Digital Tax Debate Heating Up In Europe as EU Eyes New Taxes for Facebook, Amazon

EU Tax

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European legislators and ministers are meeting tomorrow to discuss moving forward with a novel tax on digital commerce giants such as Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), and Facebook (NASDAQ:FB). The EU has made no secret about its desire to levy new kinds of taxes on sales stemming from virtual goods and data transacted by the largest tech companies.

If you would like to get up to speed on some of the schemes companies engage in to minimize their tax, as well as a good background on what and why the EU is doing what it's doing, head on over to our original piece. Here

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The plan is far from simple and its perhaps even further away from European consensus.

Member countries are sending their finance ministers to a summit in Brussels, slated to kick-off tomorrow, to discuss the legislative proposal for a 3 percent tax on sales for companies like the aforementioned Facebooks and Googles of the world.

What more people can seem to agree on is that current tax-codes, replete with various loopholes, is outdated and doesn't fairly address new types of revenue streams. Revenue from things such as the sale of customer data or ad-clicks. There aren't any tangible goods crossing state or country borders so the origin and point of sale is a bit muddy. Yet, these same companies are soaring into new levels of profits in the billions while countries aren't seeing a proportional rise in the tax they collect.

France leading EU charge to tax 'where tech users are based'

France is leading the movement and its no surprise that France also has the highest corporate tax rate currently in the EU as shown by the graph below.

The idea is to tax companies based on where their customers are physically located versus the older rule of taxing a company based upon where it places its headquarters. This prevents some of the shuffling companies currently do to super-low or zero tax havens such as Ireland or Bermuda. So say, should Google sell the information of 1,000 customers located in the UK, then despite its EU HQ based in Ireland, which has favorable tax laws, it would still pay tax on these sales to the UK.

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Also proposed in this idea is that this is a separate tax, not creditable to a company's overall tax bill for all other operations outside of either targeted ads or customer data.

Unanimity is required to pass the new tax, and there are some major disagreements already. The European Commission's legal services and the Council of Member States aren't seeing eye to eye on the legality of the tax.

We should receive further developments later this week as the meeting is expected to place tomorrow in Brussels. Amazon and Facebook have issued memo's calling against the new tax and should things begin to look like they might move forward, these tech giants will need to readjust business forecasts in Europe which will have a windfall of effects, especially on the stock market.


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