EU – Baltic States, Internet, Taxation, Technology

British paper The Guardian reported that 12 EU member states, including Latvia and Estonia, rejected the proposal would have forced firms to reveal profits made and taxes paid in each EU country. 

The proposed directive was designed to shine a light on how some of the world’s biggest companies – such as Apple, Facebook and Google – avoid paying an estimated USD 500 bn a year in taxes by shifting their profits from higher-tax countries such as the UK, France and Germany to zero-tax or low-tax jurisdictions including Ireland, Luxembourg and Malta.

Karins said that there has been a misunderstanding in the information published earlier because the discussion on the digital tax includes two separate issues - the directive on revealing profits of global corporations and introduction of the digital tax.

"The first issue is related with profits of international companies. Latvia supports the proposal that profits of these companies should be revealed," said Karins.

The second issue is related with introduction of digital tax and Latvia has objections in this respect.

"So far all issues on taxes in Europe had been decided unanimously, still Latvia has objections to handing over tax policy decision to the large member states because we have our own rights to decide on the amount of the value added tax, personal income tax, etc.," said the prime minister.

"We cannot support a system when we cannot decide on our own taxes," he said.

The Latvian Finance Ministry informed earlier that on December 5 the ECONFIN meeting will review the proposal in relation to revealing information about taxes paid by particular companies and branches.

"Latvia in general supports the main goal of the proposal to fight tax avoidance, forcing the particular multinational companies and their branches to reveal information about their tax payments and other related information," the ministry said.

However, the European Commission has decided to move forward the directive referring to direct taxes, in the way of qualified majority vote instead of unanimous vote as required for specific tax changes. "Issues related with direct taxes should be revised by the ECONFIN council and decisions should be based on an unanimous vote," said the Finance Ministry.

The ministry explained that Latvia insists on the unanimous vote regarding taxes because of the different development level of the EU members. Also, this is the only chance for small member states to ensure representation and protection of their national interests.