Key EU countries block draft of digital tax on tech corporations like Apple

Posted:
in General Discussion edited April 9
This weekend, Sweden, Finland, Ireland and Denmark blocked a draft proposal of tax that would affect major tech corporations operating in the European Union.

Apple offices near Cork, Ireland.
Apple offices near Cork, Ireland.


The tax -- nicknamed "GAFA," for Google, Apple, Facebook, and Amazon -- is being championed by France, with the backing of European Competition Commissioner Margrethe Vestager, Reuters reported. Vestager has argued that a "global solution" is ultimately needed, but that if results are to come "in a reasonable period of time," Europe will have to lead the way with a harmonized tax.

France's National Assembly is voting today on a national GAFA tax, which would claim 3 percent from digital ads and other income sources for tech firms with revenues over 750 million euros, or about $842 million.

Of concern is the fact that tech companies often escape paying regular taxes, even as they and the demands on government budgets continue to grow. Apple for instance is known to have funneled billions in international revenue through Ireland, exploiting loopholes to minimize its global tax bills.

A 2016 European Commission ruling found that the Irish government had for years arranged preferential tax treatment, something illegal under E.U. law. Apple has already paid over $15 billion to comply with that ruling, though both it and the Irish government are working to appeal.

A close relationship with Apple could theoretically explain Ireland's decision to block a GAFA draft. New taxes could also affect other regional powerhouses, such as Sweden's Spotify, which is forecasting 2019 revenues of 6.35 billion to 6.8 billion euros.

Comments

  • Reply 1 of 12
    kruegdudekruegdude Posts: 334member
    Hmm, I wonder if they’re going to share that “harmonized tax” globally? 
    chaickasteven n.
  • Reply 2 of 12
    chaickachaicka Posts: 108member
    It’s interesting that nations or governments which are slow to innovate and move on to this era’s tech and biz, are championing such tax move to de-incentive nations which did innovate their biz to align with this era.

    France is definitely one of those passé government. Always against everything about globalisation. Yet now champion this ‘pretentious’ harmonized tax.

    Kudos to those nations who dare to stand up against these obsoleted nations.
    steven n.JWSCjbdragonsocalbrianSpamSandwichbshankwatto_cobra
  • Reply 3 of 12
    JWSCJWSC Posts: 384member
    kruegdude said:
    Hmm, I wonder if they’re going to share that “harmonized tax” globally? 
    Ha.  You’re funny!
    ArloTimetravelerwatto_cobra
  • Reply 4 of 12
    jbdragonjbdragon Posts: 2,078member
    So a Special Tax to steal even more money from company's , mainly American company's of more money.

    I don't think most people really realize this, but it's really just another TAX on the people. it's a round about way to tax people more money. See Corporations don't pay taxes. No, they pass those taxes right alone to YOU the customer that end up paying the taxes. So you would not only be paying Apple's taxes, but the normal taxes, the VAT tax you normally pay. You're paying Apple's taxes from Apple jacking up prices another 3-4% to cover that new unfair tax.

    See the Politician generally looks good. They are going after that evil Apple or Google or the Oil company's and the end result in higher cost product. Higher cost GAS at the pump. They look good as you get screwed. It's another way to steal money from people without just coming out and saying that he/she wants to raise Taxes on you.
    edited April 8 bshankwatto_cobra
  • Reply 5 of 12
    chandrachandra Posts: 24member
    US companies invent new technology. French live off the ingenuity of US companies by taxing them.
    bshankwatto_cobra
  • Reply 6 of 12
    chandra said:
    US companies invent new technology. French live off the ingenuity of US companies by taxing them.
    Isn't that how international commerce works? But you missed a step where US companies earn revenue in France - on which they pay those taxes. If foreign companies try to avoid taxes on digital services then they of course will find the laws change.
  • Reply 7 of 12
    seanjseanj Posts: 40member
    France is pushing hard for this because Macron’s recent handouts to try and stop the weekly riots in Paris have helped push the French national debt to the point where it will soon overtake Italy’s... and Italy is essentially bankrupt with is GDP still below what it was in the crash of 2008. (The Eurozone sovereign debt crisis was never solved, it just got pushed down the road.)
    watto_cobra
  • Reply 8 of 12
    I don't disagree with the idea of taxing digital ads/services in the region they will be displayed in, since this fixes the problem of companies just setting up in another country to avoid paying local taxes - even though they are gaining output from that local economy. E.g. Uber here provided invoices from a GmbH.. an entity that would be nearly 16,000km away - despite having local offices: that was plain and simple tax evasion.

    The effect on Apple for a tax like this would be minimal because in contrast to their hardware operations where they centralised taxation to places such as Ireland, their services businesses have generally been invoiced from the country in which the products are delivered.

    Contrary to how some people choose to paint Apple as tax evaders, I personally believe both approaches make sense and are not contradictory: hardware expenses are deeply tied to R&D and manufacturing, it's fair to chalk up those expenses to the country which holds the IP being sold. Services however don't have that benefit, they are largely selling IP which is locally sourced, so taxation should happen locally.

    This tax actually wouldn't have a big impact on Apple, it will however have a significant impact on Google and Facebook which, despite local operations and evidence of work being done locally, still invoice from foreign entities whenever possible.
  • Reply 9 of 12
    SpamSandwichSpamSandwich Posts: 31,010member
    Good lord. Scumbags and government go together like cheese and crackers.
    watto_cobra
  • Reply 10 of 12
    crowleycrowley Posts: 5,799member
    Seems decent enough as a part-solution to the digital services geography issue.  I'd be interested to read a more in-depth examination of why Sweden, Finland, Ireland and Denmark blocked in.  Also why Luxembourg didn't, since they're neck-deep in this kind of business behaviour.
  • Reply 11 of 12
    bshankbshank Posts: 161member
    chandra said:
    US companies invent new technology. French live off the ingenuity of US companies by taxing them.
    Isn't that how international commerce works? But you missed a step where US companies earn revenue in France - on which they pay those taxes. If foreign companies try to avoid taxes on digital services then they of course will find the laws change.
    The problem is that France never charged taxes on these companies until the companies were known to be worth a lot of money. If they had to pay taxes all along it would be understandable and sound like an actual tax. Now it’s just a punitive tax, punishing success. Even worse the appearance is that France and other EU money grubbers are opportunistically scrambling to change the laws to capture this money they see innovative companies earning.
    edited April 9 watto_cobra
  • Reply 12 of 12
    These tech companies are masters in tax avoidance because of their aggression, innovation and multi-national structure, and so I am generally with the French, simply to make sure taxes on the tech companies run roughly where taxes are on other types of businesses. That being said, European tax systems tend to be much more thorough and fair and quick to catch on to new types of business behavior than the American one, and so when you actually look at the numbers over there, you don't see absurdities such as Amazon avoiding ALL US federal taxes last year by booking losses from many years ago as a deduction on the current tax return. So I suspect that in practice, European efforts to close loopholes, while important in terms of fairness to smaller businesses, won't end up raising much extra revenue. It's the US that really needs to be thinking about this.
    edited April 9
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