EU plans digital tax targeting US tech giants

BRUSSELS • A digital tax targeting US tech giants was proposed by the European Union yesterday, heaping more problems on Facebook after revelations over misused data of 50 million users shocked the world.

The special tax is the latest measure by the 28-nation EU to rein in Silicon Valley giants and could further embitter the trade row pitting the EU against United States President Donald Trump.

EU Economics Affairs Commissioner Pierre Moscovici presented his proposals in Brussels aimed at recovering billions of euros from mainly US multinationals that shift earnings around Europe to pay lower tax rates.

"This current legal vacuum is creating a serious shortfall in the public revenue of our member states," Mr Moscovici told a press conference in Brussels.

"We estimate this could generate at least €5 billion (S$8.1 billion) a year if the tax is imposed at 3 per cent."

He insisted it was "not an anti-GAFA tax nor an anti-US tax", referring to the popular acronym for Google, Apple, Facebook and Amazon.

The transatlantic blow has been championed by French President Emmanuel Macron and will be discussed by EU leaders tonight.

The unprecedented tech tax follows major antitrust decisions by the EU that have cost Apple and Google billions and also caught out Amazon.

The EU tax would affect revenue from digital advertising, paid subscriptions and the selling of personal data.

The tax comes as EU agencies are set to tighten rules on data privacy, targeting tech firms. That file has come to the fore following revelations that a firm working for Mr Trump's US presidential campaign harvested data on 50 million Facebook users.

The EU tax plan will target mainly US firms with worldwide annual turnover above €750 million, such as Facebook, Google, Twitter, Airbnb and Uber.

Spared are smaller European start-ups that struggle to compete with them.

Brussels is seeking to choke tax-avoidance strategies used by the tech giants that, although legal, deprive EU governments of billions of euros in revenue.

EU law allows firms like Google and Facebook to book their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg.

The European Commission estimates that digital businesses pay an average effective tax rate of just 9.5 per cent, compared with the 23.3 per cent that traditional businesses pay.

These numbers are, however, disputed by the tech giants.

"At the very least, the tax is prone to be interpreted by the US as a hostile act in the already-begun trade war," wrote tax specialist Johannes Becker in a blog post tweeted by the Computer & Communications Industry Association.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 22, 2018, with the headline 'EU plans digital tax targeting US tech giants'. Print Edition | Subscribe