Displaying items by tag: European Union

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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European mobile operators have blasted the decision by the EU to place a price cap on intra-EU phone calls. The decision has been hailed by MEPs as a victory for Brussels, but critics of the decision have labelled it a populist stunt and a political smokescreen.

European operators said the decision was being used to deflect attention away from the failure by politicians in Brussels to agree on far more critical measures that are required to be implemented in order to facilitate the much-needed investment for 5G and other high-tech innovations.

Telecoms lobbying group ETNO said the European Commission had missed a ‘once in a decade’ opportunity. In a statement released to the press, ETNO said, “The main aim of the original proposal by the European Commission was to significantly improve the investment climate for rolling out new networks and to empower users of all communication service. This ‘once in a decade’ opportunity has been missed.”

This latest decision by the EC comes just twelve months after the ‘free roaming’ revolution which allowed Europeans to be charged the same amount to call, text, or use the internet when travelling in other EU nations as they would be at home.

In the latest measure, it has been disclosed that mobile or fixed-line phone calls from an EU home country to another bloc member will now be capped at 19 euro cents ($0.22) per minute and six cents per text message.

MEP, Pilar Del Castillo, who negotiated on behalf of the European Parliament, expressed his delight that the decision to put a price cap on calls was rubberstamped - and said companies should not be allowed to charge excessive fees to users when making calls to other EU member states.

He said, “We agree that companies cannot charge excessive fees to users when they call or send an SMS from their home country via mobiles or landlines to another EU Member State.  The cap came after 12 hours of talks between the EU Bulgarian Presidency, the European Commission and the European Parliament and will now need signing off by the bloc's 28 member states.

But the limit, which was part of a wide-ranging telecoms package, comes as an increasing share of inter-EU communication takes place via mobile apps such as WhatsApp, iMessage or Skype.

Published in Telecom Operators

EU taking Ireland to court over Apple tax dispute

Written on Sunday, 15 October 2017 08:21

The European Commission is taking Ireland to the European Court of Justice for failing to recover from Apple illegal state aid worth up to €13 billion, as required by the Commission’s August 2016 decision. EU Member States have to recover illegal state aid within the deadline set by the Commission, which is usually four months.

The Commission concluded that Ireland’s tax benefits to Apple were illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. As a matter of principle, EU state aid rules require that illegal state aid is recovered in order to remove the distortion of competition created by the aid.

“Ireland has to recover up to €13 billion in illegal state aid from Apple. However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part,” said Commissioner Margrethe Vestager, in charge of competition policy. “We of course understand that recover in certain areas may be more complex than in others, and we are always ready to assist. But Member States must make sufficient progress to restore competition.”

The deadline for Ireland to implement the Commission's decision on Apple's tax treatment was 3 January 2017 in line with standard procedures, i.e. four months from the official notification of the Commission decision. Until the illegal aid is recovered, the company in question continues to benefit from an illegal advantage, according to the Commission, which is why recovery must happen as quickly as possible.

Today, more than one year after the Commission's decision, Ireland has still not recovered any of the illegal aid, the Commission claims. Furthermore, although Ireland has made progress on the calculation of the exact amount of the illegal aid granted to Apple, it is only planning to conclude this work by March 2018 at the earliest.

The Commission has therefore decided to refer Ireland to the Court of Justice for failure to implement the Commission decision, in accordance with Article 108(2) of the Treaty on the Functioning of the European Union (TFEU). If a Member State does not comply with the judgment, the Commission may ask the Court to impose penalty payments.

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Google files appeal against $2.8bn EU antitrust fine

Written on Tuesday, 19 September 2017 10:45

Alphabet-owned Google is fighting back against the $2.8 billion antitrust fine it was given by the European Commission in June this year. The Californian tech giant has filed an appeal against the fine, which was the largest penalty ever given by the European Union’s regulator.

The European Commission had ruled that Google’s positioning of its own shopping comparison service at the top of Google search results was an abuse of power. If the practice continued, the Commission said, more fines would come Google’s way.

At the time when the fine was imposed, the EC’s Competition Commissioner, Margrethe Vestager, said Google was conducting activity that was “illegal under EU antitrust rules.” Google “respectfully disagreed” with the ruling, but was given 90 days to end its “anti competitive” practices or else face another fine amounting to 5 percent of the average daily global earning of Alphabet.

The company “has systematically given prominent placement to its own comparison shopping service,” the Commission claims. Furthermore, “Google has demoted rival comparison shopping services in its search results.”

For instance, rival comparison shopping services appear in Google's search results on the basis of Google's generic search algorithms. Google has included a number of criteria in these algorithms, as a result of which rival comparison shopping services are demoted. 

Evidence, according to the Commission, shows that even the most highly ranked rival service appears on average only on page four of Google's search results, and others appear even further down.

Google's own comparison shopping service is not subject to Google's generic search algorithms, including such demotions. As a result, Google's comparison shopping service is much more visible to consumers in Google's search results, whilst rival comparison shopping services are much less visible.

Google's “illegal practices” have had a “significant impact” on competition between Google's own comparison shopping service and rival services, the Commission claims. They allowed Google's comparison shopping service to make significant gains in traffic at the expense of its rivals and to the detriment of European consumers.

Given Google's dominance in general internet search, its search engine is an important source of traffic, the Commission claims. As a result of Google's practices, traffic to Google's comparison shopping service increased significantly, whilst rivals have “suffered very substantial losses of traffic on a lasting basis.”

The Commission is now looking at other areas where it suspects Google may have abused its monopoly power, notably its Android mobile operating system, speculates BBC Technology Correspondent Rory Cellan-Jones. The Commission’s ruling against Google “was seen as just the first shot in a wider campaign,” he said.

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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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Citizens of the United Kingdom will soon be able to force social media platforms to delete information about them, including content published during their childhood, due to government proposals that will bring data laws into line with new European regulations, Reuters reported.

Digital Minister Matt Hancock said Britons will be given more control over their data by having “the right to be forgotten” online and ask for their personal data to be erased. The new measures will force companies to seek permission to obtain personal data rather than rely on pre-selected tick boxes, which are often ignored, Hancock said.

The European Union’s General Data Protection Regulation (GDPR), to become enforceable from May 2018, tightens and extends the scope of data protection law in Europe, and the UK’s new rules will fall in line with this.

Despite the UK planning to leave the European Union, it will have to comply with GDPR, according to lawyers and tech experts, to avoid disruption to the data traffic that is essential to international business. The new rules would give the UK one of the most robust, yet dynamic, set of data laws globally, Hancock claims.

"It will give people more control over their data, require more consent for its use and prepare Britain for Brexit," he said, adding that the data protection regulator, the Information Commissioner’s Office (ICO), will be given scope to issue higher fines (up to 17 million pounds), in cases of serious data braches.

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The European Commission has launched a public consultation on how Europe should promote digital innovation in health and care, for the benefits of citizens and health systems in Europe.

The input will feed into a new policy Communication to be adopted by the end of 2017, as announced in the recent review of the Commission's Digital Single Market strategy.

“We are dedicated to improving European citizens' quality of living by improving Europe's health, care and research systems by using digital technologies to their full potential,” stated Vice-President Andrus Ansip and Commissioners Vytenis Andriukaitis, Mariya Gabriel and Carlos Moedas.

“This consultation will help us identify ways to offer citizens, medical professionals and researchers better access to health data, prevention, rapid response to pandemic threats, personalized treatments and care,” the statement added.

“We are considering new digital initiatives to deliver on the free movement of patients and data, to support the modernization of national health systems, and to bring together scattered evidence and innovative knowledge from across Europe. At the heart of our policies, citizens and their wellbeing are our first priority.”

The consultation will collect information on three main pillars, including citizens' secure access to their health data and the possibility to share it across borders, clarifying citizens' rights and enhancing interoperability of electronic health records in Europe.

It will also focus on connecting and sharing data and expertise to advance research, personalize health and care, and better anticipate epidemics. Finally, it will focus on using digital services to promote citizen empowerment and integrated person-centered care.

Citizens, patient organizations, health and care professionals, public authorities, researchers, industries, investors, insurers and users of digital health tools are all invited to share their views via EU Survey until 12 October 2017. 

Demographic change, growing prevalence of chronic diseases, re-emergence of infectious diseases and the rising cost of healthcare poses major challenges for healthcare provisions in Europe.

The Communication on effective, accessible and resilient health systems concluded that the Member States' future ability to provide high-quality healthcare to all citizens will depend on making health systems more resilient, while remaining cost-effective and financially sustainable.

Digital innovation can offer cost-effective tools to support the transition from a hospital-based healthcare model to a person-centered and integrated model, improve health promotion, prevention and access to care, and contribute to the sustainability and resilience of healthcare systems, the European Commission claims. It can make effective the right for citizens to access their health data everywhere in Europe.

It can also help improve surveillance and early detection of infectious outbreaks. It can drastically advance the diagnosis and treatment of patients. For instance, in the area of rare diseases, the current average time for diagnosing a known rare disease of 5.6 years could be shortened to one year thanks to molecular diagnosis and tele-consultations with specialists.

Furthermore, the digital transformation of health and care stimulates the empowerment of citizens allowing them to manage their own health and interact more easily with health providers.

The Digital Single Market Mid-term Review tackles these issues. It proposes that the Commission addresses the need and scope for measures on digital health and care, in line with legislation on the protection of personal data, patient rights and electronic identification.

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Alphabet Inc., the parent company of Google and YouTube, posted its financial results on July 24 for the quarter ended June 30, 2017. The tech giant reported a 21 percent jump in quarterly revenue, maintaining a strong growth rate despite a massive anti-trust fine from the European Union.

The company said it made $3.5 billion in net income on sales of $26 billion. Alphabet’s profit would have been even larger if not for the record $2.7 billion EU fine. Alphabet was accused of abusing its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.

Anti-trust concerns have not come from the US. If it weren’t for the EU fine, Alphabet said its earnings per share would have been $8.90 in Q2, compared with $7 a year earlier. But with the fine, the company reported earnings per share of $5.01, beating an average estimate of $4.49.

The company will fight to continue bundling its Android operating system with popular smartphone apps such as Google Maps, said Google CEO Sundar Pichai in a conference call – a practice the EU anti-trust officials are investigating.

“It’s a very open market, open ecosystem, and it works well for everyone, and I expect that to continue,” he said, adding that billions of people use Google products worldwide.

"With revenues of $26 billion, up 21 percent versus the second quarter of 2016 and 23 percent on a constant currency basis, we're delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams," said Ruth Porat, CFO of Alphabet.

There are concerns, the company noted, that its costs have been rising faster than sales. Expenses would remain high as more searches shift to mobile devices. The uncertainty of expected profit appeared to weigh down on Alphabet’s share price, said Reuters, which fell about 3 percent to $967 after the bell.

The company’s revenue costs, a measure of how much it needs to spend to keep its platforms running before added costs such as research, rose 28 percent, according to the results, which is higher than the growth in revenue itself. The rising costs, such as Google paying to drive traffic to its search engine, affected the company more than expected, analysts report.

“This could be problematic going forward,” Doug Kass, president of Seabreeze Management, told Reuters.

Alphabet is focused on growing bigger, according to Porat, who was asked about margins during a conference call with analysts. She said, “As we’ve often said, we’re focused on revenue and operating income dollar growth and not on operating margins.”

She further noted that increasing costs are merely the result of more money being invested into high-growth products that she said would create value for Alphabet shareholders. The company currently holds $15.7 billion in cash and cash equivalents, according to the results, and a further $79 billion in marketable securities.

Alphabet competes head-to-head with social media giant Facebook for online advertizing revenue. According to eMarketer, Google is expected to have $73.75 billion in net digital ad revenue worldwide while Facebook is expected to make just $36.29 billion. Together, eMarketer reports, Google and Facebook rake in 49 percent of the market.

Other products under the Alphabet umbrella, such as the Pixel smartphone, the PlayStore and Google’s cloud business, saw revenue increase 42.3 percent to $3.09 billion. Google’s cloud business competes against heavyweights such as Amazon and Microsoft.

Some of Alphabet’s losses came from business units such as Waymo, its self-driving company, and thermostat-maker Nest, and the life sciences firm Verily.

Published in Finance

The European Commission has fined Google €2.42 billion for breaching EU antitrust rules. Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service, according to a European Commission statement. The company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company.

Google has come up with many innovative products and services that have made a difference to our lives. That's a good thing. But Google's strategy for its comparison shopping service wasn't just about attracting customers by making its product better than those of its rivals,” said Commissioner Margrethe Vestager, in charge of competition policy.

Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors,” Vestager added. “What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

Google's flagship product is the Google search engine, which provides search results to consumers, who pay for the service with their data. Almost 90% of Google's revenues stem from adverts, such as those it shows consumers in response to a search query, according to the European Commission statement.

In 2004 Google entered the separate market of comparison shopping in Europe, with a product that was initially called "Froogle", re-named "Google Product Search" in 2008 and since 2013 has been called "Google Shopping". It allows consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms (such as Amazon and eBay), and other re-sellers.

When Google entered comparison shopping markets with Froogle, there were already a number of established players. The Commission’s statement points out that contemporary evidence from Google shows that the company was aware that Froogle's market performance was relatively poor (one internal document from 2006 stated "Froogle simply doesn't work").

Comparison shopping services rely to a large extent on traffic to be competitive. More traffic leads to more clicks and generates revenue. Furthermore, more traffic also attracts more retailers that want to list their products with a comparison shopping service. Given Google's dominance in general internet search, its search engine is an important source of traffic for comparison shopping services.

From 2008, Google began to implement in European markets a fundamental change in strategy to push its comparison shopping service. This strategy relied on Google's dominance in general internet search, instead of competition on the merits in comparison to shopping markets.

The company “has systematically given prominent placement to its own comparison shopping service,” the Commission claims. Furthermore, “Google has demoted rival comparison shopping services in its search results.” For instance, rival comparison shopping services appear in Google's search results on the basis of Google's generic search algorithms. Google has included a number of criteria in these algorithms, as a result of which rival comparison shopping services are demoted.

Evidence, according to the Commission, shows that even the most highly ranked rival service appears on average only on page four of Google's search results, and others appear even further down. Google's own comparison shopping service is not subject to Google's generic search algorithms, including such demotions. As a result, Google's comparison shopping service is much more visible to consumers in Google's search results, whilst rival comparison shopping services are much less visible.

Google's illegal practices have had a “significant impact” on competition between Google's own comparison shopping service and rival services, the Commission claims. They allowed Google's comparison shopping service to make significant gains in traffic at the expense of its rivals and to the detriment of European consumers.

Given Google's dominance in general internet search, its search engine is an important source of traffic, says the Commission. As a result of Google's illegal practices, traffic to Google's comparison shopping service increased significantly, whilst rivals have “suffered very substantial losses of traffic on a lasting basis.”

Published in Finance

The European Commission has opened an “in-depth” investigation to assess the proposed acquisition of NXP by Qualcomm under the EU Merger Regulation. The Commission has concerns that the transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.

Commissioner Margrethe Vestager, in charge of competition policy, said: “We use our electronic devices every day - mobile phones or tablets. As semiconductors are used in practically every electronic device, we are dependent on them in those devices. With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices."

The proposed transaction involves the acquisition of the whole of NXP by Qualcomm and would combine two of the leading players in the semiconductor industry. More specifically, Qualcomm develops and supplies baseband chipsets (both standalone and integrated with an application processor) enabling cellular telecommunications standards such as UMTS and LTE. NXP is an important provider of semiconductors, in particular for the automotive industry. With respect to mobile devices, NXP is a leading provider of near-field communication ("NFC") chips and secure elements ("SEs").

The Commission's initial market investigation raised issues relating in particular to semiconductors used in mobile devices, such as smartphones, and in the automotive industry. The Commission is concerned that the merged entity would hold strong market positions within both baseband chipsets and NFC/SEs chips, and would have the ability and incentive to exclude their rival suppliers from these markets through practices such as bundling or tying.

The Commission is also concerned that the merged entity would have the ability and incentive to modify NXP's current intellectual property licensing practices, in particular in relation to NFC technology, including by bundling the acquired NFC intellectual property to Qualcomm's patent portfolio. The Commission will investigate whether such conduct could lead to anticompetitive effects, such as increased royalties for customers and/or exclusion of competitors.

The Commission claims the merger would remove competition between companies active in the markets for semiconductors used in the automotive sector and, in particular, in the emerging Vehicle-to-Everything ("V2X") technology, which will play an important role in the future development of "connected cars".

The transaction was notified to the Commission on 28 April 2017. The Commission now has 90 working days, until 17 October 2017, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

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