“A digital services tax deviates from fundamental principles of income taxation by applying the tax on gross income, i.e. without regard to whether the taxpayer is making a profit or not,” Swedish Finance Minister Magdalena Andersson, and the finance ministers of Denmark and Finland, Kristian Jensen and Petteri Orpo, said in a joint statement.
The big US tech companies called GAFA or FANG, have been avoiding paying taxes on profits because they can establish their European HQ in low-tax areas.
So the EU proposed a flat 3% tax on turnover on companies with European revenue over €750,000. The tax was proposed as a stop-gap until the EU couldvwork out a way to tax profits. Clearly the plan dispropotionately penalises companies with thin margins.
The EU tax plan will need backing from the European Parliament and all 28 EU countries to become effective.
The Scandinavian statement splits the EU in its response to how the FANG/GAFA companies are to be taxed. In March, Germany, France, the UK, Italy and Spain put out this joint statement on the EU’s proposed tax on the gross revenues of companies
“We welcome the EU Commission’s proposals that have been published today,”said the statement, “we continue to support the EU’s ongoing work and hope it provides an impulse for the discussions at the G20/OECD level, while at the same time providing a basis for coordinated EU action to effectively align the taxation of highly-digitalised business profits with the place where value is created.”