– European Union Finance Ministers (Eurogroup) has expressed cautious support for the implementation of the new rules for taxation of high-tech giants such as Google (part of the holding Alphabet) and Facebook.
However, they stressed the need to find a lasting global solution to this issue, including in the U.S., according to MarketWatch.
The leaders of the Finance unit of the EU agreed to move forward in finding improved ways of taxing digital services, although Ministers disagreed about how to proceed.
“Despite some differences, we eventually came to several General conclusions,” said Thomas Tyniste, the Minister of Finance of Estonia, which hosted the meeting of the Eurogroup. “All agreed that the problem exists,” he said, referring to the inadequate taxation of technology companies.
Lately in Europe there is a growing struggle with underreporting and tax evasion in order to assure the citizens that big companies pay to the budget a fair amount. The EU aims to modernize corporate taxation, the traditional rules which are based on the availability of physical assets and activities of companies, to include virtual operations, such as targeted advertising for Internet search for users from those countries where the company has no permanent establishment.
One of the topics on the Eurogroup meeting short-term plans has been the proposal by France, supported by Germany, Italy and Spain, the introduction of the “equalization tax” on revenues generated in Europe’s digital companies. But the initiative raised the question of how it will be implemented.
Although more than half of the 28 EU Finance Ministers supported the plan, but the majority were in favor of finding a long-term agreement at the global level, together with the Organisation for economic cooperation and development (OECD).
The fight against deviators
In recent years the European Commission has strengthened the struggle against tax evasion, primarily among the working population in the EU of U.S. companies. So, in August 2016, the EC recognized the tax breaks for Apple in Ireland illegal, and therefore ordered the company to refund the government tax subsidies amounting to 13 billion euros plus interest. Chief Executive officer Tim cook called it political and unjust decision of the European Commission of additional taxes in Ireland.
Ireland gave Apple illegal tax breaks between 2003 and 2014, which led to a significant reduction of company’s tax payments, according to the European Commission after three years of investigation. Released in 2013, the report of one of the committees of the U.S. Senate reported that the government of Ireland allowed Apple to use the income tax in the amount of 2% or less at normal rate of 12.5%.
In 2015, Starbucks Corp. received the instruction of the regulator to pay 30 million euros of taxes in the Netherlands. In January 2016, the EC decided that the Belgian government should collect 700 million euros in illegal tax breaks from 35 companies, including Anheuser-Busche InBev and BP.
As previously reported, Ireland, Luxembourg and the Netherlands had to repeatedly deny accusations that they are tax havens, allowing giant corporations to significantly reduce tax payments.