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EU set to hit US tech firms with three per cent turnover tax

THE EUROPEAN UNION is planning to whack major US tech firms, including Google, Facebook and Amazon, with a three per cent tax on their turnover under a draft proposal by the European Commission (EC).

The proposal, seen by Reuters, could be adopted as early as next week, although it is still subject to changes. However, the current update has nailed down a specific tax rate percentage after an earlier draft had suggested a tax rate of between one and five per cent.

The tax would still need the backing of EU member states’ governments and lawmakers, but if it did go into force, it would – at least to begin with – be restricted to large firms with annual worldwide revenues of about £662.2m and annual “taxable” revenues above €50m within the EU.

The threshold for EU revenues has been raised from the €10m that was initially in place in a bid to exempt smaller firms and start-ups from the tax.

The EU wants services such as digital advertising – for which Google and Facebook are leaders – to be imposed with this new tax. It would also be levied on the likes of Airbnb and Uber as online “intermediation services” offerings, while Amazon and other digital marketplaces could also be hit by the three per cent tax.

Services such as Netflix, which do not rely on users to create value, will be excluded.

The new tax would depend on where the digital users are located – so if they live in different EU countries, it will be shared according to some sort of prior arrangement. So revenues through digital advertising would be allocated to countries depending on the number of times an advert has been displayed on a users’ device in that country.  

While big tech firms have been accused by large EU countries of paying too little tax and avoiding doing so by claiming that finalised sales and profits are made in low-tax states such as Ireland and Luxembourg, the big tech companies believe more should be done to tackle cross-border tax policies.

There is the chance that US firms may offset the higher tax in the EU with lower tax payments to US authorities for overseas profits, a measure introduced under President Donald Trump’s recent tax reforms. µ

Source : Inquirer

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