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In March it was proposed by EU parliament that large corporations, with either annual revenue above €750m or EU revenue above €50m should be charged a tax based on their revenue generation location, not just based on the corporate structure and transactions between corporations. This tax has been named the “GAFA tax” (Google (NASDAQ:GOOGL) , Apple (NASDAQ:AAPL) , Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) ) by some. EU economics commissioner Pierre Moscovici said that the taxation structure in EU was not properly setup for digital revenue.
For example, if Facebook were to show an advertisement under the current law, the taxation would be very dependent on where/when the transaction between Facebook and the advertising agency or company took place. The proposed new system considers that the activity that actually generated the revenue (Facebook showing you the ad), and would tax a negligible amount per transaction, over many different transactions. We reported on some of the issues with Digital revenue in the EU before, but little has been done since.
The finance minister of France Bruno Le Maire said in an interview with Public Senat TV “Enough of talking. Enough words. Enough excuses!” He also added: “What's getting in the way, as always in Europe, is a lack of political will. All the technical issues have been resolved.” There were no specifics unveiled about how the technical issues were resolved, or how open to the solution large businesses would be. In March it was estimated that roughly €5bn would be generated from this tax, but no mention was made whether it would affect the net taxes already paid by tech companies in the region. In an earlier statement Moscovici said that roughly 150 firms would be affected, not strictly GAFA or other American companies.
This news comes out the day after Google has made changes to the way it will distribute applications and licenses in the EU to comply with a European Commission decision that Google was abusing its market strength with Android to push users towards more of its services. Google still stand by its decision to appeal the ruling, but did make the concessions requested by the EU to ensure compliance.
The EU is taking a strong approach over the last year on how it handles taxes of large corporations, and in general how it chooses to act in the EU. Whether this tax will actually be implemented in the near future is still up in the air, but with the EU parliament elections coming up in May 2019 current ministers will need to decide which stance to take on the matter and how hard they want to push big corporations.