Home Technology Regulation More EU states back big tech paying tax on revenue

More EU states back big tech paying tax on revenue

Nine European Union countries have supported a move to tax big multinational technology companies on their revenue, and not profits.

The EU is considering a raft of measures to get companies like Google and Facebook to pay what is claimed to be their correct amount of tax. Accusations are rife of profits being routed to low-tax nations like Ireland and Luxembourg.

Four countries — France, Germany, Italy and Spain — proposed the change last week and French Finance Minister Bruno Le Maire told a news conference in the Estonian capital Tallinn that nine countries were now backing the move, according to a Reuters report.

The new countries backing the move are Austria, Bulgaria, Greece, Slovenia and Latvia. The EU has a total of 28 member states.

EU finance ministers met in Tallinn on Friday to consider the proposals, a day after a Reuters report said Google and Facebook may have paid anything from €5.1 billion (A$7.61 billion) to €5.4 billion less in taxes in European Union states between 2013 and 2015.

The news agency said it had obtained access to a report written by a lawmaker who has drafted tax reform that could increase the amount of taxes paid by the two online behemoths.

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EU socialist lawmaker Paul Tang drafted the report which said that digital multinational companies "minimise the overall tax burden in the EU by routing all revenues to low-tax member states such as Ireland and Luxembourg".

Similar complaints have been voiced in countries outside the EU, including Australia.

Last year, Bloomberg, citing regulatory filings in the Netherlands, reported that Google had avoided paying  US$3.6 billion (A$4.49 billion) in taxes globally in 2015 by shifting US$15.5 billion to a company in Bermuda that is just a shell.

Multinational tech companies, including Apple and Microsoft, have faced questioning in the Australian Senate over tax minimisation.

Tang's report was said to focus on Google and Facebook because the two companies cite most of their EU revenues in Ireland where the rate of corporate tax is low. This allows them to pay much less tax than in other parts of the world.

The report said that Google paid tax of up to 9% outside the EU, but less than 0.82% inside the Union.

Reuters quoted Tang as writing, “Facebook’s taxes as a share of their revenues recorded outside the EU is between 28% and 34%,  whereas in the EU this is a remarkably low ratio of 0.03 percent to 0.10%."

This led to a shortfall in tax payments of between €5.1 billion and €5.4 billion between 2013 and 2015, the report claimed.

Tang is tasked with shepherding through the EU parliament tax reform that brings about equal national tax deductions on business profits.

Reuters said he planned to present a change that would make it mandatory for multinationals to be taxed in EU states where they had a “digital platform” that generated at least €5 million in annual turnover.

The current regulations allow online companies to pay taxes only where they have both a physical presence and tax residence, irrespective of where their profits are created.

The European Commission will prepare a number of options for resolving the tax problem and present them at an EU summit on digital issues to be held in Tallinn on 29 September.

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Sam Varghese

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A professional journalist with decades of experience, Sam for nine years used DOS and then Windows, which led him to start experimenting with GNU/Linux in 1998. Since then he has written widely about the use of both free and open source software, and the people behind the code. His personal blog is titled Irregular Expression.