Now the European Commission wants to tax “behemoth” digitally-oriented multinational companies for doing business within the EU. The only companies that fit the EC’s definition of behemoth—large firms with annual worldwide revenue above €750 million ($922 million) and annual taxable EU revenues above €50 million ($61.5 million)—are American companies like Alphabet through its Google subsidiary, Apple, and Amazon.com.
That taxable EU revenue is key here.
The EU says these firms have exploited loopholes in tax laws and managed to lower their tax bills by shifting profits to low-tax jurisdictions within the EU such as Ireland and Luxembourg.
The effective corporate tax rate paid by digital firms amounts to just 9.5%, but traditional businesses pay about 23.3%, according to EU data.
But the measure is likely to pit low-tax European member states against countries like France and Germany, which have often complained about digital companies’ aggressive cross-border tax planning….
Heaven forfend the EU should lower, or allow its member nations to lower, those traditional business’ effective tax rates to the 9-10% range. On the contrary, the EU is adamantly opposed to tax rate competition and to lowering member nations’ tax rates. All members much charge substantially the same high tax rates.
And this anti-competitive, so say nothing about anti-liberty, position:
the European authorities’ push for more control over how the digital world operates.
This is the tax portion of the EU’s mercantilist push for protectionism, even as it decries what it sees as American protectionism. The EU, though, is aiming its moves at its own members as well as the outside world.