Tech giants facing EU ‘digital tax’

The world’s biggest tech companies could be forced to pay a 3% tax on digital revenue earned in Europe, under new measures announced by the European Commission.

All firms with global annual revenue in excess of €750m (£655m) and taxable EU revenue above €50m (£44m) would be subject to the new ‘digital tax’, which could raise over €5bn (£4.4bn) for the bloc.

There have been widespread claims in recent years that the likes of Facebook and Google pay too little tax. The Commission says top digital firms pay an average tax rate of just 9.5% in the EU, compared to 23.3% for traditional companies.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Unveiling the measures, the EU’s economics affairs commissioner Pierre Moscovici said the “current legal vacuum is creating a serious shortfall in the public revenue of our member states”.

The EU has led the way in standing up to Silicon Valley tech giants. Competition regulators have fined Apple and Amazon, while Google is appealing against a record €2.4bn (£2.1bn) fine for abusing its dominance to favour its own shopping services. The EU has also ordered Apple to pay Ireland billions of euros in unpaid taxes and EU agencies are looking to tighten rules on data privacy.

However, the 28 EU countries, whose unanimous ratification is required to pass the new digital tax into law, are divided on the issue. Ireland warned the proposals could actually reduce tax yields, while other countries believe they should apply to smaller companies as well.

“Some will say Mr Moscovici’s timetable is overly ambitious, and that gaining agreement from all the EU member states will prove difficult,” BBC economics editor Kamal Ahmed predicts.

“His answer to that? That the political direction of travel is clear, voters want to see digital giants like Facebook and Google pay more tax. And here is a thought through plan to do it.”