Proposed E.U. laws crack down on tax-avoiding tech giants | Cult of Mac

Proposed E.U. laws crack down on tax-avoiding tech giants

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Apple is worth more than the entire US energy sector combined
Europe has been pushing for tech giants to pay their share.
Photo: Ste Smith/Cult of Mac

The European Commission wants tech giants like Apple and other “digital businesses” to pay their fair share of taxes, and it’s announced new proposals to help implement this.

As previously suggested by French Finance Minister Bruno Le Maire, the proposed rules mean that companies would have to pay taxes throughout the EU, and not just in the location of the European headquarters.

“[C]urrent tax rules were not designed to cater for those companies that are global, virtual or have little or no physical presence,” a document describing the changes notes. “The change has been dramatic: 9 of the world’s top 20 companies by market capitalisation are now digital, compared to 1 in 20 ten years ago. The challenge is to make the most of this trend, while ensuring that digital companies also contribute their fair share of tax. If not, there is a real risk to Member State public revenues: digital companies currently have an average effective tax rate half that of the traditional economy in the EU.”

The document describes two distinct legislative proposals to ensure “fairer taxation” of companies. The first of these aims to reform corporate tax rules so that profits are registered and taxed in the place where the money is actually made. The second proposal calls for an interim tax which covers digital activities that currently escape tax altogether in the EU.

Rules will likely apply to Apple

No companies are explicitly named in the document, although digital companies affected include those with a threshold of 7 million euros ($8.6 million) in revenue in a taxable year, companies with more than 100,000 users in a member state, and ones in which more than 3,000 business contracts for digital services are created each year.

Apple would appear to conform with all three of these requirements. (Heck, as the world’s most valuable company we’d be surprised if there was any imaginable metric on which Apple didn’t qualify!)

“Tax revenues would be collected by the Member States where the users are located, and will only apply to companies with total annual worldwide revenues of 750 million euros and EU revenues of 50 million euros,” the report notes. “This will help to ensure that smaller start-ups and scale-up businesses remain unburdened. An estimated 5 billion euros in revenues a year could be generated for Member States if the tax is applied at a rate of 3 percent.”

The European Union previously handed Apple a 13 billion euros ($15.5 billion) tax bill in August 2016, claiming that the company took advantage of illegal state aid that allowed it to route profits through Ireland. The investigation alleged that Apple paid the equivalent of as little as 0.005 percent on all European profits in 2014.