US-based digital behemoths may soon face an additional tax charge to the tune of 3% based on revenue rather than profit alone, Bloomberg reports.
The proposal is expected to be released on March 21.
Companies such as Google (Alphanet), Twitter, Amazon, eBay, and Facebook do not pay tax for revenue incurred where the users are located; instead, they pay corporate tax where they are headquartered. The plan only concerns behemoths, that is, companies with a turnover of more than €750 million a year and profits in the EU in excess of €50 million.
The European Commission has drafted a proposal that achieves a compromise between member states whose growth model is founded on tax “competition” and members states that want to ensure revenue incurred in their markets is taxed. States with a “competitive” approach to corporate taxation includes Ireland, the Netherlands, Belgium, and Luxembourg.
Some member states have argued against “unilateral” approaches to taxation, which France has threatened, advocating a global approach negotiated within the Organisation of Economic Cooperation and Development. That could prove a political non-starter, as the US and Europe are not likely to reach a consensus.
The compromise is expected to be a short-term fix until a more long-term resolution is achieved. The European Commission remains committed to the notion of a “digital residence” that will increase the share of revenue for the countries where the users reside.