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The European Union is considering the implementation of a three-percent tax on the income of digital corporations such as Twitter, Facebook, eBay, and Google. The proposed tax would be levied against gross revenues dependent on where users are located.
According to Bloomberg, the European Commission released the draft last Friday outlining a plan that would increase the tax burden of large companies that operate digitally within the EU. The commission believes that these companies do not pay enough compared to the value created in the union and use loopholes in the current “uncoordinated” European regulations to avoid paying what they owe.
“EU countries have been looking into methods to tax digital companies, including Amazon.com Inc. and Facebook Inc., in a way that captures the true value created in the region,” said the report.
According to lawmakers, the tax would only be a temporary short-term remedy for the perceived problem. It would allow the EU to collect taxes while it works out a more permanent long-term solution.
"While agreeing to work towards a long-term solution by 2020, some countries believe that there is a strong imperative to act quickly and are in favour of the introduction of interim measures, while other countries are opposed to them and consider that such measures will give rise to risks and adverse consequences."
The proposed plan targets businesses that offer advertising or the sale of user data but also has provisions for companies that provide a platform for interaction between users. However, the plan looks to only impose the tax on corporations with annual revenues of over 750 million euros ($920 million). So smaller businesses are not in the crosshairs.
The commission plans to propose the tax on March 21, but it is not guaranteed to pass. Some countries have already expressed concern that the tax may cause customers to purchase products outside of the EU.
Additionally, for the proposal to become law, all 28 members of the union must agree to it. This means that a single country could block the tax. The Organization for Economic Cooperation and Development reports that EU members agree that there needs to be tax reform for the new digital economy, but as of yet, they cannot seem to agree on how to proceed.