France has led a European charge to start taxing tech giants like Google and Facebook on the revenue they earn in each country rather than according to where they’re based.
“We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries.”
According to Reuters, France found support in Spain, Italy, and Germany for the push as the four countries signed a letter to the EU’s Estonian presidency with the bloc’s executive Commission in copy, saying, “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries.”
At present big tech companies tend to locate subsidiaries in low-tax countries like Ireland while operating and earning revenue Europe-wide.
Both France and the UK have taken Google to court recently over their taxes, in the French case it was ruled that Google did not have to pay any back-taxes. While in the UK case it was ruled that Google should pay £130 million [$172.4 million] (which was seen at the time as spare change) while also coming to an agreement that Google would thenceforth pay the UK government taxes based on its ad revenue.
The UK is conspicuously absent from the discussions as it is currently embroiled in negotiating its exit from the European Union, although the discussion itself may have been brought forward in anticipation of the UK’s potential maneuvers post-Brexit. The day after the vote to leave the EU, the UK Treasury slashed corporation tax from 20% to 15%, then in November the UK government announced a further review of corporation tax.
The move to tax tech companies on revenue may well be an attempt to outflank a probable move by the UK to undercut its EU neighbours and attract business post-Brexit. We might expect more of this jostling in the future, as the UK could look to arrange its statute books in such a way that they’re close enough to EU laws for businesses to operate across Europe from the UK, but different in crucial ways so as to make it beneficial to set up shop in London or Manchester.
The move also fits with the recent direction of the French government under Emmanuel Macron, who was elected on a centrist pro-business platform. France has been under pressure from Germany and other EU countries to loosen its strict labour laws in order to improve the trading power of the bloc. Last week Macron unveiled his proposals which will see collective bargaining power reduced and a cap introduced on compensation from labour court rulings.
Macron is beginning to lose popularity but is heading in a direction agreeable to the international community. With France brought up to the norms of labour laws and the playing field leveled with revenue taxes, Europe becomes a much more open field for tech companies to operate in.