The Netherlands must levy own taxes on tech giants

31 May 2018

The Netherlands must levy own taxes on tech giants

There is currently an absolutely justified call for digital giants such as Facebook and Google to be made to pay taxes on their extremely lucrative activities. It's therefore to be welcomed that the European Union's member states and the European Commission are looking for an effective way to achieve this. Now that it turns out that the proposals from Brussels fall well short of what is required, however, the Netherlands must set an example for other countries to follow and impose its own taxes on these corporations' activities, argue Mahir Alkaya and Renske Leijten.

Internet corporations such as Facebook and Google are used by billions of people across the globe and work via the worldwide web in a way which is in a certain sense 'borderless'. Over two billion people have voluntarily handed their personal data to Facebook, and much can be earned by using these profiles and the data which make them up, for example by individually targeted advertising. We know that Facebook has raked in billions in this way.  Platforms also shirk their responsibility to pay a decent rate to people who make music, write journalistic articles, or create videos or other visual material. With all of these data, the advertising and the use of material from artists and other creative people, they make billions in profits, yet as things stand firms such as  Facebook pay in some countries very limited amounts in taxes. They negotiate with the country in which they have their head office and make private agreements to pay scandalously low rates of tax. 

A number of countries do tax them, or are proposing to do so, including EU member states such as France, Germany, Belgium, Hungary and Portugal. India, also, already imposes taxes on their activities.  Not surpringly, this prompted the tech giants to lobby Brussels. The result? The European Commission has now formulated a plan to impose a maximum rate of tax of 3% on  turnover in the member states. 

Of course it's to be welcomed that in March the European Commission presented two proposals to levy a turnover tax on the tech giants. The first of these would create a structural regulation on the basis of which the tax can be levied (turnover and partly made profit), while the second would establish a temporary regulation to fill in until the structural solution is in place. These two proposals are, however, inadequate, which is why a majority in the Dutch Parliament has now requested the Commission to reconsider them, in what is known as a 'yellow card procedure'. This request for the proposals to be reviewed does not by any means represent a rejection of the principle of imposing tax. Quite the reverse. The review may lead to improved proposals, for example without the maximum rate of 3% and with instead a minimum standard which would allow member states to opt for a higher level. This is after all how certain other tax regulations work: the agreement in these cases is that taxes will be collected on profits, but the level of such taxes is left to each member state to determine. 

After its doling out of the yellow card, it has been suggested that the Dutch Parliament is opposed to imposing taxes on the tech giants, but this is not the case. Aside from the fact that nothing stands in the way of the Netherlands introducing our own turnover tax, we should be concerned to ensure that international or European norms for such taxes are based on effective proposals. Such proposals must not be set at too low a level as a result of lobbying from Facebook and Google. On the contrary, we should expect these powerful corporations to make a fair contribution to our society. 

Mahir Alkaya and Renske Leijten are Members of Parliament for the SP.

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