EU unveils plans for 3% tax for digital companies

Tax could raise €5bn for member states, commission says

The European Commission has unveiled its proposals for increasing tax collected on digital services such as online advertising.
The Commission is also seeking an “interim” digital services tax at EU level, to be levied at 3 per cent on turnover. This would apply to services provided by digital companies where user participation and user contributions play a central role in value creation – services like the sale of third party goods online through sites will be targeted rather than direct sales by those sites.

“Companies engaged in digital activities, like all other companies, must share the tax burden needed to finance the public services on which they rely,” the commission said in its communication prior to the EU leaders’ summit that begins on Thursday.

Taxation commissioner Pierre Moscovici, highlighting the tax challenges facing the EU, said: : “The digital economy is a major opportunity for Europe and Europe is a huge source of revenues for digital firms. But this win-win situation raises legal and fiscal concerns. Our pre-internet rules do not allow our member states to tax digital companies operating in Europe when they have little or no physical presence here.

READ MORE: France, Germany to propose new tax on internet giants

Large EU states have accused the tech firms of paying too little tax in the bloc by routing some of their profits to low-tax member states such as Ireland and Luxembourg.

U.S. tech companies themselves have said they are paying tax in line with national and international laws and, in some cases, that the tax should be paid in the United States on profits repatriated there.

Smaller countries also fear becoming less attractive to multinational firms.

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