The European Commission proposed new rules to ensure that digital business activities are taxed in the European Union. The proposed measures come as EU works towards becoming a global leader in designing tax laws that the foot both for the digital age and modern economy.
The proposed plan includes a 3 percent tax on revenues of digital tech companies like Google, Facebook, and Amazon, to ensure that they are paying ‘their fair share.’ The proposal is intact a two-part plan. The first part of the plan is to take the primary measures while drafting long-term reforms that would ensure taxing digital companies on where they sell and not where they are located.
The proposal talks about how digital companies are leading the e-commerce markets in the recent years, and nine of world’s top companies are digital-based companies where there was only one twenty years ago. The proposal also talks about how internet-based companies have a standard tax, and that is almost half of what traditional business pay. EU member states cannot tax digital companies’ sales in Europe region when they do not have a physical presence in the area. The proposal aims to target larger digital companies, whereas smaller startups will be excluded from the plan.
However, the Verge reports that the odds of this proposal passing through are fairly low. All of the European Union members would have to agree with the proposal before it becomes law, and countries like Ireland and Luxembourg that benefit from being the tax haven for US companies would want to make any drastic changes as it would make it challenging for companies to hide their sales from tax. For what its worth, the new proposal in an indicator of how the future is going to be for digital-based companies to function in the EU. The tech giants will be held more accountable. Even if the proposal does not get approved by all the country in Europe, it sure does put a lot of pressure on these tech giants in the coming days.