Europe emerging from the crisis: new profit tax
Europe is recovering from the crisis caused by the pandemic, but the recovery requires new measures to stimulate the economy and increase financial flows. The EU has found a way out of this situation – the parliament has decided to introduce a tax on profits, which will be taxed on IT companies.
This tax has been discussed for several years and it has caused a lot of questions from both European countries and the USA. Last year, leading EU countries tried to introduce a tax, which will apply to the income of technology giants such as Google, Amazon, as well as Facebook. The fact is that the activities of such Internet corporations have distinctive features – they provide services and sell goods without reference to a particular country.
This gives companies a number of advantages that they enjoy, but also benefits some States. A striking example is Ireland, which offered corporations to pay taxes at reduced rates in exchange for registering business in the country and contributing to the local budget.
There are disputes in the European Union about the size of the rate and the options for levying this duty. Representatives of the states have not come to a single solution, so the organization that deals with economic cooperation and development issues has been instructed to deal with all the nuances. Despite the fact that the common duty for the EU has not been introduced yet, similar duties have already come into force in some states. France has done that.
A heated discussion of the tax was also taking place outside the European Union. The USA reacted negatively to the initiative of Europe, as this duty will primarily concern American companies. Washington believes that the profit tax should be imposed only on the territory of the country where such business is registered.
Although the duty has not been accepted yet, however, representatives of the digital sphere are already waiting for a thorough inspection of their activities in the EU. Experts believe that the incentive for active discussion of the tax was the pandemic, which caused serious damage to the economy, so countries are urgently looking for finances to improve the situation. In addition, the government needs to cover the 500 billion euros it has allocated to support business and citizens.
IT companies are attracting interest from European tax authorities because the global crisis has affected them to a lesser extent, and some representatives of this segment were able to earn good money. In addition, these corporations are taxed in Europe below the rates for other industries.
While the authorities are considering tax options, a review of VAT or income tax is under consideration, but a final decision will be made later.