Displaying items by tag: Tax

France to increase taxes on internet giants

Written on Thursday, 07 March 2019 08:35

French President Emmanuel Macron has planned to implement an increase in taxes on internet giants such as Google and Facebook.

After failing to convince his European counterparts to introduce it as an EU-wide tax, he decided to implement it in his own country. Many EU officials were against the idea such as Ireland which is well-known for its low-tax jurisdictions.

The matter will be discussed by cabinet ministers and then submitted to Parliament. The proposal put forward regarding the new tax mechanism suggests that lare companies operating within France are subject to a tax of three per cent on their digital sales made within the territory.

This weekend, French Economy Minister Bruno Le Maire told Le Parisien, “The amount obtained from this three per cent tax on digital gross sales in France from January1, 2019 should soon reach 500 million Euros.”

This new tax is called “GAFA tax” which stands for Google, Apple, Facebook and Amazon.

Indeed, the European Commission found that Apple paid just 0.005 per cent of corporate tax on its European profits in 2014 which equates to approximately 50 Euros per million. As a result, in 2016 Apple was ordered by the European Commission to make a payment of 13 billion Euros in taxes to Ireland.

Under EU law, internet giants are expected to report their income which has prompted them to opt for low-tax nations for business such as Ireland, the Netherlands and Luxembourg.

Under the legislation which will be presented by French politician Bruno Le Maire on Wednesday, digital companies with sales of more than 750 million euros per year globally and more than 25 million n France will be taxed.

Le Maire stated, “If these two critera are not met, the taxes will not be imposed.”

He also said that around 30 companies in China, Germany, the US, Spain and the UK will be affected by this tax.

According to Le Maire, taxing such companies “is a question of fiscal justice” because “digital giants pay 14 per cent less tax than small- and medium-sized European companies.”

Ireland, Sweden and Denmark have refused the EU’s efforts to implement a new tax due to fear of decreased investment. Germany had a somewhat neutral stance on the matter as it feared an adverse response from the S against its car industry.

While the prospect of enforcing this tax within Europe has failed, France is hoping for a global agreement by 2020.

France is trying to pursue “common ground” on the issue with members of the Organization for Economic Cooperation and Development (OECD) which is comprised of representatives from the most advanced economies in the world.

 Britain, Italy and Spain have also been working on a new digital tax while Singapore, Japan and India are in the process of planning their own schemes.

Recently, aggressive legal action by tax authorities has been taken against these companies.

Just last month, Apple reached an agreement to pay 10 years’ worth of backtracked taxes which amounted to nearly 500 million Euros.

However in 2017, France tax collection drive experienced a setback when their court action against Google resulted in the internet giant not being liable to pay 101 billion Euros in taxes from revenues which were reportedly transferred from France to Ireland.

French tax is “symbolic and does not solve the problem of massive fiscal evastion,” said Raphael Pradeau from the anti-globalisation lobby group Attac. “It’s as if we accept that such firms can practice tax evasion in return for a few crumbs.”

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GAFA tax lands in second EU country after France

Written on Thursday, 03 January 2019 10:08

Austrian Chancellor Sebastian Kurz vowed to press ahead with a tax on large internet and technology companies, following France's example, as the European Union struggles to finalize a new EU-wide levy.

France, which is pushing for a new so-called “GAFA tax” is advancing with its own tax to ensure the global giants pay a fair share of taxes on massive business operations in Europe.

“It is only fair that internet giants in Europe pay a proper amount of tax,” Kurz said, according to a statement. ‘In addition to an EU-wide move, we'll also act on a national level. We will introduce a digital tax in Austria.”

Kurz said that EU member states “agree in principle that there is a need for such a tax.” He said Finance Minister Hartwig Loeger was in the process “of working out the details and their implementation and will unveil the basic framework at the beginning of January.” The tax would then come into force as part of the government's planned tax reforms in 2020.

“The aim is clear - to tax companies that generate huge profits online, but pay hardly any tax on them, such as Facebook or Amazon,” Kurz said.

In addition to taxing direct sales, France will also require the companies to pay a levy on advertising revenues, websites and the resale of private data, French Finance Minister Bruno Le Maire announced earlier.

Under EU law, US technology titans such as Google and Facebook can choose to report their income in any member state, prompting them to pick low-tax nations like Ireland, the Netherlands or Luxembourg. Such firms, on average, pay a nine-percent levy, compared to 23% for other businesses, according to Margrethe Vestager, the EU competition commissioner.

The low tax rates have caused anger among voters in many European countries, but the 28-member bloc is divided on how to tackle the issue.

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France is leading a push to increase the taxation of tech giants in Europe, backed by Germany, Italy and Spain. The countries’ finance ministers said in a joint letter that they want multinational technology companies like Google and Amazon to be taxed based on their revenues in Europe, rather than only profits as now.

Other European nations have expressed their support for the tax change, Reuters reported, because of the low tax they receive under the current international rules. Some nations are missing out on their share because tech giants are often taxed on profits booked by subsidiaries in Ireland, a low-tax haven, even though the revenue generated came from other EU countries.

In the letter written by the four European finance ministers it says, “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries.”

The letter, seen by Reuters, was sent to the European Union’s Estonian presidency with the bloc’s executive Commission in copy. It was written by French Finance Minister Bruno Le Maire, Wolfgang Schaeuble of Germany, Pier-Carlo Padoan of Italy, and Luis de Guindos of Spain.

In the letter the ministers express the need to create an “equalization tax” on turnover that would bring taxation to the level of corporate tax in the country where the revenue was generated. The ministers said, “The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax.”

The ministers will reportedly present their case to other EU counterparts at a meeting in Tallinn from Sept. 12-16. A discussion has been scheduled by the EU’s current Estonian presidency to consider the concept of “permanent establishment” with the goal of being able to tax companies on where they generate their revenue, not only where they have their tax residence.

France has faced setbacks trying to obtain payments for taxes on tech giants’ activities in the country, hence its move to put pressure on the EU to change tax rules. In July a French court ruled that Alphabet’s Google should pay 1.1 billion euros ($1.3 billion) in back taxes because it has no “permanent establishment” in France but ran its operations there from Ireland.

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US technology colossus and global search engine giant Google has avoided paying a whopping €1.1 billion tax bill in France after a Parisian court ruled in its favour. The court’s decision was a welcome reprieve for the Californian based entity, as the ruling comes just weeks after Google was fined by the European Commission (EC).

Google’s legal row in relation to this tax bill has dragged on for six years, but a Parisian administrative tribunal ruled that Google was not liable to pay five years worth of back taxes which was being sought by France’s tax authorities. The tribunal found that Google’s advertising saes business had no taxable presence in the country.

The Wall Street has claimed that the French court’s decision could have implications for the other tax battles that Google are currently embroiled in Europe and other parts of the world. In its summary of its findings, the Parisian court concluded that Google did not illegally evade French tax by routing sales in the country through the Republic of Ireland. Google’s European headquarters is in Ireland - and they ruled that Google could not be taxed if it also has a permanent base in France.

Google reiterated its commitment to France by vowing to support the growth of its digital economy. In a statement issued by the US firm, which employs 700 people in France – they suggested that the decision by the court confirms that it abides by French tax law and international standards. The statement read, “We remain committed to France and the growth of its digital economy.”

However, France’s Minister of Public Action and Accounts, Gerald Darmanin, claimed that the tax authority may yet appeal the decision made by the administrative panel. In the meantime, the court’s decisions eased recent pressure on Google across Europe. The European Commission fined the organization €2.4 billion a fortnight ago, it said it abused its market dominance as a search engine, and illegally promoted its own shopping comparison website.

In addition to this, reports have circulated that the EU may fine Google over its Android operating system, which last year was accused of stifling innovation and market competition by the EU competition commissioner.

A number of other European countries have also attempted to claim back taxes from Google. In Spain, authorities raided Google’s offices in 2016, while the company also agreed to pay €306 million in Italian back taxes earlier this year.

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US government is set to intervene into the long-running saga between technology giants Apple, the EU and the Irish government. The EU ordered the iPhone maker to pay back €13 billion in taxes it claimed it owed Ireland.

However, in a bizarre turn of the events the Irish government rejected the EU’s ruling that it was owed €13 billion in back taxes and said that Apple hadn’t breached any tax laws in Ireland. The EU insisted that Apple had secured favorable tax incentives from the Irish government which amounted to illegal subsidies and issued the record tax demand against the US tech leaders.

Apple decided to take its case to Luxembourg-based General Court, which is Europe’s second highest in December in light of the ruling by the EU. The decision by the EU was heavily criticized by the Obama administration which alleged that the EU was attempting to help itself to cash that should have ended up in the US.

The Trump administration has subsequently proposed a tax break on $2.6 trillion in corporate profits being held offshore as part of its own tax reform, although it has not stated anything in public in relation to Apple’s tax row with the EU.

A source close to the case that who wishes to remain anonymous confirmed that the US had filed an application with the EU in relation to the long-running saga between Apple and EU decision-makers. The source said, “I can confirm the United States filed an application with the European Union General Court to intervene in the case involving the retroactive application of state aid rules to Apple.”

It has also been reported that The General Court will deal with the case in late 2018, although that has not been officially confirmed. Apple firmly believes that it is a convenient target for the EU and that EU competition enforcer used an ‘absurd theory in coming with the punitive figure. Other companies currently embroiled with the EU in relation to tax issues in Luxembourg are Amazon and McDonalds.

Ireland, the Netherlands, Luxembourg, Starbucks, Fiat Chrysler Automobiles and several other companies that were also ordered to pay back taxes to other EU countries have similarly challenged their EU rulings.

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The Canadian heritage minister rejected a recommendation to introduce a new five percent tax on high-speed internet services in the country on June 15, just shortly after the proposed tax was made public by a parliamentary committee.

Canadian politician Melanie Joly told Global news that “there are no plans for a new tax” on high-speed internet services such as Netflix, Apple Music and Crave. Joly added that the Canadian government is committed to reducing taxes, not increasing them. The Prime Minister Justin Trudeau echoed Joly’s words at a stop in Montreal.

The Canadian House of Commons initially released the tax recommendation report with 20 recommendations aimed at improving Canada’s slowing media industry and help it adapt to the ever-changing landscape. One of the suggestions was applying a five percent tax to internet services, which is already applied to broadcasters.

The goal of implementing the tax, according to the committee, was to lift up the industry and force it to adapt to technological changes and evolving consumer habits. Committee chair and Liberal MP Hedy Fry said, “At the moment, as you well know, there is a five percent levy on broadcast media in order to be able to help them bring [in] Canadian content.”

Fry added, “We found that this was a risk that they would go into streaming and escape the usual five percent tax… so we’re suggesting that the five percent levy be expanded to include streaming.”

But the proposal was strongly condemned by the Conservative members of the committee, who said the tax would have added hundreds of millions of dollars in revenues to the Canadian Media Fund, which already gets a levy on cable bills to finance the production of Canadian content.

Other recommendations by the committee include requiring the publicly funded CBC to get rid of advertizing on its digital platforms, which would allow media companies to deduct taxes on digital advertizing on Canadian-owned platforms and a tax credit for print outlets for a portion of their digital investments.

“Change brings disruption,” said Conservative MP Peter Van Loan, whose party rejects any increased government involvement in the media and adding more taxes. “In our view, higher taxes and government control of the news is not the answer to the problem.”

The Canadian Taxpayers Federation also spoke out in favor of the rejection of the new tax proposal. Federal director Aaron Wudrick said, “A new internet tax is a terrible idea, and would make the internet less affordable for Canadians.” Wudrick added, “Even worse would be using the revenue to create a new corporate welfare slush fund for the government to subsidize their favorite media outlets.”

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IMF (International Monetary Fund) Managing Director, Christine Lagarde has praised the UAE for leading other Gulf countries in its preparations to implement taxation that will be effective from January 1st, 2018. The IMF chief was speaking at the World Government Summit in Dubai, and told residents in the Gulf region that they must 'get used' to taxation in order to continue the investment in large-scale public infrastructure projects.

The UAE, and the six-nation Gulf Cooperation Council will all introduce VAT for the first time ever on January 1st, 2018. The move has been sought as governments seek to find new revenue streams to compensate for the reduction in the price of oil which has continued to decline since 2014.

The former French Finance Minister stated that in order to have public investment you need public funding and that it was inevitable that there has to be taxation in order to find the money to do this.

She said: "First of all, most people in the world do so, you know, get used to it. If people, consumers and investors, entrepreneurs want to have a country that is organized and has all the basics - you need public investment. To have public investment you need public funding. If public finances are reduced due to the price of a barrel (of oil) has gone down that money needs to be found somewhere else and, as a result, there has to be a degree of taxation."

The IMF advised the GCC governments to introduce VAT in November 2015, in the wake of a continued decline in oil prices, while many were reluctant to introduce the taxation measures - the UAE according to Largarde, has led by example in how it's preparing for the implementation of VAT.

"I really want to pay tribute to most of the Gulf countries, in particularly led the UAE, for deliberately willing to put in place VAT, which we know will be effective January 1, 2018, at a rather low rate and a system that will be simple enough and digital because when you start from scratch so you can innovate.

A spokesman for the UAE finance ministry said that the government is not considering any increase of the tax above 5% - and would not raise it in the future without conducting a thorough study of the economic and social impact a further rise could have on its citizens.

The Dubai government announced its 47.3 billion dirham ($12.87 billion) budget for 2017. The total budget allocation for the year is up 2.6 percent year-on-year, with infrastructure spending up by 27 percent compared with 2016.

The IMF Managing Director said US president Donald Trump's plan could boost the US economy and says we have reasons to be optimistic, but did disclose her fears that the Federal Reserve proposed plans to tighten monetary policy will present challenges to the global economy.

Largarde said: "From the little we know, and I will insist on the little we know, because this is really work in progress - but from the little we hear, we have reasons to be optimistic about economic growth in the United States. U.S. gains are good, but that the more worrying news, if you will, is that it will have consequences on the rest of the world, and we are seeing it. The Federal Reserve decision to tighten monetary policy will be difficult on the global economy and economies will have to prepare."

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The Irish Government have presented its argument that Apple does not owe 13 billion in back-taxes to Dublin, and claimed that the EU breached state sovereignty in relation to its interference in this issue. In August, the EU ruled that tech giants Apple should pay billions in back-taxes to Dublin because Ireland had granted Apple undue tax benefits.

Ireland’s Department of Finance, presented a three-page submission in which it outlined its arguments. The submission read, “The Commission has exceeded its powers and interfered with national tax sovereignty. The Commission has no competence, under State aid rules, unilaterally to substitute its own view of the geographic scope and extent of the Member State's tax jurisdiction for those of the Member State itself.”

The EU commission said the Irish Government allowed Apple to pay a tax rate of 1% of its European profits in 2003, which subsequently dropped to 0.005% by 2014. Following its calculations the commission then ordered the US tech company to repay 13.5 billion euros to Ireland in back-taxes.

Ireland immediately said it would appeal the ruling, which was formally lodged in November.

The Department of Finance's release provided further detail of Dublin's line of argument, claiming the Commission "has misapplied State Aid law" and is wrong in claiming Apple was granted an advantage. "The Commission attempts to re-write the Irish corporation tax rules." 

Dublin additionally claimed procedural errors in the Commission's investigation, which was launched in 2014, arguing Ireland was not contacted to comment on findings contained in the ruling.  "The Commission breached the duty of good administration by failing to act impartially and in accordance with its duty of care," said the submission.

Apple is a valued employer in Ireland, with 6,000 staff in its Cork city campus. Although claiming the tax windfall would boost state coffers, Dublin fears it would ultimately damage the economy by making Ireland less attractive to foreign investors. The case has divided opinion in Ireland with the general public appalled at the decision by the government to refuse the tax windfall which would go a long way towards improving services and infrastructure in a country which is still recovering from the 2008 global recession. However, high-profile business people like Ryanair CEO Michael O’Leary has backed the Irish Government, and said the EU should stay out of Irish tax affairs.

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