by EU states and lawmakers, would only apply to large firms with annual worldwide revenues exceeding 750 million euros (US$924 million) and annual “taxable” revenues above 50 million euros in the EU.
Other large US firms, such as Uber Technologies Inc, Airbnb Inc and Amazon.com Inc, could also be hit by the new levy, which would apply across all 28 EU countries.
GIG ECONOMY
Services to be taxed are digital advertising, which would capture providers of users’ data, such as Google, as well as companies offering advertising space on their Web sites, such as popular social media platforms.
The tax would also be levied on online platforms offering “intermediation services,” a concept under which the Commission included in its original draft gig economy firms such as Airbnb and Uber. Digital market places, among them Amazon, would also be within the scope of the new levy.
The tax is presented in the draft as a temporary measure that would only be implemented if no deal is found on a more comprehensive solution, which would tax the digital profits of companies in the countries where they are made, rather than where firms are headquartered, as is the case now.
LOCAL LEVY
The new tax would be levied by the countries where the digital users are located. If they live in different EU countries, “the tax base will have to be distributed in either member states according to some allocation keys,” the draft said.
For instance, revenues resulting from the supply of digital advertising space should be allocated to countries in proportion to the number of times an advertisement has been displayed on users’ devices there.
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