This upcoming Wednesday, the European Commission is expected to reveal a tax proposal would require digital media companies — including Apple — to pay based on where they generate revenue, rather than where they choose to locate their European headquarters.
The change would combat the tendency of multinational tech firms to funnel income through countries that contribute relatively few sales, but nevertheless offer loopholes and generally low tax rates, the New York Times said on Monday. It would most likely target companies with annual global revenues over $925 million, and sales within the E.U. that exceed about $61 million. Taxation could shift to the countries where firms generate the most sales.
The exact terms haven't been set, the Times cautioned. Any proposal must still be approved by the European Parliament and its member states — which is likely to mean resistance by countries like Ireland and Luxembourg, which have benefitted from multinational financial traffic. Others might dislike the idea of taxes flowing to bigger neighbors, though many are already missing out on those payments.
For years Apple has funneled billions of dollars through Irish subsidiaries, taking advantage of local rules to minimize its international tax bills. In 2016 the European Commission ordered Ireland to collect billions in back taxes, charging that it gave Apple preferential tax treatment, even going so far as to reverse-engineer rules to accommodate the iPhone maker. By E.U. law, governments must offer benefits to all companies equally.