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European Union proposals could tax Apple and other tech giants between 2 percent and 6 percent

The European Union will soon release proposals to change the way it taxes major tech companies operating within the continent, French Finance Minister Bruno Le Maire has revealed, with firms including Apple potentially being taxed at a rate of between 2 percent and 6 percent in the future.

In an interview with French newspaper Le Journal du Dimanche, spotted by Reuters, Le Maire advised "a European directive will be disclosed in the coming weeks." The change will be a "considerable step" that will involve a tax range between 2 percent to 6 percent, but Le Marie notes the tax rates will skew towards the lower end of the scale.

The tax may also be calculated differently, switching from the current system based on profits to one that is based on revenue, if aspects of an earlier draft proposal ends up being used in the final version.

A draft document from the European Commission, seen by Reuters last month, proposed a levy of between 1 percent and 5 percent of a company's "aggregated gross revenues." A crucial part of these draft proposals would be that the levy would be based on where the customer is located for each transaction, not the location of the company itself.

The proposal is an attempt to curtail the measures taken by major firms to minimize the amount of tax paid. Typical strategies involve routing EU-derived profits through offices registered in countries with low tax rates, including Luxembourg and Ireland.

While critics demading changes to European tax law may consider the proposals do not go far enough, Le Maire suggests this to be a "starting point" for reform. "I prefer a text that will be implemented very quickly rather than endless negotiations. We will fine tune it later."

A scheme to tax based on the customer's location may have prevented Apple's ongoing tax battle with Europe from ever taking place. Apple was hit with a demand by the European Commission for 13 billion euro ($16 billion) in back taxes to be paid to Ireland, ruling that Ireland provided illegal tax benefits for many years.

In its investigation, the European Commission found Irish taxes on Apple's European profits hit as low as 0.005 percent in 2014, and as low as 1 percent in 2003. It was also ruled the tax arrangement between Apple and Ireland was "reverse engineered" on the fly to guarantee the smallest possible tax bill.

Despite protests from both Ireland and Apple, a payment from Apple to an escrow account set up by the country is expected to start in the second quarter of 2018, continuing into the third quarter. Progress has been so slow, the European Commission filed a complaint against the Irish government for its failure to collect the funds, but the Commission says it is willing to withdraw the court case if the full amount is collected.



51 Comments

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Madrajin 6 Years · 7 comments

Much as a love Apple’s products, this type of tax avoidance is morally repugnant. A move to tax on revenue will fix this shenanigans. Large multinationals have got away with paying almost no corporation tax in the same markets that domestic companies have to pay full dues for years.

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chasm 10 Years · 3629 comments

All this hullabaloo, and they end up coming up with a tax rate not wildly different from what Apple pays now. Compare this to Apple's US tax rate of ~25 percent, and kiss all those imaginary jobs you thought would "come back" to the US goodbye (it's okay, they were never going to come back in the first place).

gregg thurman 16 Years · 456 comments

Madrajin said:
Much as a love Apple’s products, this type of tax avoidance is morally repugnant. A move to tax on revenue will fix this shenanigans. Large multinationals have got away with paying almost no corporation tax in the same markets that domestic companies have to pay full dues for years.

It’s only morally repugnant because the tax system was developed by politicians, each of which hopes to include an element that benefits their respective constituents. 

The only real real solution is to tax the transaction (sales tax) at a rate that satisfies government revenue requirements, and cease trying to tax profits. This is the difference between taxing consumption vs taxing production. Taxing production increases production costs and sets the stage for tax law manipulation, while taxing consumption provides tax revenue in the jurisdiction where the transaction takes place. 

In order to tax foreign imports and lower the cost of domestic production many countries have established value added taxes (an overly complex sales tax). 

The biggest problem with with tax compliance is the creators, all of which are constituent motivated. Understand that not all constituents are equal (think “Animal Farm”) with the more equal bearing the most political motivation. 

cogitodexter 13 Years · 196 comments

The EU already has a tax based on revenue. It's called VAT (Value Added Tax).

In addition, the European Commission does not have the right to raise taxes. That privilege is - for the time being - reserved to the sovereign treasuries of the EU member states.

This is a case of the EU massively overstepping its competencies and a Commission that, yet again, acts without any democratic mandate.

I'm very glad that the UK has voted to kick it to the kerb.

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jameskatt2 16 Years · 722 comments

Wow. Even at 6% income tax, this is FAR FAR below the 30% tax rate for Corporations in the United States. And this is FAR FAR below the 36% income tax for individuals making over $125,000.

Obviously, someone has to pay taxes. And individuals pay lots more in tax (including VAT) than people in the U.S.