Silicon Valley tech giants are flourishing, and the European Union wants a slice of the pie. Targets include Facebook, Amazon, Apple, Netflix, and Google – a group of companies collectively known as “FAANG.”
At least 9 of the EU’s 28 member states support a movement to tax large digital corporations on their turnover rather than on their profits. Such a tax would raise revenues on companies that do not report profits (like Amazon). Other ideas include putting a levy on online ads or imposing a withholding tax on payments to Internet firms.
Estonia, which currently holds the EU presidency, wants to tax all social media platforms being used by its citizens – whether or not the company actually has a physical presence there.
As announced earlier this month, the EU is fining Google more than $2 billion for favoring its own products and services in searches.
These moves are part of a broader campaign by the EU to dig into the coffers of online giants without support from the United States.
“When liberal politicians – who are motivated by the need to gather funds through taxes in order to support their constituencies – see an untapped source of revenue, they want to attack it,” writes The Hill’s Judd Gregg.
Those pushing for tax reform accuse tech giants of skirting tax revenues by directing profits to low tax rate states; for example, Google’s EU tax residence is in Ireland and the company paid taxes of less than 0.8% of its EU revenues between 2013 and 2015. Facebook (also based in Ireland) paid less than 0.1% and Amazon (based in Luxembourg) paid almost nothing.
“The digital economy should be taxed as the rest of the economy,” argues EU taxation commissioner Pierre Moscovici.
EU leaders will meet September 29th to discuss digital issues including the proposed taxes. Rumor has it the commission is considering using an old rule to block small economies like Ireland from vetoing decisions on tax policy.
The results of the summit are likely to cause backlash from the US, where many global tech giants are based.
Websites like Amazon and Facebook are “key components in the engine of American economic resurgence,” writes Gregg. The digital age is “just beginning,” and “we do not want them to be shackled in this undertaking by governments intent on undermining their impact. We want this American dominance.”
Gregg calls on conservatives to fight back against European nations if they continue to threaten American companies’ opportunities to grow.
Editor’s note: Many of the great companies in the world are U.S. based internet companies. Europe has not had so much success on the internet, so to participate in internet wealth creation they have to tax American companies. I see this as partly sour grapes, and partly a grab at free money from deep-pocket American companies. But these countries really have no recourse except to leave those markets.