The European Union unveiled a plan designed to modify tax rules for Internet companies, most of which are based in the United States.
According to current rules, digital companies only pay tax in countries where they have a physical presence, even if they are actually generating business in other territories and making money there. The European Commission wants to change this to make sure digital companies pay taxes everywhere they operate, just as traditional companies do.
Under the Commission's plan, companies with significant digital revenues in Europe will pay a 3 percent tax on their turnover on various online services in the European Union, generating an estimated 5 billion euros ($6.1 billion) in revenues a year for EU member states.
If supported by EU states and lawmakers, the tax would apply to large firms with worldwide annual turnover above 750 million euros ($924 million), such as Google, Amazon and Facebook.
The tax, designed as a short-term measure before the EU finds a way to tax profits based on where business actually happens, could also encompass other high-profile U.S. firms such as Airbnb and Uber. But start-ups will be exempted from the interim tax.
It is designed to apply to activities in which users contribute to value creation - whether via online advertising, such as in search engines or social media, via online trading or in the sale of data about users.
Tightened EU-U.S. ties
The EU proposals came in the wake of the new $1.5 trillion tax law that President Trump signed last year, which tried to crack down on profit-shifting by imposing a new minimum tax on the overseas earnings of any companies with United States operations. The international provisions in the United States tax law have angered some European leaders, who say they go too far and may violate World Trade Organization rules.
The proposals have been faced with clear objections from the U.S. officials.
"The U.S. firmly opposes proposals by any country to single out digital companies. Some of these companies are among the greatest contributors to U.S. job creation and economic growth," U.S. Treasury Secretary Steven Mnuchin said in a statement last week before the EU disclosed its tax plan.
"Imposing new and redundant tax burdens would inhibit growth and ultimately harm workers and consumers," Mnuchin added.
But the Commission regarded the proposals as requisite measures to "ensure that all companies pay fair tax in the EU", as "digital companies currently have an average effective tax rate half that of the traditional economy in the EU."
According to the Commission, top digital firms pay an average tax rate of just 9.5% in the EU - far less than the 23.3% paid by traditional companies.
The proposals also came as the EU fighting against the United States on another trade front -- a 25 percent tariff on imported steel and a 10-percent tariff on aluminum exports to the United States, set to take effect on March 23.
After the Commission made public the tax plan, EU Commissioner for trade Cecilia Malmstrom and U.S. Secretary of Commerce Wilbur Ross released a joint statement that agrees to "launch immediately a process of discussion with President Trump and the Trump Administration on trade issues of common concern, including steel and aluminum, with a view to identifying mutually acceptable outcomes as rapidly as possible.".
Posted from my blog with SteemPress : https://insights.jumoreglobal.com/eu-unveils-digital-tax-plan-targeting-us-tech-giants/