Digital disruption

IRELAND COULD LOSE €160m PER YEAR IF 3% TAX FOR DIGITAL FIRMS PASSES

If the EU’s proposal for a 3% tax on the turnover of digital companies passes, Ireland could lose up to €160 million in tax revenue a year, revenue official Kate Levey told the Oireachtas finance committee at Ireland’s Parliament.

The proposal in question, pushed primarily by France, Germany and the UK, was published in March this year by the European Commission, and it seeks to make it so that tax revenues are collected by EU member states where the users of digital services, such as Facebook, Apple, and Google, are located.

“The application of the current corporate tax rules to the digital economy has led to a misalignment between the place where the profits are taxed and the place where value is created,” reads the proposal. “Historically if you were receiving a service, you paid for it, whereas now people don’t make a contribution and their contribution is just watching ads or giving away data,” said Brendan Crowley, the Principal Officer in the International Tax Unit of the Department of Finance.

According to Ms. Levey’s calculations, which are based on an estimation of €5 billion earned through taxes on digital services across the EU and split among 28 EU member countries, Ireland would earn only €45 million, making the country a net loser from the tax.

In 2017, top 20 digital companies based in Ireland achieved combined EU sales of €56 billion, with 95 percent of this figure coming from the top 10 companies, which include Amazon and Microsoft. The proposal could make Ireland less attractive in the eyes of digital companies, depriving the country of a sizeable chunk of its €8 billion in corporation tax.

 

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Categories: Digital disruption, EU, Markets

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