Tech giants are the ‘winners’ of the coronavirus crisis and should pay more tax, Europe official says

Big Tech has to pay a “fair amount” of taxes in Europe, especially as they are the “real winners” of the coronavirus crisis, a top European official told CNBC Saturday.

His comments come amid an ongoing rift between the United States and the European Union over the taxation of companies such as Apple, Alphabet and Amazon.

“It is a major problem,” Paolo Gentiloni, European Commissioner for economics and taxation, told CNBC at the European House Ambrosetti Forum, acknowledging the difficulty in overcoming differences with the United States.

However, the former Italian prime minister added that it was no longer possible “to accept the idea that those giants, the winners of the crisis, are not paying a fair amount of taxes in Europe.”

In 2018, the European Commission, the executive arm of the EU, proposed a 3% digital levy, arguing that the tax system needed to be updated for the digital age. However, the White House said a digital tax was unfair as it disproportionately impacted American firms.

At the time, the European Commission said digital companies, on average, pay an 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 got a boost, with many consumers relying on these companies for teleworking, shopping and staying connected.

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

Meanwhile, governments are in desperate need of additional funding and imposing new taxes is one key way of achieving this.

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

“If we will not have decent results at the global level, the European Commission will come out next year with our own a proposal,” Gentiloni said.

In a blow to negotiations, the United States pulled out of talks in June — raising doubts about any feasible progress this year.

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

“We are in an electoral year in the U.S. and I think this also has an influence,” he said, adding that, nonetheless, the EU needed “to insist on the necessity of a global solution.”