The European Commission has announced its plans to tax big technology firms (opens in new tab)that would see businesses with significant online revenues paying a three per cent tax on turnover for their online services.
The new tax would bring in an estimated €5bn and the proposal would affect Google, Facebook and other firms with global annual revenues over €750m and taxable EU revenue above €50m.
The Commission found that the top digital firms pay an average tax rate of just 9.5 per cent in the EU which is far less than the 23.3 per cent paid by traditional companies. However, the companies themselves have disputed these figures and claim the tax proposal is flawed.
To prevent firms from routing their profits through low-tax EU member states such as Ireland and Luxembourg (opens in new tab), the Commission has proposed taxing companies based on where their users are located. The tax itself would only apply to certain revenue streams such as online advertising in search engines and on social media as well as online trading and the sale of user data.
The proposal would still require the backing of the European Parliament and all 28 EU countries before it could go into effect though it is divisive issue as several countries have benefited significantly from large tech companies that have chosen to move their operations to places with lower taxes.
If the new tax on large tech firms does manage to get the necessary approval, doing business in Europe (opens in new tab) will be quite different for Google, Apple, Facebook and Amazon going forward.
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