Saturday, 17 November, 2018

EU plan to tax Facebook, Amazon heads for Brussels showdown

Finance Minister Paschal Donohoe said the proposed new digigal tax would set a negative precedent for Europe Finance Minister Paschal Donohoe said the proposed new digigal tax would set a negative precedent for Europe
Ginger Lawrence | 09 November, 2018, 00:50

Under a proposal from the EU's executive Commission in March, EU states would charge a 3 percent levy on the digital revenues of large firms that are accused of averting tax by routing their profits to the bloc's low-tax states.

"It is very hard to see an agreement on the digital tax because so many technical issues are not solved yet", Danish finance minister Kristian Jensen told ministers, according to Reuters.

"We need unbelievably rapid progress on the worldwide level", German Finance Minister Olaf Scholz said on Monday. All the European Union states are in agreement that the tax should be only a temporary measure, until an agreement can be reached at OECD level on a better global taxation system for online services.

Finance Minister Bruno Le Maire said before Tuesday's meeting that France is now flexible on the implementation date.

The digital tax, sometimes called the "Google tax" for the impact it would have on Google and cohorts Apple, Facebook and Amazon, is deeply controversial. Britain has said it will go it alone with its own digital tax of 2 per cent. Traditional tax rules have failed to capture these companies' activities, fueling anger from voters disgruntled after years of austerity and meager wage growth.

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"If the United Kingdom or other countries proceed, that will prompt a review of our U.S. tax and regulatory approach to determine what actions are appropriate to ensure a level playing field in global markets", said Republican representative Kevin Brady last week. The levy would apply on revenue from "targeted advertising" and "intermediation services", while the tax will be imposed on turnover, irrespective of profit or loss, and won't be connected to or "creditable". After the United Kingdom announced its tax last week, Representative Kevin Brady, a Republican from Texas, called the measures troubling and would prompt a review of the US tax and regulatory approach to "ensure a level playing field in global markets".

In the run-up to Tuesday's meeting, some countries also expressed doubts about whether the initiative would violate existing treaties on avoiding double taxation.

But such an agreement requires the unanimous support of all member states, and in the absence of that, France and Germany said they were new supporting a significantly less far-reaching plan.

"If we do nothing, the EU will be split up like a puzzle and our European businesses will be the first to suffer", EU Economics Commissioner Pierre Moscovici told the ministers.

"Several member states might introduce a tax nonetheless, and create serious distortions in the EU's single market" said Guntram Wolff, director of the Brussels-based Bruegel think tank.