The EU is getting serious about taxing big tech. Or maybe it’s not. In January 2019, there were reports that EU governments were going to have a new Europe-wide “tech tax” in place by the end of March. When the Ides of March approached, however, the tech tax was “dealt a final blow” as EU finance ministers failed to agree a plan.
Critics argue that the EU’s tech tax plans were cobbled together in an effort to appease political pressure. However, activists argue that big tech companies are simply paying too little tax. In Ireland, for example, Apple has been forced by the European Commission to pay €14 billion in back taxes and interest (despite the Irish government not actually wanting to collect the money).
What do our readers think? We had a comment sent in from Franka, who says she is losing faith in the EU because, among other complaints, the institutions do not ensure fair taxation for big tech companies. So, should big tech companies be made to pay the tax they owe?
To get a reaction, we put Franka’s comment to Margrethe Vestager, outgoing European Commissioner for Competition
For another perspective, we put the same comment to Elena Gaita, Senior Policy Officer on Corporate Transparency at Transparency International. What would she say, not just about tech companies but large multinationals in general?
Obviously if you ask a question like ‘Should big tech companies pay the tax that they owe’, I think everyone would agree with this. The main issue here is how to determine the right amount, and what actually is ‘fair taxation’…
We, at Transparency International, think that a first step in determining what is fair taxation… would be to remove what we think is currently the main obstacle in ensuring that taxes are paid where they are owed, by all multinational companies, not just tech companies. And this obstacle, in our opinion, is the secrecy of the current tax system, which basically doesn’t allow citizens, like Franka, to know what large companies are doing, where they have operations, what profits that they make, and obviously the taxes that they pay and whether they are aligned with the profits that they make.
The way it works right now is that large multinationals which have operations in hundreds of countries around the world, what they do is they publish an annual financial report where they provide figures on financial data such as turnover, profits, employees, taxes that they pay, etc. However, they only provide global figures. So, obviously, if you see that they have paid X amount of taxes but you don’t know where exactly, it’s impossible to know if they have paid too much, too little, not enough.
So, what we have been proposing to the EU institutions and to EU Member States is a very simple change in how big companies should report on this kind of basic financial data. In EU jargon this is called “country-by-country reporting”, which is a basic tax transparency measure which would require multinational companies to report on all of this financial data for each country of operation, so you would have the turnover, profits, employees, taxes, etc., per country. And this would allow you to see if there was an alignment or misalignment between profits and taxes paid in that country…
Should big tech companies be made to pay the tax they owe? How do we decide what is ‘fair taxation’ for such multinationals? Should more data about their tax affairs on a country-by-country level be made public? Let us know your thoughts and comments in the form below and we’ll take them to policymakers and experts for their reactions!
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Our countries subsidising large corporations is a scandal. The EU demanding austerity from all countries is a scandal based on debunked study with erroneous data. Trickle down economy does NOT WORK. If big corporations and large fortunes paid their fair share, countries could relieve the tax burden on citizens and invest in saving the earth. Lobbying should be banned. Fiscal incentives to fossil fuel companies should be banned. Fiscal evasion bu the richest amongst us should be banned.
I’m pretty sure they do pay what they owe. It’s just that they owe less because the laws were written to be advantageous to them.
Google and Apple are unscrupulously taking advantage of loopholes written for the advantage of other “more worthy” politically connected organisations.
And the reason for that is that if the government charged them more tax they would just move operations to a country that doesn’t.
I’d love to see them try!
This is just pure propaganda coming from you. Let them move operations. You think Facebook or google or amazon has any desire to move countries?
You really don’t understand the powerhouse that is the US economy and that the US has more business friendly laws and regulations than virtually any other first world country.
Then make it illegal for them to move* to a country that doesn’t, problem solved.
*their existing business that is making profit in a country where they’re not paying taxes
Didn’t read the article, but Uncle Sam squeezes me of every single penny, I don’t see why this guys don’t have to pay.
That’s American capitalism. The working poor paying for the filthy rich criminals to get their 5th $75MN yacht.
What are you even talking about?
Trickle down economics.
This trickle feels suspiciously like getting pissed on.
I bet they do pay, but they don’t pay a lot of tax because of tax breaks and how the laws were designed.
They do pay. They just invest more of their revenue for the future.
They tend to invest in offshore private accounts, though.
The working poor don’t pay income tax in the US.
You’re delusional if you believe that.
My parents got more back than they paid in when I was a kid.
That’s called EITC. The earned income tax credit is for people who make below a certain amount. What you are saying is possible. However when I say working poor I’m referring to the more than 50% of American workers who can barely survive and are living paycheck to paycheck. The burden of things such as many trillions in handouts to the rich, the Trump taxes (aka trade war), trillions for unnecessary wars, and the entire national debt are on the working poor. My best friend is a medical doctor and his wife is a manager of an engineering dept at one of the big 3. They gross ~ $400K together. They are not even middle class if you ask Republicans who claim that threshold is $450K.
These companies find our politicians. Politicians have to do them a solid by changing tax code so that the companies can hold onto more of their money. Which frees up more money for them to feed our political system.
And it just cycles on itself.
I bet they do pay, but they don’t pay a lot of tax because of tax breaks and how the laws were designed.
Trickle down economics.
What do you think it means to have the money in an offshore account?
That money isn’t sitting in a pile cash in a vault, though. It’s reinvested elsewhere…including US bonds (i.e., US government). Or back into the company itself, either in the US or elsewhere in the world. Or in other sound investments, basically anything other than cash, because that would be foolish.
This is for big multinational companies. If you mean some orthodontist hiding his income from the IRS, then sure maybe he’s stashed his $3m in an off-shore account and isn’t doing much with it. But that’s not what big companies do.
Socialism for the rich, capitalism for the poor
This shouldn’t even be a question. The answer is yes.
They should pay their employees, not the government. That money is created by the company and it’s workers, and it’s fed to a government that would rather spend the money on making themselves more rich than improving the country they claim to serve.
Tax churches first.
Companies earn tax dollars for the government in other ways mostly, but churches have been tax free Haven’s for so long
Why not both?
Sure. But there’s an argument to be made that corporations earn a ton of money for our government.
Churches are revenue black holes dotting every other corner in the US.
That’s what I mean by saying churches first.
Do you really want churches to be able to fund political campaigns?
Hell no.
But you don’t think they are currently?
No. Their members will have their own leanings, and people of similar core beliefs will tend to vote the same way. However what churches can’t do right now is fund political causes as an organization.
Yeah you might get, say, 40% of churchgoers out voting. You might get half of those also donating to political funds. What you don’t have is ministers endorsing candidates from the pulpit or donations from 100% of the members going into the church coffers and then out into a PAC for that candidate.
If churches are taxed they will get the exact same rights as every other organization to participate in the political system as a singular body.
https://en.wikipedia.org/wiki/Whataboutism
Nah, I’m not discrediting the argument.
I think there’s a better opportunity to fix the tax black holes in churches, first. I never said to not tax companies.
That’s odd. There’s another user with your exact same name who responded to someone stating both corporations and churches to be taxed with “…there’s an argument to be made that corporations earn a ton of money for our government.” I’m glad you point out you’re not discrediting the point because that other user seems to be doing just that: encouraging not to tax corps more unless you also tax churches.
You seem nice. There’s no need to change my point for me, but I’ll clarify for you.
The point is that churches pay zero now.
Corps should pay income tax, but there’s more to consider, such as how many people they employ, import export tariffs, impact fees, shipping to other states, fda certification for farms, etc.
These are all examples of taxes that corps pay now. I’m not saying to omit corps from the income tax discussion, I’m saying there’s more to look at, without blinders.
Alright, so being serious here, your idea is fundamentally flawed. Your main argument is to remove property tax exemptions for churches. While there’s a valid argument for it, and I do feel like that should happen, prioritizing this over corporation taxes is problematic because it disproportionately favors the wealthy and middle class over the lower class. Lower class people don’t pay much in taxes and would not experience any boon in your proposal. But home owners definitely would. Instead, you could focus on better funding for socioeconomic support programs or education in general and pay for it through the added revenue from church property tax.
It’s only a flaw if I put it in context of the social classes. I didn’t.
I agree with you in the altruistic intent, we need to help the poor over many other considerations.
However, it’s my belief that removing tax exemptions from churches is more effective because it’s a more achievable goal… Since corps already pay taxes on different forms than strict income tax.
I never understand the ‘tax the churches’ idea. What’s supposed to be taxed? The donations they receive?
Property tax.
It’s the tax every real estate in America pays except churches.
And to take the thought a step further. Imagine if all churches paid property taxes. The tax break for each person, due to increased municipality revenue, would be staggering.
It goes further here too. The ministers can write off certain income too.
It’s why you hear us yelling “separation of church and state.” Under the law that allows the tax exemptions, churches should have zero political influence should.
The only income that most churches have are tithes?
Probably, except for mega churches that also sell products like holy water and candles.
Although, property taxes is where they’re [unfairly] exempt. Think of how many churches are in your area, and what that land is worth to your local tax collector.
I don’t know, the percentage of land in my city owned by churches is much less than 1%. I don’t think people would see much in tax cuts if churches paid property taxes. The extra money might be used for neat things though.
I understand. I live in the South. Churches on every other block.
Prime street front commercial real estate.
“ No, because it’s good for business “
Sadly taxes corporations are bad for the economy… but good for reelection. And no matter how unpopular this facts is its still a fact.
You say corporation but you really mean wealthy individuals. Corporations are a legal entity ran by real people.
Nope.. taxing corps is bad. Taxing profit on individuals is fine by me. Especially capital gains. And this is coming from someone that is dependent on capital gains for retirement. Im willing to pay more on selling stock if the government doesn’t tax a corporation while its trying to increase the value of its stock.
Taxing corporations just slow growth… if growth is bad then tax them.. but i have never read were slow growth is globally better for businesses. So why tax them. Its because people think they deserve money and hate people that have money. The weird thing is most elected officials understands this and that is why there isnt overwhelmingly high taxes on corporations right now.
It’s not just wealthy individuals. Regular people have their retirements invested in stocks. Companies also have employees and customers, and taxes will hit at least one of the two.
The biggest taxpayer was the most profitable: Apple, which reserved $15.8 billion for income taxes on $59 billion in operating income. Apple reports its effective tax rate as 25.8%
According to the IRS’s preliminary data from the 2015 tax year (the returns you filed during 2016), americans paid an average effective federal income tax rate of about 13.5% per return.
Yeah they should pay
That’s a weird question. Would you ask the same if an individual wasn’t paying the taxes they owe?
Make it simple: the board and executives are suspended without pay, their stock put in escrow, until such a time all taxes are paid, in full, with interest.
Yes. To me a better approach then breaking up. Make them pay their taxes and even increase the tax that big tech pays.
Why not to ask tpe and sme the same questions. It’s a big distorsion and a failure of EU to see Gafa and multinationals paying so small tax in Europe through tax optimisation… A bookstore will pay in France 28%income tax while Amazon which is going to kill this shop with unfair competition hardly pay 10….
The question is not “if”, the question is how do we make them pay if the whole economic system is based on them being able to basically do what they want and tax laws are drafted with tailor made loopholes they can exploit?
Who would say no….but caculating what they “owe” requires a more common/cooperative approach to corporate taxation than we’ll likely see.
Ps…really would like that piece for my monopoly set !!
@ Paul
A six year old in my family is obsessed with Monopoly. Can’t get any interest from him in another pursuit. He wins repeatedly and with thousands left over for his triumph with aplomb. We sincerely hope that kind of luck is in his DNA.
Yes. Only Europe together can fix this.. No taxes, no market for them.
indeed. We should use the power of the European market (second largest in the world) to our advantage.
Sure they should pay like any other business they compite with. It is unfair competition to small business. EU, as a block, should manage this.
Should big tech companies be made to pay the tax they owe?
No, they should be left to rob the people and each country they trade in for eternity….. And the ordinary tax payer should refuse to pay a penny to such a foolish inland revenue who could dare ask a people such a ludicrous question.
Yes. It’s sad that it should even be a question.
Yes, but it’s not going to solve much of anything. Contrary to public perception, their shares are mostly held by pension and investment funds owned by ordinary pensioners and savers and by insurance companies investing the premiums you pay until you make a claim and get the money back.
Sounds like a good idea. Of course it should be made public. The only problem I see is local governments squandering the tax money and it not benefiting the actual citizens. Maybe the tax should go to an EU fund. Then the EU can make it public about how they spent the money to help actual EU citizens, public services and infrastructure on a yearly basis. Not spent on the business and finance sector as per usual.
Yes they should pay their fair share. It’s ridiculous to give billionaires tax cuts. Trickle down economics doesn’t work if you’re greedy.
Simple answer: YES
Yes. How is this even in question?
We also need to address any loopholes in the tax code(s) that let companies avoid their tax burden through and sort of “funny” accounting practices. There’s no reason a company as large as Amazon should have zero tax liability.
Of course not. We should take what they are willing to give us and be happy they give us anything at all.
They are already taxed by the political parties.
They do pay what they owe. Your politicians should be made to do their jobs and close up tax loopholes those big tech companies legally use to pay the least amount possible.
http://www.doingbusiness.org/en/data/exploretopics/paying-taxes/why-matters
The amount of the tax cost for businesses matters for investment and growth. Where taxes are high, businesses are more inclined to opt out of the formal sector. A study shows that higher tax rates are associated with fewer formal businesses and lower private investment. A 10-percentage point increase in the effective corporate income tax rate is associated with a reduction in the ratio of investment to GDP of up to 2 percentage points and a decrease in the business entry rate of about 1 percentage point.(3) A tax increase equivalent to 1% of GDP reduces output over the next three years by nearly 3%.(4) Research looking at multinational firms’ decisions on where to invest suggests that a 1-percentage point increase in the statutory corporate income tax rate would reduce the local profits from existing investment by 1.3% on average.(5) A 1-percentage point increase in the effective corporate income tax rate reduces the likelihood of establishing a subsidiary in an economy by 2.9%.
I mean the answer is pretty much in the question isn’t it it’s not fucking rocket surgery. If they didn’t owe the tax, they definitely shouldn’t pay it. If they however DO owe the tax (note – this is how this is supposed to work) they should pay it. I hope this has been instructional for everyone.
From the article:
“Obviously if you ask a question like ‘Should big tech companies pay the tax that they owe’, I think everyone would agree with this. ”
My opinion:
But, if you phrase a question like “Should big tech companies pay more tax than they are required to? Or pay taxes that don’t exist yet?” then I think you might get some who disagree.
Apple claims to be based in ireland. in ireland they tried to claim to be based in Luxembourg. In luxembourg….etc etc.
It requires to look into the issue why traditional companies need to pay 23% but tech companies pay 9%. Apparently, this should be an out dated arrangement so as to facilitate the growth of the IT companies and attract foreign investment from big IT companies. Apparently again, IT companies have grown big enough to dominate the whole economy and life. It is time to increase the tax and at the same time, reduce tax of traditional companies of specific types. This is to facilitate the survival and even revival of some traditional companies. Although increase of tax is agree, it needs to maintain its competitiveness, particularly in the 5G era, when huge input for research is required. May be, tax exemption or reduction for research budget in EU can be considered. This can encourage research input.
I think they already pay taxes, but just on the sold products and not on the profit. The problem is that the EU has 0 tech companies. Renault has a factory in Morocco. The profit gets taxed in France not at the satellite factory….