The European Commission will outline on Thursday different options for taxing digital companies as the 28-nation bloc seeks to raise money from an industry that it says provides less than it should to public coffers.
The commission plan, a draft of which was obtained by Bloomberg, comes the week after European Union finance ministers discussed how to adjust levies for companies such as Amazon.com Inc. and Facebook Inc. in a way that better reflects their economic activity and ensures they pay their fair share.
The commission’s options include inserting digital taxation rules into the general international framework for corporations; an “equalization tax” on turnover; a withholding tax on digital “transactors”; or a levy on the revenues generated from advertising or the provision of digital services.
As digital companies make up a larger share of business done in Europe, the EU is struggling to adapt its tax policies to better address these non-traditional firms. While international companies pay an average tax rate of 23.2 percent, digital companies pay just 10.1 percent, according to the commission paper.
The battle has intensified since the commission last year ordered Apple Inc. to pay as much as 13 billion euros ($15.6 billion) plus interest in back taxes, saying Dublin illegally slashed the iPhone maker’s obligations to woo the company to Ireland. Apple and the Irish government are fighting the decision. In another case, Alphabet Inc.’s Google in July won its battle against a 1.12 billion-euro French tax bill after a court rejected claims the search-engine giant abused loopholes to avoid paying its fair share.
But even though momentum has picked up across the EU to tackle this issue, some of the finance ministers meeting in Tallinn, Estonia, last week said it should be dealt with at a global level instead. Any opposition will affect the ultimate legislation since the bloc requires unanimity among its 28 members to implement tax policies.
Still, the commission paper says that if no such global consensus can be found, the EU should proceed alone with a new way to tax these companies.
“In the absence of adequate global progress, EU solutions should be advanced within the single market and the commission stands ready to present the appropriate legislative proposals,” it says.