Google and Facebook Inc could face higher tax bills in Europe, as the EU yesterday rushed to change rules so that more of Silicon Valley’s mega profits would fall into public coffers.
Public anger against the billions of euros earned by online behemoths is growing louder in Europe and EU finance ministers meeting in Estonia pledged to make sure the companies pay a fairer tax.
However, divisions emerged on how to go about taking on the giants, with several member states worried that a tax in Europe could push the companies to set up shop in Asia.
In the digital age, “the current taxation system no longer applies and that is why we have to find another solution,” said Estonian Minister of Finance Toomas Toniste, whose country holds the EU’s six-month rotating presidency.
Led by France and Germany, big EU powers urged their bloc partners to explore an emergency tax so that the giants pay tax where they earn revenue, instead of on profits booked in a low-tax EU headquarters of their choice, often Ireland or Luxembourg.
“We are now about 10 countries to back this idea,” French Minister of the Economy and Finance Bruno Le Maire said as he stepped into the talks.
However, the road ahead could be difficult. Europe-wide tax reform is a huge headache in the EU, requiring unanimity of all 28 states, which has proven nearly impossible on tax issues.
Ministers from smaller member states already hinted at difficulties, warning that they would much prefer the problem be addressed at the international level, such as at the G20 or through the Organisation for Economic Co-operation and Development (OECD).
“I think we should be very careful not to tax on what we are going to live on in the future,” Danish Minister for Finance Kristian Jensen said. “I am ... always skeptical by new taxes and I think Europe taxes heavily enough.”
The OECD has also poured doubt on the proposal.
Generally speaking, “taxes on revenues, they’re daft,” OECD Centre for Tax Policy and Administration director Pascal Saint-Amans said during a hearing on Wednesday at the French parliament.
However, “politically, I understand that it may be necessary, given that reform led by the OECD at the G20 level could take years to achieve,” he said.
The European Commission, the EU’s executive arm, has been tasked to draw up a set of solutions, including the French proposal, in time for an EU summit in Tallinn on Sept. 29.
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