The EU surges ahead in its bid to find a common tax base across its member states

With the world’s richest nations dragging their feet on ways to find a common solutions on how to tax digital companies, including Facebook and Google, the European Commission has surged ahead in a bid to block some of the world’s wealthiest companies to exploit existing tax regulations to their favor.

On Tuesday, U.S. companies operating in the European Union stated the bloc’s plan to hike taxes on digital companies risks undermining EU’s growth as well as stifle global efforts to find common solutions.

The move by the European Union comes in the wake of tech companies, including Facebook and Google, rerouting the bulk of their profits to countries which have a low tax rates, such as Ireland and Luxembourg.

Frustrated at the length of time the world’s rich nations take to hammer out on how to fairly tax these digital giants, the EU has threatened to surge alone with a tax on turnover or with other short or long-term measures.

“Unilateral action by the EU would seriously undermine international efforts to address tax issues,” said Susan Danger, head of the American Chamber of Commerce to the EU (AmCham EU).

According to AmCham EU, the turnover tax, as proposed by France and backed by other large EU states, would potentially reduce investment, hit jobs and penalize start-ups, low-margin and loss-making companies.

Current rules exempt loss-making firms from paying taxes.

In a report prepared by Paul Tang, a EU lawmaker, the tax paid by the world’s largest online retailer, Amazon, which has its EU tax residence in Luxembourg, for the period of 2013-2015, was zero since it did not make any profits.

The European Union is also considering structural changes in its tax regime to include levies on goods when they have a “virtual” platform in a country, and not only a physical presence.

As per Paul Tang, existing rules may be appended to include changes in corporate tax rules, that are currently under debate in the EU Parliament.

Clearly on the defensive, AmCham EU has criticized this initiative for a common tax base, saying the move could “adversely affect EU competitiveness and growth if it is not in line with internationally agreed rules”.

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