Europe is soon to impose higher taxes for etch tech companies like Google, Amazon and Facebook.
The new taxation policy is based on calculation of taxes for tech companies on the place of generation of revenue instead of the convention of calculation of taxes where it is headquartered, according to the plan as proposed by the European Commission which is the executive wing of the European Union (EU).
The amount of taxes large tech companies would have to pay under the proposed new taxation policy would be substantially high.
In Europe, while traditional businesses pay 23.3 per cent taxes, the effective taxes paid by the large digital companies is just about 9.5 per cent, according to data from the European Commission.
"The digital revolution has overturned our economies and also shaken profoundly the way businesses create value today," Pierre Moscovici, the EU's commissioner for taxation said at a press conference on Wednesday he claimed that the present taxation rules are outdated.
"The idea is to ensure equal treatment and fairer taxation," he said.
Such attempts by the EU to force large companies to pay up the right tax amount have been made earlier. For example, a special tax agreement benefited Amazon – headquartered in Luxembourg but operational across the entire EU. Luxembourg was directed to recover 250 million euros ($306.98 million) of "illegal" tax benefits from Amazon by the European Commission last year.
All of the revenues generated across Europe by Amazon were counted by the company in Luxembourg and the company ended up paying a smaller rate of tax there. However, the company later one started paying taxes in 5 countries in EU after it altered its structure in 2015. But tech firms such as Amazon would be forced to report its sale in the Eu in each of the countries it operates in, according to the new proposed rules.
Until the long term action is implemented, countries which take liberties and unilateral decisions on taxation would be prevented from doing so in the short run which distorts the European market and this interim tax measure is a part of the new taxation regimen by the European Commission. Revenues that are generated from selling of data resulting from information provided by users, digital intermediary business where users can interact with each other and selling of space for online advertising would also be taxed according to the interim measure.
About 5 billion euros in revenues every year can be generated by the European Commission if the 3 per cent digital tax is implemented by every member state, says the Commission.
There is no specific intention of targeting of U.S. companies through the new taxation rules, said Moscovici during a television interview after the announcements.
"It is not an anti-U.S. tax," he said, "It is just about taxing properly those companies who generate value through digital activity in Europe."
"It's not a response to this or that decision taken by the U.S. administration recently, whether it's tax reform or trade measures," Moscovici said.
(Source:www.cnbc.com)
The new taxation policy is based on calculation of taxes for tech companies on the place of generation of revenue instead of the convention of calculation of taxes where it is headquartered, according to the plan as proposed by the European Commission which is the executive wing of the European Union (EU).
The amount of taxes large tech companies would have to pay under the proposed new taxation policy would be substantially high.
In Europe, while traditional businesses pay 23.3 per cent taxes, the effective taxes paid by the large digital companies is just about 9.5 per cent, according to data from the European Commission.
"The digital revolution has overturned our economies and also shaken profoundly the way businesses create value today," Pierre Moscovici, the EU's commissioner for taxation said at a press conference on Wednesday he claimed that the present taxation rules are outdated.
"The idea is to ensure equal treatment and fairer taxation," he said.
Such attempts by the EU to force large companies to pay up the right tax amount have been made earlier. For example, a special tax agreement benefited Amazon – headquartered in Luxembourg but operational across the entire EU. Luxembourg was directed to recover 250 million euros ($306.98 million) of "illegal" tax benefits from Amazon by the European Commission last year.
All of the revenues generated across Europe by Amazon were counted by the company in Luxembourg and the company ended up paying a smaller rate of tax there. However, the company later one started paying taxes in 5 countries in EU after it altered its structure in 2015. But tech firms such as Amazon would be forced to report its sale in the Eu in each of the countries it operates in, according to the new proposed rules.
Until the long term action is implemented, countries which take liberties and unilateral decisions on taxation would be prevented from doing so in the short run which distorts the European market and this interim tax measure is a part of the new taxation regimen by the European Commission. Revenues that are generated from selling of data resulting from information provided by users, digital intermediary business where users can interact with each other and selling of space for online advertising would also be taxed according to the interim measure.
About 5 billion euros in revenues every year can be generated by the European Commission if the 3 per cent digital tax is implemented by every member state, says the Commission.
There is no specific intention of targeting of U.S. companies through the new taxation rules, said Moscovici during a television interview after the announcements.
"It is not an anti-U.S. tax," he said, "It is just about taxing properly those companies who generate value through digital activity in Europe."
"It's not a response to this or that decision taken by the U.S. administration recently, whether it's tax reform or trade measures," Moscovici said.
(Source:www.cnbc.com)
