EU countries push for revenue tax on international technology companies

Ten EU countries have backed the idea of an "equalisation tax" that would be based on turnover generated in Europe, according to a letter seen by Politico.

The proposal was originally suggested by France and backed by Germany, Italy and Spain. It gained the support of finance ministers from Romania, Bulgaria, Slovenia, Greece, Portugal and Austria, who signed the letter at an EU meeting in Tallinn, Estonia this month, Politico reported.

The letter asked the European Commission to ways of establishing a tax based on "turnover generated in Europe by the digital companies".

"We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries," the finance ministers said, according to Politico.

According to a statement from the Estonian government Toomas Tõniste, the minister for finance of Estonia, said after the meeting: “For us, it is important to agree on new international tax rules that also take into account the business models of the digital economy. This would guarantee the equal taxation of all companies regardless of their location or place of activity. I hope that today’s discussion helped us get a step closer to a suitable solution."

All EU countries have to agree to any change to EU taxation rules. The ministers will raise the subject again at a meeting in December, the news site said.

The European Commission has run several state aid investigations into tax rulings issued to large multinational groups.

The Commission said in August 2016 that Ireland must recover the unpaid taxes from Apple after it concluded that the country granted undue tax benefits to Apple between 2003 and 2014.

The Commission's decision followed a three year investigation into two rulings issued by Ireland in favour of two Apple group companies: Apple Sales International (ASI) and Apple Operations Europe (AOE). These companies were both incorporated in Ireland and, although they did not have any taxable presence in the US or any other tax jurisdiction, they were not treated as Irish tax resident because Irish law at the time regarded them as US tax resident. The Irish law has since been amended and Apple has now changed its operating structure.

The tax rulings concerned the method of allocation of profit to the Irish branches of these companies. The rulings meant that almost all of the sales profits recorded by the two companies were internally attributed to a head office of ASI that the Commission said, in a statement issued in August, "existed only on paper and could not have generated such profits". The profits allocated to the head office were not subject to tax in any country and as a result, the Commission said Apple only paid an effective tax rate of between 0.005% and 1%.

The Commission is also investigating rulings given to Amazon and McDonalds by Luxembourg.