October 1, 2019
Impatient with the slow pace of overhauling corporate taxation to better represent the real profits of international digital companies, European Union commissioners propose that the EU agree on a tax if no global decision is reached by end of 2020. Up until now, individual countries have crafted different approaches to taxation. In France, former digital affairs minister Mounir Mahjoubi said he may file an amendment to a budget bill forcing these same Internet behemoths to reveal how much profit they make in the country.
Reuters reports that the EU Commission’s incoming vice president Margrethe Vestager, who will oversee digital policy and competition, stated that, “if no effective agreement can be reached by the end of 2020, the EU should be willing to act alone” on a digital tax.
Paolo Gentiloni, commissioner-designate for taxation, seconded her position, adding that he “would seek to prevent individual EU governments from being able to veto decisions on tax matters” and asserting that “as part of the fight against tax evasion and tax avoidance, jurisdictions included in the EU’s tax haven list should be subject to common sanctions.”
The incoming commissioners expressed different ways to revive the economy: Gentiloni promoting fiscal leeway and Latvia’s Valdis Dombrovskis asking for a “responsible fiscal policy.” The two will decide “how to apply the rules in the coming five years.” Reuters notes that “highly-indebted states fear that a push on banks to diversify their sovereign bond holdings could increase yields on their public debt, as national lenders would dump riskier paper in favor of safer securities.”
Bloomberg reports that France’s Mahjoubi, who served in President Emmanuel Macron’s administration until March, estimated that, without the proposed amendment, “the government’s new digital tax may end up collecting only half the money that it should.”
“I want lawmakers to have the tools to pressure the government when it is negotiating with other countries for fair taxation at a global level,” he said. “It’s parliament’s role to help the government to improve their legislation. So I am keeping open the possibility of filing an amendment to force the companies to be transparent here.”
In July, the French government began imposing a three percent tax on the revenue digital companies make doing business there, but “never disclosed the list of companies affected.” The government did say it “estimated it could raise 400 million euros ($440 million) this year and close to 650 million euros in 2022.” Mahjoubi based his figures “on the 2018 public data ranging from Internet traffic to corporate filings.”
In 2018, he added, “the five leading Internet companies paid 130 million Euros in total business taxes.” Google also agreed to pay 965 million Euros ($1.1 billion) to end two tax investigations in France. France has stated its “digital tax is temporary until the OECD manages to broker a global agreement for more effectively taxing Internet companies that use complicated structures to shift earnings to low-tax jurisdictions.”