Huge profits for tech companies, but are they also paying taxes?

Peter Kavelaars, Professor of Fiscal Economics at Erasmus School of Economics
BNR Nieuwsradio
Erasmus School of Economics

Three of the world's largest tech companies, Apple, Microsoft and Google, made huge profits in the second quarter of this year. They made a total profit of about 50 billion euros. The question that remains is whether these big tech companies are also going to pay a lot of taxes for these huge profits. In an interview with BNR Nieuwsradio, Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, answers this question.

Not taxable

According to Kavelaars, the enormous profits that these companies have made were expected, and Kavelaars also expects this to continue for the coming years. However, the profits will be spread over many countries, Kavelaars points out. 'What makes it difficult is that these companies do not have branches in many countries. The tax system assumes that you can only levy tax on profits in a country if the company has an establishment in that country. That means that the profits of these companies are not taxable in a lot of countries.'

New tax system

However, this is going to change in the short term, says Kavelaars. 'In about two years it will be possible to tax companies without branches in countries where they do make profits.' However, this will only apply to companies with a global turnover of at least twenty billion euros. For many countries, this is great news, as it means that more tax can be levied. This even applies to countries where these companies already have branches, such as the United States and China. This is also the reason why so many countries are in favour of the new tax regime. It is hoped that an extra 100 billion in profits can be taxed as a result.

More information

The full item from BNR Nieuwsradio, 28 July 2021, can be found here

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