EU members seek more tax revenue from tech giants

France, Germany, Italy, Spain sign letter calling for rule change ahead of EU meeting

BRUSSELS • European Union (EU) finance ministers are set to discuss this week changing rules to make tech giants, such as Google and Facebook, pay more taxes, according to a joint letter they wrote.

European regulators have become increasingly aggressive against United States technology giants seen by officials as gaining too much power, with Amazon and Apple also facing scrutiny.

France is leading the push to clamp down on the taxation of such companies, but has found support from other countries - including Germany, Italy and Spain - also frustrated at the low tax they receive under current international rules.

Currently, such companies are often taxed on profits booked by subsidiaries in low-tax countries in the EU even though the revenue originated from other EU countries.

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the four ministers wrote in a letter seen by Reuters and Agence France-Presse last week.

"It is urgent to close the gap in international tax rules in order to ensure the fair taxation of profits from businesses in the digitalised economy," stated the EU document, which was prepared for a Sept 15-16 meeting of all 28 EU finance ministers in Tallinn, Estonia.

The letter, signed by French Finance Minister Bruno Le Maire and his counterparts Wolfgang Schaeuble of Germany, Pier-Carlo Padoan of Italy and Luis de Guindos of Spain, was addressed to the EU's Estonian presidency and the bloc's Executive Commission.

The paper was drawn up by the government of Estonia, which currently holds the EU's six-month rotating presidency and sees itself as a digital leader in Europe.

The document deplores the current situation in Europe in which taxation rights are held by EU nations with the "physical presence" of multinationals.

In the proposal, such businesses would be liable to pay corporate tax in the countries where they make profits, not only where they are present. Many digital platforms operating in the EU are based in Ireland, which offers a low corporate tax regime, allowing Internet giants to escape a higher tax rate in other member countries.

Several national authorities in the EU have clashed with Internet giants over their business models and practices.

The EU on June 27 hit Google with a record €2.4 billion (S$4 billion) fine for abusing its dominant position in the search engine business and illegally favouring its own shopping service over rivals.

France faced legal setbacks in July when a French court ruled that Google, now part of Alphabet, was not liable to pay €1.1 billion in back taxes because it had no "permanent establishment" in France and ran its operations there from Ireland.

France appealed the decision.

Newly elected French President Emmanuel Macron promised to get tough on US Internet giants during his campaign earlier this year, seeing their low tax rates as a source of resentment about globalisation and unfair to European companies.

AGENCE FRANCE-PRESSE, REUTERS

A version of this article appeared in the print edition of The Straits Times on September 11, 2017, with the headline 'EU members seek more tax revenue from tech giants'. Print Edition | Subscribe