U.S. companies urge EU to refrain from unilateral moves on Web tax

The European Union’s plans to increase taxes on digital firms risks undermining the bloc’s growth and stifle global efforts to find common solutions, U.S. companies operating in the EU said on Tuesday.

Critics say online firms such as Google or Facebook pay too little tax in the EU by rerouting most their profits to low-rate countries like Luxembourg or Ireland.

Frustrated by how long it is taking the world’s rich nations to reach a deal on how to tax fairly digital giants, the EU has threatened to move ahead alone with a tax on turnover or with other short or long-term measures.

“Unilateral action by the EU would seriously undermine international efforts to address tax issues,” Susan Danger, head of the American Chamber of Commerce to the EU (AmCham EU), said.

AmCham EU said a turnover tax, as proposed by France and backed by other large EU countries, would reduce investment, hit jobs and penalize start-ups, low-margin and loss-making companies.

Current rules exempt loss-making firms from paying taxes. A report by EU lawmaker Paul Tang said the U.S. online retailer Amazon, which has its EU tax residence in Luxembourg, has been mostly exempted from taxes in the 2013-2015 period because it did not make profits.

The EU is also considering more structural measures to change the way companies are taxed, so that levies could be raised when they have a “virtual” platform in a country, and not only a physical presence.

Changes to existing rules may be added to a review of corporate tax rules that is currently under debate in the EU Parliament, the EU executive commission said.

AmCham EU also criticized this initiative for a common tax base in the 28-country bloc saying the move could “adversely affect EU competitiveness and growth if it is not in line with internationally agreed rules”.