Austria looking at raising taxes on Apple amidst European disagreement

Posted:
in General Discussion
Having failed to get all 28 European Union countries to back a plan to tax the likes of Apple and Amazon, the Austrian Chancellor has announced plans to follow France in implementing new national taxes on tech giants starting in 2020.

Apple's Kaerntner Strasse store in Austria
Apple's Kaerntner Strasse store in Austria


Austria's Federal Chancellor Sebastian Kurz has announced that his country will introduce a new national tax on the largest technology companies. Details are to be hammered out in January with the tax expected to start in 2020, but the move is in response to the European Union's current failure to implement a bloc-wide digital tax on the so-called GAFA companies -- Google, Apple, Facebook and Amazon.

Previously, Chancellor Kurz has said that Austria would introduce its own scheme if the European Union did. Now that Austria's six-month presidency of the EU ends, he announced in a statement that the country intends to continue working for a pan-European system. However, he added that "in addition to the European plan, we will take a national step. We will introduce a digital tax in Austria."

"The aim is clear," he continued. "To tax companies that generate huge profits online, but pay hardly any tax on them, such a Facebook or Amazon."

Currently the European Commission estimates that the largest firms pay an average of nine percent tax on their profits. In comparison, regional companies play 23 percent.

All member countries of the EU must agree before a bloc-wide tax can be implemented. At present, a company can choose which member country to register its taxes with and so all pick those with the lowest taxation rate, such as Ireland.

This benefits those countries who also argue that such taxes should not be implemented now when there are trade tensions between the EU and the USA.

Austria is not the first country to decide to implement new national taxes. The UK, which remains an EU member country until March 2019, has announced plans for a 2 percent tax that may be implemented from April 2020.

France, which led the proposals for an EU-wide system, is introducing its own separate tax levy from January 1, 2019.

Comments

  • Reply 1 of 9
    So what Austria is saying is they have a tax enforcement issue, not a tax law issue. Government failure at its best. Pass another tax law yet fail to fix the problem, enforcing them. Makes the government look strong in the eyes of the people I suppose. 
    watto_cobra
  • Reply 2 of 9
    I'm sure Apple will just pass this tax on to the Austrian consumer in the form of higher prices.
  • Reply 3 of 9
    gatorguygatorguy Posts: 20,618member
    darelrex said:
    I'm sure Apple will just pass this tax on to the Austrian consumer in the form of higher prices
    I'm just as sure they won't. That topic has come up a few times here and reasons why not have been explained before. 
    edited December 2018 muthuk_vanalingam
  • Reply 4 of 9
    rob53rob53 Posts: 2,032member
    How is this any different than Ireland's reduced taxes? Double standard? EU forces Ireland to tax an amount they demand but when the EU can't all agree on a proper tax, independent countries go ahead and tax the way they want to. I feel Apple should be able to challenge the additional taxes as being unlawful by an EU country. Just trying to be fair ...
    watto_cobra
  • Reply 5 of 9
    croprcropr Posts: 938member
    rob53 said:
    How is this any different than Ireland's reduced taxes? Double standard? EU forces Ireland to tax an amount they demand but when the EU can't all agree on a proper tax, independent countries go ahead and tax the way they want to. I feel Apple should be able to challenge the additional taxes as being unlawful by an EU country. Just trying to be fair ...
    This is very different. 

    The EU does not care how a member state defines its taxes, as long the tax is applicable to everyone in the same way.  Austria can indeed tax online business, and Ireland is completely free to define its corporate tax level, which is 25% or 12.5% depending on some parameters

    In the Apple Ireland case Apple was only paying about 0.05% and not the normal 12.5%.  And this is not allowed, because this is considered as illegal state aid from Ireland to Apple.
    gatorguy
  • Reply 6 of 9
    This is a "digital tax". So I infer it doesn't apply to brick and mortar sales like Apple stores. Only a small fraction of Apple's business is digital, eg iTunes. On the other hand Facebook and Google are mostly digital. Amazon (and Apple) does a lot of hardware delivery through digital ordering. If online ordering is impacted (I hope it's not) but stores are not impacted then people will simply buy their new products in stores. So definitely this would impact Facebook and Google, but I'm not so sure about the others. As the article says, "To tax companies that generate huge profits online, but pay hardly any tax on them, such a Facebook or Amazon."
  • Reply 7 of 9
    chaickachaicka Posts: 112member
    I interpret 'Digital Tax' as a tax meant for product or services which are digital (in short, virtual, not physical) such as digital books (eBooks), digital music (streaming, downloaded digitally), advertisement (online, not print nor local placement of digital ad boards), marketing services, analytical services, etc.
  • Reply 8 of 9
    tbornottbornot Posts: 107member
    Apple is and is run by Socialists, so why aren’t they overjoyed to pay their “fair share”?  Since the percentage necessary to qualify as “fair” is subjective, why can’t Austria take all the profit?
    SpamSandwich
  • Reply 9 of 9
    MarvinMarvin Posts: 14,219moderator
    tbornot said:
    Apple is and is run by Socialists, so why aren’t they overjoyed to pay their “fair share”?  Since the percentage necessary to qualify as “fair” is subjective, why can’t Austria take all the profit?
    Apple is run by wealthy liberals who are different from socialists. Wealthy liberals are the J.K Rowling, Zuckerberg types. They espouse social values (mostly through tweeting) but lock themselves in their ivory towers and gated communities expecting other people to sort things out. They promote equality for all but perpetuate the only real inequality that matters - wealth inequality. When you brush away the noise of identity politics, all people really care about is quality of life and that is defined by wealth. We exist in a closed man-made economic system where the wealth of some directly means less for everyone else. If Apple were run by socialists then, as Cook said to Zuckerberg, they wouldn't be in this situation.

    To be fair though, if Apple had been run by socialists for the last few decades, they might not even exist today. It's actually very hard to be genuinely socialist because it requires that you put aside all kinds of prejudice and consider that all people should be treated equally and fairly. The more that you see of human nature the less true that becomes, it seems fairer to treat more competent people better. So the tendency is towards self-interest, very few people value the competence and interests of others above their own. That's why we have governments to enforce social values because wealthy liberals will only ever tweet about them.

    These tax issues arise because on some level everyone accepts that some tax needs to exist and everyone should pay some tax. The tax is put onto profits because you can't tax losses. The financial experts in the corporate world find ways to exploit international trade laws to fabricate losses or low profits to legally qualify for significantly less than the level of taxes that businesses agree to when they start trading in a country. Countries have no choice but to create tax laws that aren't subject to manipulation from global trade. This cost may well get passed onto the consumer but higher prices will result in lower sales for the company. This tax differs from the Ireland tax in that it applies to more than just Apple as people have mentioned but also raising taxes isn't anti-competitive with other countries, especially larger countries. It may not produce an overall improved outcome but what certainly doesn't result in a positive outcome for competing businesses is allowing hugely profitable international companies to trade essentially tax-free.
    gatorguy
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