Plan to take more tax from firms such as Google, Facebook and Amazon may hamper cooperation with US, EU told

The American Chamber of Commerce in Europe has warned that the EU’s plans to take more tax from technology giants such as Google, Facebook and Amazon will damage the continent’s economic growth and could lead to a breakdown in cooperation with the US on global tax reform.

The European commission, on the prompting of France and Germany, is seeking ways to capture a greater amount of tax from companies that exploit their lack of physical offices in a country to book their profits in low-tax states.

Taxing tech companies is on the agenda of an EU leaders’ summit devoted to the digital economy in Tallinn, Estonia, on Friday.

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A recent study found that Amazon’s corporation tax bill in the UK is 11 times smaller than that of British bookstores. In Ireland, the European commission concluded that Apple paid 0.005% to Irish tax authorities in 2014.

France is pushing a proposal to tax technology companies on turnover, rather than a conventional corporation tax on profits. It has won support from 10 EU member states, including Germany, Italy and Spain.

The commission’s first choice, meanwhile, is a common corporate tax base for companies aimed at introducing a common set of tax rules, but not rates, in order to prevent the hiding of profits from the appropriate tax authorities.

The development is just the latest move by Brussels to try and keep pace with the activities of tech companies. On Tuesday it was reported that Google is to create a standalone unit for its shopping service and require it to bid against rivals for ads shown on the top of its search page, in an effort to oblige with an EU ruling that it was abusing its monopolistic position in the internet search market by artificially promoting its service. The company had been given a deadline of this Thursday to provide a remedy when it was fined a record €2.4bn in June. Neither the company nor the European commission commented.

Some have accused Brussels of having a vendetta against Silicon Valley. The American Chamber of Commerce to the European Union (AmCham EU) said on Tuesday that they were concerned “by the recent proposals from the European commission and some member states to introduce new measures to tax digital activities”, adding that it would make Europe less attractive to investors.

Facebook Twitter Pinterest An aerial protest in Tel Aviv against Google’s tax regime. Photograph: Baz Ratner/Reuters

The US business organisation added that the initiatives had been floated by Brussels last week without any assessment of the impact and that they “could both harm the competitiveness of the EU and jeopardise international efforts to tackle tax issues if they are not subject to very broad multilateral agreement”.

A statement said: “Turnover taxes, as proposed by some member states, can substantially reduce the amount of company profits available for investment and reinvestment, with a negative effect on jobs and growth.

“They penalise startups, low-margin companies and loss-making companies because they do not seek to tax the value created.

“The European commission’s proposal to consider including digital taxation under the scope of the common consolidated corporate tax base (CCCTB) may also adversely affect EU competitiveness and growth if it is not in line with internationally agreed rules on value creation.”

During a meeting of finance ministers in Estonia two weeks ago, the UK chancellor, Philip Hammond spoke of his concern that unilateral efforts to clamp down on the tax affairs of US technology companies would be met with retaliation from Donald Trump’s White House. The EU is working with the US on a rewriting of global tax laws to avoid aggressive tax avoidance.

Susan Danger, chief executive of AmCham EU, said: ‘Unilateral action by the EU would seriously undermine international efforts to address tax issues.

“The EU should continue to support tax reforms and the harmonisation of tax regimes within the OECD [Organisation for Economic Co-operation and Development] framework.”

Danger went on to say: “Current EU plans risk putting Europe at a competitive disadvantage vis-a-vis other global players. Internationally agreed-upon tax standards ensure the EU remains an attractive destination for foreign investment”.