European Interest

New EU tax on tech giants

Flickr/Fondapol/CC BY-NC-ND 2.0
“A European directive will be disclosed in the coming weeks,” French Finance Minister Bruno Le Maire told Le Journal du Dimanche.

New plans to tax large global tech companies’ revenue will be presented by the European Union later this month.

“A European directive will be disclosed in the coming weeks. It will be a considerable step. The [tax rate] range is 2% to 6%, we will be closer to 2% than 6%,” French Finance Minister Bruno Le Maire told Le Journal du Dimanche.

As reported by the Reuters news agency, to those who might say the measure is too modest, Le Maire argued: “It’s a starting point. I prefer a text that will be implemented very quickly rather than endless negotiations. We will fine tune it later”.

A draft European Commission document seen by Reuters last month and subject to changes before its publication, proposed a levy based on where the customer – rather than the company – is located. The charge would be based on 1% to 5% of the company’s “aggregated gross revenues”.

The proposal aims at increasing the tax bill of firms like, Alphabet’s Google and Facebook, which are accused by large EU states of paying too little by rerouting their EU profits to low-tax countries such as Luxembourg and Ireland.

French President Emmanuel Macron’s government has proposed taxing the tech giants on revenues rather than profits, to get around the problem that the companies shift the profits from where they are earned to low tax jurisdictions.

According to Reuters, Italy, Germany and Spain, together with France, are spearheading the push for tax reform. They face resistance from smaller nations like Ireland who are a hub for those firms’ investments and fear changes could hurt their economies.

In a separate report, the Agence France-Presse (AFP) noted that critics say the tax-avoidance strategies used by the tech titans deprive EU governments of billions of euros while giving them an unfair advantage over smaller rivals.

Meanwhile, the Organisation for Economic Cooperation and Development (OECD) says such strategies cost governments around the world as much as €195bn a year in lost revenue, according to a 2015 estimate.

Asked if the proposed rate might be criticised as too low, Le Maire said: “I would rather have a law that can be implemented quickly instead of drawn-out negotiations.”

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