Last week, Estonia decided to join the ranks of a minority consisting of mostly Eastern European countries in Brussels that voted against obligating major tech giants, such as Google, Apple and Facebook, to declare profit and taxes in every EU member state in the future, the daily Postimees writes.
Against the disclosure were low-tax countries Ireland, Malta and Luxembourg as US tech giants have established their European headquarters namely in these countries and are paying income earned from Europe into the treasuries of those countries. For example, Ireland's corporate tax rate is 12.5 percent but it charges only 6.25 percent for profits linked to a company's patent or intellectual property, while the figure is 19 percent in the United Kingdom.
Curiously, the countries seeking to block the changing of the directive at a vote that took place in the Competitiveness Council (COMPET) on Nov. 28 were joined by Estonia, represented at the vote by diplomat Marten Kokk. Since its presidency of the Council of the European Union, Estonia has been one of the leaders of imposing a universal digital tax on tech giants.
The Estonian Ministry of Finance said that the problem stemmed from the fact that the discussion and adoption of the tax directive was being planned in the wrong council (COMPET), the legal basis for the amendment was, in Estonia's opinion, wrong and it was intended to be adopted by majority vote. Estonia believes that the Economic and Financial Affairs Council (ECOFIN), which discusses tax policy issues and makes decisions according to the principle of unanimity, would be a much better place for this bill.
The ministry said Estonia also finds that exchange of information between member states is working and tax administrators can exchange reports.
The bill states tech giants would have had to start disclosing their profits for all 28 EU countries separately. However, 12 countries voted against it, although the update would serve as a vital basis for the imposition of a long-discussed digital tax. Estimates show that the world's biggest companies, such as Apple, Facebook and Google, currently avoid paying an estimated €500 billion in taxes a year in the EU.
The Guardian wrote that Ireland's decision to vote against the proposed directive – which would have forced companies to report their revenues and profits on a country-by-country basis – came as the Irish tax-and-spending watchdog warned that the country's economy could collapse if there was a global clampdown on tax avoidance.
In addition to Estonia and Ireland, other countries that voted in favor of continuing to hide the profits of tech giants were Slovenia, Czech Republic, Hungary, Croatia, Cyprus, Luxembourg, Austria, Sweden and Latvia. According to The Guardian, Elena Gaita, a senior policy officer at anti-corruption charity Transparency International, said that "it's an outrage that member states have once again put the interests of big business above those of citizens".
Editor: Helen Wright