Recent times have seen a culmination of European union fiscal attention on corporate giants in the digital sales industry, and measures to harmonize or impose VAT (sales tax) on on-line vendors in the EU and US.
EU avoidance and subsidization
Draft legislation was tabled on 12 April by the EU to make major multinationals such as Google, Amazon and Facebook disclose exactly where and how much tax they pay across the continent. Fortune wrote on March 11 “corporate tax-dodging costs the EU between $54.5 billion and $76.4 billion a year, according to a study by the European Parliamentary Research Service. “
Google, Amazon, Apple and Microsoft were some of the tech companies accused of having avoided taxes in the EU, or unduly benefited from subsidization. The European Commission brought forward plans to make major multinationals such as these disclose increased transparency about tax they pay across the continent.
On August 30, Reuters reported that the European Commission ordered Apple Inc to pay Ireland unpaid taxes of up to 13 billion euros ($14.5 billion) as it ruled the firm had received illegal state aid. The US authorities themselves were alarmed at the measures affecting large US corporations : “a U.S. Treasury spokesperson warned the move threatens to undermine U.S. investment in Europe and “the important spirit of economic partnership between the U.S. and the EU.”(See also Europages article on TTIP).
EU VAT harmonization
On December 1, the European Commission unveiled a series of measures to improve the Value Added Tax (VAT) environment for e-commerce businesses in the EU. The proposal is designed to allow consumers and companies, in particular start-ups and SMEs, to buy and sell goods and services more easily online. By introducing an EU-wide portal for online VAT payments (the ‘One Stop Shop’), VAT compliance expenses will be significantly reduced, saving businesses across the EU €2.3 billion a year, the EU assured.
US sales tax extended
Meanwhile in the US, Chris Matthews writes in Fortune August 26 “Uncle Sam’s toll collector’s latest savior is House Judiciary Committee Chairman, Virginia Republican Bob Goodlatte, who is set to put forward a proposal that would allow state and local governments to tax online purchases made over state lines,” (see Europages article on Silicon Valley’s concerns expressed at Lisbon web summit).
The challenge of old free democracies’ justice and taxation keeping up with the pace of technological and business change – in this instance the massive expansion of on-line business, – is in full swing. In these times of strained public budgets and expanding digital economy, states are grappling with how to tax this booming business.
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European Commission, 1 December 2016 “Commission proposes new taxrules to support e-commerce and online businesses in the EU”
“7 Corporate Giants Accused of Evading Billions in Taxes”, Fortune, by Jonathan Chew March 11,
“Get Ready to Pay a Lot More in Sales Tax“, Fortune, by Chris Matthews , August 25, 2016,
“Facebook, Google and Amazon to be forced to open up tax books by EU” The Independent, by Adam Withnall 12 April
European Commission Fact Sheet “Combatting corporate tax avoidance: Commission presents Tax Transparency” 18 March 2015
“EU hits Apple with $14.5 billion Irish tax demand” Reuters, Aug 30, By Foo Yun Chee and Padraic Halpin