The European Union has renewed its offensive strategy against Silicon Valley companies. According to reports from Brussels, there are proposals to increase the tax that is remitted by digital companies from the United States including Amazon, Apple, and Facebook. The new proposals target internet companies and the New York Times managed to acquire one of the proposals. In these proposals, there is a desire to tax these companies in the places where they generate their business. Earlier laws allowed these tech companies to move their taxes to countries with lower taxes.
However, this latest move is likely to draw a lot of criticism where critics accuse the European Union of having a bad blood with the technology sector from the United States. It’s also expected that the European Union leaders will deny these allegations. In the past, American technology companies have been unfairly targeted by European leaders especially on how they handle user data relating to the European antitrust complaints. What remains clear is whether the move will go through. The move is being pushed for by the European executive arm known as the European Commission. For the proposals to pass, they must be voted for by all the 28 members of the block. The vote must also be unanimous. However, while there are some countries that support the crackdown like France, some countries have been known to oppose the move as they will be chasing away the opportunity to attract American corporations using various inducements such as tax incentives.
The European Union want the internet companies from America to pay national treasuries of the countries they do business by taxing revenue rather than profit. One of the companies being targeted in Europe is Amazon. The American giant operates in Europe making billions of dollars every year. However, the company has listed its headquarters in Luxembourg which is a small country in Europe with an estimated population of half a million people. This gives Amazon the edge of enjoying low tax rates. The current international tax rules were designed at the beginning of the 20th century. The European Union commission on tax says that the laws are very effective for the brick and mortar businesses. However, as businesses embrace technology and become more global, the tax laws are no longer favorable to major shareholders. A recent study showed that internet companies pay a flat tax rate of 8.5 percent. This is half of what traditional businesses paid during the same period.