EU finance ministers to discuss taxing online giants

The EU plans to catch tax dodging online multinationals with a new levy
Photo: Michael Dalder/Reuters

The EU plans to catch tax dodging online multinationals with a new levy

Today, EU finance ministers will be meeting in Estonia to discuss tax reform for multinational digital platforms, like Google, Facebook and Amazon.

Currently, the profits generated by internet-based companies are only taxed in the company’s country of residence. As such, many multinational corporations base themselves in countries with low corporate tax rates, like Ireland or Luxembourg, and use creative accounting processes to shift their profits to those countries.

The new scheme aims to levy an “equalisation tax” of 2%-5% anywhere firms generate revenue, not just in the state of their established tax residence. Some countries, like Ireland, fear they’ll lose billions in foreign investment from multinational businesses, and therefore oppose it. All EU member states have the power to veto the proposal.

With the issue gaining momentum, holdout countries might be pressured into meeting halfway- possibly on an Estonian plan that is similar to the one above, but taxes profits instead of revenue. Even if a consensus is reached, it’s unlikely that Brussels will institute the changes without global compliance– primarily from the OECD. Without such coordination, big firms could move outside the bloc, meaning EU states risk losing the tax revenues altogether.

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