Tech companies are not taxed sufficiently under the current tax framework due to their lesser demand on physical hubs. This raised attention from tax authorities globally and many jurisdictions have recently taken measures to collect more tax from the tech giants, such as Web tax in Italy and Cryptocurrency tax in South Korea, while the European Union also launched a proposal introducing “virtual Permanent Establishment” to tackle the digital economy tax issue. On the other hand, these unexpected changes also affect the operation of the companies, with the tech giants paying more tax even “voluntarily”.
On January 29, 2018, Airbnb has announced to endow tourist tax equal to the amount of 13.5 million euros to the French cities nationwide, with tourist attractions such as Paris, Nice and Marseille receiving significant portion. The sharing economy company has been blamed for committing to local housing shortage as well as unfair competition. Consequently, in 2017 French authorities imposed a 120-day limit usage of a house or a flat to provide accommodation and increased the nightly rate per person by 1% to 5%, with the company’s liability to pay in the year doubling compared to the amount paid in 2016.
On the recent World Economic Forum in Davos, Sundar Pichai, the CEO of Google, announced the company’s willingness to pay an alleged fair share in tax. He also appealed to a revamp in existing tax framework so that tech companies like Google can be tax appropriately. “It’s not an issue about the amount of tax we pay, as much as how you divide it among various countries…We encourage the OECD to actually solve these issues, which would make it much easier for companies to operate,” according to Pichai.
With the fast growth of China’s economy and the continuous improvement of the comprehensive strength of domestic enterprises, as well as the implementation of the “One Belt, One Road” policy, an increasing amount of Chinese enterprises are beginning to expand their global footprint and establish their presence in Europe.
TPA Global has developed a practical roadmap of 6 steps meant to guide CFOs in their Journey of rising above troubles to reach a situation of full control. These steps are presented in a series of short video clips (3-5 minutes):