In a change that would wreak havoc with many technology groups' business models in Europe, based on revenues generated in EU countries, Paris and Berlin are mounting a joint offensive to tax internet giants such as Google and Amazon.
National tax codes will be overhauled to include an "equalisation tax" for tech companies that would collect levies based on national turnover by the initiative, launched by Bruno Le Maire, French finance minister, and set to be presented to all 28 EU finance ministers next week. Waiting to be approved by member states unanimously, Brussels would propose an EU-wide plan.
Profits rather than total revenues form the basis of US technology groups such as Apple and Facebook being taxed in Europe currently.
By using EU governments' disparate tax codes to record profits in jurisdictions with the lowest effective rates, many of these companies have angered European tax collectors and voters for years. This meant that in countries where they have billions in sales, some companies have been able to pay little or no tax.
Most recently, reports that the online booking service Airbnb paid less than €100,000 tax in France last year raised hackles in Paris.
In calling for an EU-wide regime, the finance ministers of Germany, Spain and Italy have joined Mr Le Maire, according to an outline of the plan.
Mr Le Maire would need support from low-tax countries like Ireland and Luxembourg for the initiative to become law because under EU treaties, tax measures require all members to back legal changes.
"The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax," reads the outline signed by the four ministers. "We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries."
The potential to deliver a tax take that was "orders of magnitude" higher than what European governments had managed to collect so far was there in a turnover tax, even levied at a low percentage, a French government official said. somewhere between 2 and 5 per cent of turnover would be the rate of the tax as envisaged.
Though Britain last year reached agreement with Google to pay tax based on revenues from UK advertisers, taxing companies based on revenues rather than profits would be highly unusual for any developed country.
Ruling that Google's Ireland-based subsidiary was not taxable in France, a French court struck down a similar effort by Paris to collect €1.1bn in back taxes.
As voters reacted angrily to higher individual taxes that were included in austerity programmes as some big companies continued to avoid bigger levies since the European crisis has seen the initiative is part of a growing effort in Brussels to crack down on multinational tax avoidance.
And a move that has received tacit support from Berlin, the new initiative is part of an effort by Emmanuel Macron, the French president, to push Paris' policy priorities to the top of the European agenda, and France has long been a leading advocate of more aggressive taxation of tech groups in the EU.
At a meeting of finance ministers in Tallinn on September 15-16, the four countries would present the plans, the French official said.
(Source:www.cnbc.com)
National tax codes will be overhauled to include an "equalisation tax" for tech companies that would collect levies based on national turnover by the initiative, launched by Bruno Le Maire, French finance minister, and set to be presented to all 28 EU finance ministers next week. Waiting to be approved by member states unanimously, Brussels would propose an EU-wide plan.
Profits rather than total revenues form the basis of US technology groups such as Apple and Facebook being taxed in Europe currently.
By using EU governments' disparate tax codes to record profits in jurisdictions with the lowest effective rates, many of these companies have angered European tax collectors and voters for years. This meant that in countries where they have billions in sales, some companies have been able to pay little or no tax.
Most recently, reports that the online booking service Airbnb paid less than €100,000 tax in France last year raised hackles in Paris.
In calling for an EU-wide regime, the finance ministers of Germany, Spain and Italy have joined Mr Le Maire, according to an outline of the plan.
Mr Le Maire would need support from low-tax countries like Ireland and Luxembourg for the initiative to become law because under EU treaties, tax measures require all members to back legal changes.
"The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax," reads the outline signed by the four ministers. "We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries."
The potential to deliver a tax take that was "orders of magnitude" higher than what European governments had managed to collect so far was there in a turnover tax, even levied at a low percentage, a French government official said. somewhere between 2 and 5 per cent of turnover would be the rate of the tax as envisaged.
Though Britain last year reached agreement with Google to pay tax based on revenues from UK advertisers, taxing companies based on revenues rather than profits would be highly unusual for any developed country.
Ruling that Google's Ireland-based subsidiary was not taxable in France, a French court struck down a similar effort by Paris to collect €1.1bn in back taxes.
As voters reacted angrily to higher individual taxes that were included in austerity programmes as some big companies continued to avoid bigger levies since the European crisis has seen the initiative is part of a growing effort in Brussels to crack down on multinational tax avoidance.
And a move that has received tacit support from Berlin, the new initiative is part of an effort by Emmanuel Macron, the French president, to push Paris' policy priorities to the top of the European agenda, and France has long been a leading advocate of more aggressive taxation of tech groups in the EU.
At a meeting of finance ministers in Tallinn on September 15-16, the four countries would present the plans, the French official said.
(Source:www.cnbc.com)
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