EU risks trade war with USA over tax rules for Google, Amazon and Apple

THE EUROPEAN Union will risk the wrath of President Trump and a transatlantic trade war by calling on Washington to introduce new taxes on some of the world’s wealthiest companies, including Google, Amazon and Apple.

The bloc is looking at new ways to bring in more tax revenue from tech giants that, while they may not have a physical presence in a country, accrue huge profits through online users or customers.

A report published by the European Commission revealed technology companies paid a typical tax rate of 10.1 per cent in the EU, less than half the 23.2 per cent rate of bricks-and-mortar businesses.

A series of high-profile cases has prompted the bloc to act, with France driving the initiative with a proposal to tax technology companies on turnover rather than a conventional corporation tax on profits.The European Commission concluded that Apple paid just 0.005 per cent to tax authorities in Ireland in 2014, a claim Apple continues to deny.

In the UK, Google paid just £130million over a decade - despite generating £4.9billion in the last tax year.

Facebook, Amazon, Netflix and Airbnb are among the US companies cited in an EU document setting out alleged market distortions created by the low taxes paid by digital businesses.

The French plan has already been backed by 10 EU member states, including the influential Germany, Spain and Italy, but there are concerns that taxing turnover may not be appropriate for all technology companies.

Pierre Moscovici, the commissioner for taxation, said: “Companies must pay their taxes where they make their profits. Digital companies that don’t have a physical base or sales outlets but still make huge profits in the EU, should not be an exception to this rule.”

Mr Moscovici said the commission’s first choice was a common corporate tax base for companies, a longstanding proposal that has been blocked by some member states, including Britain, since 2007.

The taxation commissioner added: “It’s the commission’s preferred solution. The digital presence of companies could be included to solve once and for all the question of digital taxation.”

The EU is set to push the US to change existing taxation rules to ensure digital firms with large operations or turnover but no physical presence in a given country pay taxes there instead of being allowed to reroute their profits to low-tax jurisdictions.

The Commission is risking a trade war by setting out plans for unilateral EU legislation next spring, designed to target internet companies. Britain is among the countries that want the bloc to negotiate changes via the Organisation for Economic Co-operation and Development before any new legislation is brought in.

Brexit is likely to make it easier for the EU to drive through common tax measures but there remain EU members who oppose the idea of a common corporate tax base.

Mr Moscovici added: “This is an issue on which we have to advance as 27 if we want to be effective.

“At all costs, we must avoid creating digital havens on one side where taxation is more attractive, and administrative nightmares on the other for European companies that want to grow in the single market.”

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