Big Tech Must Pay More Tax, Says EU’s Gentiloni

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Paolo Gentiloni, European Commissioner for the Economy, speaking at The European House – Ambrosetti Forum in September 2020.Michael Green | CNBC

Big Tech must pay “a fair amount” of taxes in Europe, especially since they are the “real winners” of the coronavirus crisis, a senior European official told CNBC on Saturday.His comments are part of an ongoing rift between the United States and the European Union over the taxation of companies such as Apple, Alphabet and Amazon.

“This is a major problem,” Paolo Gentiloni, European Commissioner for the Economy and Taxation, told CNBC at the European House Ambrosetti forum, acknowledging the difficulty of overcoming disputes with the United States.

However, the former Italian Prime Minister added that it was no longer possible “to accept the idea that these giants, winners of the crisis, do not pay a fair amount of taxes in Europe”.

The giants of digital platforms are the real winners of this crisis.

Paolo Gentiloni

European Commissioner

In 2018, the European Commission, the EU’s executive arm, proposed a 3% digital tax, arguing that the the tax system needed to be updated for the digital age. However, the White House said a digital tax was unfair because it disproportionately affected US businesses.

At the time, the European Commission said digital businesses pay an average effective tax rate of 9.5% – compared to 23.2% for traditional businesses.

However, in the wake of the Covid-19 pandemic, Big Tech has had a boost, with many consumers relying on these companies for telecommuting, shopping and staying connected.

“The giants of digital platforms are the real winners from this crisis, from an economic point of view,” added Gentiloni. “We all experience this in our own lives. ”

Meanwhile, governments are in desperate need of additional funds and imposing new taxes is one of the main ways to achieve this.

In this context, the EU plans to propose a new digital tax in 2021 if negotiations at OECD level collapse by the end of the year.

“If we don’t get decent results globally, the European Commission will come out next year with our own proposal,” Gentiloni said.

A blow to the negotiations, the United States withdrew from the talks in June, raising doubts about possible progress this year.

Gentiloni said there had been progress at the technical level, but the upcoming presidential election in the United States was having an impact on the process.

“We are in an election year in the United States and I think that also has an influence”, he said, adding that, nevertheless, the EU must “insist on the need for a comprehensive solution”.

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