EU finance ministers from 10 countries on Saturday threw their weight behind a plan to start taxing the revenues of digital giants like Google, Amazon and Facebook, which have been accused of paying minimal tax to their treasuries.
The plan would force major tech firms to start paying a tax on revenues in any country where they do business, instead of being taxed on profits that they currently report in often low-tax countries. But as all members have to agree on any plans to change EU taxation rules, the ministers agreed to take up the issue again in their meeting in December “to reach a common understanding.”
Originally spearheaded by France and backed by Germany, Italy and Spain, the initiative won backing from six other nations at an informal gathering of EU finance ministers in Tallinn, Estonia. Finance ministers from Romania, Bulgaria, Slovenia, Greece, Portugal and Austria all signed a letter voicing support for the plan.
“We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries,” read the letter, seen by POLITICO.
The 10 countries urged the European Commission to explore “EU law compatible options” for establishing an “equalization tax” based on “turnover generated in Europe by the digital companies.”
Other EU countries, however, expressed skepticism over the initiative.
Pierre Gramega, finance minister of Luxembourg, where many many digital companies are based, cited fears of overhauling a tax system that targets profits rather than revenue.
“It’s not clear that it will at all work,” he said. “The idea is that you tax the profit. We’ve been doing that for hundreds of years … If you’re going to walk away from that, then you have to think hard about it and do it all together [on a global level].”
Another concern, other politicians said, was the impact on competition — an area where the EU has pushed ahead compared to other regions, including the United States.
“I know that the Commission and Margrethe Vestager is doing a hell of a job trying to tax Google and other companies that are situated in Europe, but we should be very careful not to tax the products because it is … our citizens [who] will use the products,” said Denmark’s Kristian Jensen. “If we make it more difficult to do that in Europe, then we’re perhaps pushing them to use Chinese, U.S. products.”
Despite the disagreements among finance ministers, the European Commission said it aims to propose a plan “next spring.”
“The idea is that the Commission would come with a communication outlining different options and ways on how you can address this digital taxation,” said Valdis Dombrovskis, the commissioner in charge of financial services.
An agreement at the December Economic and Financial Affairs Council (ECOFIN) would then guide “the Commission’s work ahead of a proposal, which we intend to put forward next spring,” he said.
Spokespersons for Amazon, Apple, Google and Facebook declined to comment on the announcement.
Tech companies have previously defended their tax practices across Europe, saying that they comply with local rules and pay sufficient levels of tax wherever they operate.
But over the last couple of years, the likes of Google, Apple and Amazon, among others, have faced increased scrutiny because despite generating billions of dollars in annual revenue, they have paid relatively small amounts of tax on their operations in individual member countries.
In response, Amazon agreed in 2015 to alter some of its practices in Europe, agreeing to pay tax in a number of countries where it has large operations, instead of transferring nearly all of its sales to low-tax Luxembourg.
Ireland — home to many of Silicon Valley’s largest companies, mostly due to the country’s 12.5 percent corporate tax rate — has moved to close some of the most aggressive of its local tax rules, and the likes of France and Italy have taken legal action against some digital giants to force them to pay back taxes on their local sales.
Finance ministers floated several solutions to tax digital giants, including quick fixes, international-led initiatives, and even amending the Commission’s proposed common consolidated corporate tax base.
Earlier this week, officials in the French finance ministry, which is driving the new taxation plan, argued that such Commission initiatives could take years to reach maturity. A plan to tax revenue of web giants could be concluded much more quickly, and even enforced by a group of member countries if no unanimous agreement on EU tax reform is reached.
Saturday’s letter builds momentum behind the taxation initiative before a gathering of heads of state in Tallinn later this month, when French President Emmanuel Macron is expected to appeal for support from all 27 member countries.