The finance ministers of France, Germany, Italy and Spain said in a joint letter that instead of only taxing on the profits made as of now, they want digital multinationals like Amazon and Google to be taxed in Europe based on their revenues.
There are many countries in Europe that are frustrated at the low tax they receive under current international rules even though it was France that is leading a push to clamp down on the taxation of such companies.
At present, despite the fact that revenues that these companies made revenues in other EU countries, such companies are often taxed on profits booked by subsidiaries in low-tax countries like Ireland.
“We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries,” the four ministers wrote in a letter that has been seen by the media.
Addressed to the EU’s Estonian presidency with the bloc’s executive Commission in copy, the letter has been signed by French Finance Minister Bruno Le Maire, Wolfgang Schaeuble of Germany, Pier-Carlo Padoan of Italy and Luis de Guindos.
Urging to bring taxation to the level of corporate tax in the country where the revenue was earned, the finance ministers of these countries urged the Commission to come up with a solution creating an “equalization tax” on turnover which would achieve that aim.
“The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax,” the ministers said in the letter, first reported on by the Financial Times.
They wanted to present the issue to other EU counterparts at a Sept. 15-16 meeting in Tallinn, said Le Maire, Schaeuble, Padoan and de Guindos of Spain.
With the aim of making it possible to tax firms where they create value, not only where they have their tax residence, a discussion at the meeting about the concept of “permanent establishment”, has been scheduled by the EU’s current Estonian presidency.
And after facing legal setbacks trying to obtain payments for taxes on activities in the country, France has stepped up pressure for EU tax rules.
because it had no “permanent establishment” in France and ran its operations there from Ireland, a French court ruled that Google, now part of Alphabet Inc, was not liable to pay 1.1 billion euros ($1.3 billion) in back taxes in July.
(Adapted from Bloomberg)