An Apple advertisement in Paris. Photo: AP
US tech giants like Google, Amazon, Apple and Facebook which do business in the European Union have long avoided paying billions in taxes on their European operations through, uh, creative use of tax laws. That all might come to an end soon, if a group of member countries led by France is able to get their way.
Per Reuters, the finance ministers of France, Germany, Italy and Spain have all signed a joint letter to the presidency of the EU (now held by Estonia) as well as the European Commission, saying the companies need to be taxed on total revenue rather than profits.
"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the letter read.
It proposed an "equalization tax" which would bring the companies' tax rates in line with normal corporate rates, adding "The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax."
Per the Financial Times, EU treaties require tax proposals to be approved with the unanimous support of all member countries — meaning any such measure would need to win over the countries doing the tax sheltering, like Luxembourg and Ireland. Cut-rate corporate tax rates are a way for those countries to attract revenue, though the end result is that large, profitable tech giants and other multinationals are able to pay next to nothing or even nothing in taxes in some of their markets.
Per the Financial Times, authorities believe the new approach could finally force the tech companies to shell out:
A French government official said that a turnover tax, even levied at a low percentage, had the potential to deliver a tax take that was "orders of magnitude" higher than what European governments had managed to collect so far. It is envisaged that the tax could be set at somewhere between 2 and 5 per cent of turnover, the official said.
Google's parent company Alphabet managed to scrape by without paying a 1.11 billion euro ($2 billion) tax bill in France, the Guardian reported, after courts determined its use of an Irish subsidiary was legal. Apple was not so lucky in 2016, when the EU ordered it to pay some 13 billion euros (over $19 billion) in back taxes originally saved by routing the money through Ireland, but it said it would appeal the decision.
As the Times noted, rental app Airbnb paid less than 100,000 euros ($148,792) in taxes last year throughout all of France, which might have set the tone for a wider crackdown on people using the service to rent out residences in Paris this summer.
In August, it was revealed Amazon paid just £7.4 million (roughly $12 million) in taxes in the UK in 2016, despite in 2015 making an estimated £7 billion (over $11 billion) in UK sales — though the low total was partially driven by issuing shares to employees.