European Union proposals could tax Apple and other tech giants between 2 percent and 6 per...
The European Union will soon release proposals to change the way it taxes major tech companies operating within the continent, French Finance Minister Bruno Le Maire has revealed, with firms including Apple potentially being taxed at a rate of between 2 percent and 6 percent in the future.
In an interview with French newspaper Le Journal du Dimanche, spotted by Reuters, Le Maire advised "a European directive will be disclosed in the coming weeks." The change will be a "considerable step" that will involve a tax range between 2 percent to 6 percent, but Le Marie notes the tax rates will skew towards the lower end of the scale.
The tax may also be calculated differently, switching from the current system based on profits to one that is based on revenue, if aspects of an earlier draft proposal ends up being used in the final version.
A draft document from the European Commission, seen by Reuters last month, proposed a levy of between 1 percent and 5 percent of a company's "aggregated gross revenues." A crucial part of these draft proposals would be that the levy would be based on where the customer is located for each transaction, not the location of the company itself.
The proposal is an attempt to curtail the measures taken by major firms to minimize the amount of tax paid. Typical strategies involve routing EU-derived profits through offices registered in countries with low tax rates, including Luxembourg and Ireland.
While critics demading changes to European tax law may consider the proposals do not go far enough, Le Maire suggests this to be a "starting point" for reform. "I prefer a text that will be implemented very quickly rather than endless negotiations. We will fine tune it later."
A scheme to tax based on the customer's location may have prevented Apple's ongoing tax battle with Europe from ever taking place. Apple was hit with a demand by the European Commission for 13 billion euro ($16 billion) in back taxes to be paid to Ireland, ruling that Ireland provided illegal tax benefits for many years.
In its investigation, the European Commission found Irish taxes on Apple's European profits hit as low as 0.005 percent in 2014, and as low as 1 percent in 2003. It was also ruled the tax arrangement between Apple and Ireland was "reverse engineered" on the fly to guarantee the smallest possible tax bill.
Despite protests from both Ireland and Apple, a payment from Apple to an escrow account set up by the country is expected to start in the second quarter of 2018, continuing into the third quarter. Progress has been so slow, the European Commission filed a complaint against the Irish government for its failure to collect the funds, but the Commission says it is willing to withdraw the court case if the full amount is collected.
In an interview with French newspaper Le Journal du Dimanche, spotted by Reuters, Le Maire advised "a European directive will be disclosed in the coming weeks." The change will be a "considerable step" that will involve a tax range between 2 percent to 6 percent, but Le Marie notes the tax rates will skew towards the lower end of the scale.
The tax may also be calculated differently, switching from the current system based on profits to one that is based on revenue, if aspects of an earlier draft proposal ends up being used in the final version.
A draft document from the European Commission, seen by Reuters last month, proposed a levy of between 1 percent and 5 percent of a company's "aggregated gross revenues." A crucial part of these draft proposals would be that the levy would be based on where the customer is located for each transaction, not the location of the company itself.
The proposal is an attempt to curtail the measures taken by major firms to minimize the amount of tax paid. Typical strategies involve routing EU-derived profits through offices registered in countries with low tax rates, including Luxembourg and Ireland.
While critics demading changes to European tax law may consider the proposals do not go far enough, Le Maire suggests this to be a "starting point" for reform. "I prefer a text that will be implemented very quickly rather than endless negotiations. We will fine tune it later."
A scheme to tax based on the customer's location may have prevented Apple's ongoing tax battle with Europe from ever taking place. Apple was hit with a demand by the European Commission for 13 billion euro ($16 billion) in back taxes to be paid to Ireland, ruling that Ireland provided illegal tax benefits for many years.
In its investigation, the European Commission found Irish taxes on Apple's European profits hit as low as 0.005 percent in 2014, and as low as 1 percent in 2003. It was also ruled the tax arrangement between Apple and Ireland was "reverse engineered" on the fly to guarantee the smallest possible tax bill.
Despite protests from both Ireland and Apple, a payment from Apple to an escrow account set up by the country is expected to start in the second quarter of 2018, continuing into the third quarter. Progress has been so slow, the European Commission filed a complaint against the Irish government for its failure to collect the funds, but the Commission says it is willing to withdraw the court case if the full amount is collected.
Comments
The only real real solution is to tax the transaction (sales tax) at a rate that satisfies government revenue requirements, and cease trying to tax profits. This is the difference between taxing consumption vs taxing production. Taxing production increases production costs and sets the stage for tax law manipulation, while taxing consumption provides tax revenue in the jurisdiction where the transaction takes place.
In order to tax foreign imports and lower the cost of domestic production many countries have established value added taxes (an overly complex sales tax).
The biggest problem with with tax compliance is the creators, all of which are constituent motivated. Understand that not all constituents are equal (think “Animal Farm”) with the more equal bearing the most political motivation.
In addition, the European Commission does not have the right to raise taxes. That privilege is - for the time being - reserved to the sovereign treasuries of the EU member states.
This is a case of the EU massively overstepping its competencies and a Commission that, yet again, acts without any democratic mandate.
I'm very glad that the UK has voted to kick it to the kerb.
Obviously, someone has to pay taxes. And individuals pay lots more in tax (including VAT) than people in the U.S.
I do agree this is the right way for the EU to address the tax issues they are having. Instead of making stuff up and applying it to past performance, CHANGE THEIR LAWS!!!
This is on revenue and not profit or taxable income. Pears to grape fruits to Bermuda Grass comparison .
Do you take every tax deduction your are legally allowed to take? If you do then you are morally repugnant by your own standard.
it looks like this tax comes from the company’s actual earnings. Which means that potentially a loss making company may owe taxes in some countries, which can only see them leave those countries. It’s not clear whether this is an additional corporation tax to the existing corporation (HQ) tax, or can be deducted from it. It’s also interesting that the EU seeks to be targeting US companies. Surely BMW will also pay this tax to France, Ireland etc. No mention of that.
And of course this is both a raid on US revenue, and a totally new competency for the EU itself. Apple is now tax compliant, as it has agreed to repatriate taxes to the US. If taxes are already paid in Europe then fewer are owed in the US. Thisleads to a trade or tax war.
Hmm. The European countries already have a consumption tax, VAT is generally around 20% on electronic goods in most of these countries. VAT isn’t revenue for the company. It’s not booked as normal revenue, the business that sells onto the final (non VAT collecting) consumer is basically a collector of VAT. It’s collected and paid per quarter (gross vat minus any VAT paid by the business. That’s often zero as businesses can use their VAT number to buy goods free of VAT. So it is only sales to individuals or very small companies where VAT is charged).
This tax is new, and it seems to be a tax on actual revenue. If Apple sells a 700 Euro device to its wholesalers, the consumer country wants 14-42 per device sold regardless of profits. This may not seem very high until you realise that most companies (not Apple) make about 10% margins on electronic goods and some far less.
A flat 15% tax regardless of the size or type of industry sounds good to me.
On the second point companies tend to sell at a price that generates demand. That’s econ 101.
What is morally repugnant is that companies 1000 times smaller than Apple are paying more in taxes that support our services. Corporation taxes are higher than they could be because of this shit that huge companies like Apple pull by not contributing in proportion to their true profits.
When you look at Apple’s cash mountain it becomes obvious that they can afford to pay the same rate of tax as every local business does.
I don’t believe that Apple’s prices would increase significantly. It is a tax on profit, not revenue.