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OZ, CE Subsidaries Of Large Multinational Set To Be Hit By New Tax

Australian subsidiaries of several large multinational consumer electronics Companies who have been operating in Australia via subsidiaries in European tax havens are set to be slugged an additional 3% European Union (EU) tax that will apply to Companies who are turning over more an $1B in worldwide sales

Companies such as Amazon, Apple, Microsoft, Google, Twitter and several CE Companies who have already been hit by the Australian Government for additional taxes, are now facing further dilution of their Australian subsidiary profits.

The levy, which would be charged annually based on gross revenues, would be at a single rate across the EU of 3 percent, according to the draft proposal, although the rate, could change in the final version. Earlier drafts envisaged the rate somewhere between 1 percent and 5 percent.

The commission’s proposal comes as traditional taxation practices have so far failed to capture business proceeds from an industry where value added tends to be virtual rather than material and digital companies have sought to take advantage of loopholes created by uncoordinated European regulation.

The draft ruling, seen by Bloomberg, outlines how a targeted levy on gross revenues would increase the tax bill digital giants face, as the bloc seeks to raise money from an industry it says provides less than it should to public coffers. EU countries have been looking into methods to tax digital companies, in a way that captures the true value created in the region.

The commission’s planned revenue tax, which is expected to be proposed on March 21, would only represent a targeted, short-term solution. The bloc also plans to propose a more comprehensive, longer-term approach that will focus on a digital permanent establishment.

The scope of the planned tax would cover companies offering services such as advertising or the sale of user data, according to the draft prepared by the EU’s executive arm. It would also cover services provided by multi-sided digital platforms, which let users find and interact with each other and where users supply goods and services directly to each other.
Other countries have argued that discussions and decisions on this issue should be tackled at a global level and with the help of the Organisation for Economic Cooperation and Development, a group that advises its 35 members including Australia, on tax policy.

But a report by the OECD published on March 16 indicated that there is still no global consensus on how best to proceed with the taxation of the digital economy or on the merits of an interim solution.