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!