Swift action has been promised against search engine Google in tax evasion case and the European Union seems all set to act quickly in this respect. EU leaders have acquiesced to ensure that action is taken quickly and tax bills are raised against the tech giant. Apart from Google, another digital business that stands to face the music here is Facebook. The tech giants have been accused of underpaying the tax owed by them in Europe.
Risk of businesses moving away from EU
However, smaller states are not sure that taking stringent action against these businesses is the best way forward. They believe that doing so will impair the prospects for new businesses to think of EU as a potentially valuable market. Existing businesses may also not be particularly encouraged to expand business relations with the EU, they feel. They want any action to be taken after giving due importance and consideration to these aspects.
Taxation on basis of turnover: France
France has mooted a proposal for taxing such large businesses on basis of their turnover rather than their profits in a bid to soften the approach of the EU and make the Union more attractive for such giants. So far this proposal has met with the approval of 10 EU governments of the total 28. Belgium has given its vote for this proposal although with a cautionary note that a lot of technicalities will have to be sorted out before a final plan can be fleshed out. The Dutch finance minister has also given his green signal for France's proposal.
The system that exists at present has these companies taxed on basis of the profits that have been recorded by their subsidiaries located in minimum tax regions even if the revenue source is another EU state that may have higher tax brackets.
Estonia wants to ensure digital economy is intact
Meanwhile, Estonia which is currently holding the rolling presidency in the European Council has called for a globally acceptable long-term solution that will keep the digital economy that is currently within the EU stable. Chancellor Philip Hammond has specifically cautioned against any moves that may be viewed as unacceptable by Washington. If this happens, there is a real fear that the U.S. will stop cooperating with any efforts in global tax reform and this could be a big price to pay.