In a backlash over Trump’s harsh steel and aluminum tariffs, Europe is fighting back with a proposed tax targeting the revenue of U.S. tech giants to level the playing field.
On Wednesday, the European Commission proposed rules that would make companies such as Google and Facebook pay a 3-percent tax on turnover on various lines of services in the European Union.
Broadly, the tax plan would target companies that are based on users for value creation through advertising, search engines, social media and data-mining. So it could also possibly affect Uber and Airbnb if implemented.
According to the Financial Times, the proposed plan offers an exemption for e-commerce groups, so online retail behemoth Amazon could be spared—in part. Some of the new rules may apply to Amazon’s marketplace transactions.
Media groups and telecommunications companies would also be exempted.
Specifically, the tax would apply to companies with over $920 million in annual global revenues, and over 50 million euros in taxable EU revenues annually.
It’s a bill that could earn over $6 billion for EU coffers—if it makes it through the labyrinthine bureaucracy of EU states and lawmakers.
This goes beyond retaliation for Trump’s tariffs, though. Related: The Secretive Wall Street Firm Betting On Bitcoin
The EU has had an issue for some time with tech giants it says aren’t paying their fair share of taxes, and its anti-trust authorities have been investigating Amazon, Google and Apple for possible anti-trust violations.
The European Commission claims that the top digital companies are paying only 9.5 percent in average taxes, compared to over 23 percent that traditional companies pay, the BBC reported.
Brussels’ feathers have also been ruffled by the trend for tech firms to re-direct profits to Ireland and Luxembourg—two key tax haven destinations in Europe—to avoid paying their dues. That’s exactly why the new proposal targets revenues instead of profits.
But passing a tax law such as this won’t be easy in an increasingly fractured European Union. The benefits won’t be equal, and smaller countries won’t see any income boost from such a move, while bigger countries can expect a tax windfall. In the meantime, the smaller countries risk the ire of tech giants they are eager to lure in for investment, analysts told Reuters.
The EU announcement comes amid mounting troubles for Facebook in particular.
The social media giant’s stocks have tanked this week amid an investigation into its role in allowing a political consulting company to harvest the personal data of over 50 million users to help win the 2016 elections. Since then, no one has heard from Facebook CEO Mark Zuckerberg, and on Tuesday and group of shareholders upped the ante with a lawsuit over the issue.
Shareholders behind the lawsuit blame Facebook’s share price dive on failure to safeguard privacy after revelations that user data was being harvested inappropriately.
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More trouble may be ahead as well.
Darren Robbins, a securities class action lawyer, told Bloomberg that Facebook as “potential culpability in a number of areas”.
“Whether liability from users, government regulators or investors follows, there are implications for our society given the unique position Facebook occupies in the daily lives of Americans,” he said.
By Michael Kern for Safehaven.com
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