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The European regulatory environment is already complex, and adding a tax on the revenue of technology companies would be “a real threat” to Booking.com.
That’s the view of its CEO, Gillian Tans, who was interviewed by CNBC at Davos.
“Overall it will be a big disadvantage for innovation because companies should be able to invest for innovation instead of paying more taxes,” said Tans, whose brand is based in Amsterdam last week. “And specifically for European companies. We are a European business that pays our taxes here in Europe already.”
The proposed European Union measure, which faces opposition by several member countries, would impose a 3 percent tax on the Europe-generated revenue of tech companies. Bloomberg reported Monday that Booking.com and Spotify were among a number of companies signing a letter to Europe’s finance ministers charging that the proposal would “create a harmful legal precedent of taxing revenues over profits, even when the taxpayer is not yet profitable.”
For tech companies trying to navigate a path toward profitability, the proposed tax on revenue — regardless whether a company is profitable — could be lethal.
The tax proposal would would “impose a financial burden on burgeoning European companies and weaken their ability to compete globally,” and “result in double taxation, particularly when charged on EU resident companies’ revenues, which are already subject to corporate income tax and VAT in Europe,” said the letter, which is not public and Bloomberg obtained.
Tans said in the interview that she’s not opposed to tax reform, but it should be done on a global basis — although that’s not very realistic. Short of that, Tans argued, countries won’t want to wait and will implement “short-term measures, which we don’t really agree to.”
That wouldn’t exactly be a welcome mat for European businesses, according to Tans. “Europe should really think about making it more attractive for business to place themselves in Europe or grow their businesses in Europe, and I think that is something that Europe should think about,” she said.
Tans complained that the European regulatory environment is already complicated and burdensome, even without a new tax. “Every 300,000 kilometers you need to think about different regulations, different rules, different standards,” Tans said. “I think it is already complex for businesses and I worry this makes it even more complex.”
The target of the tax proposal would be large U.S.-headquartered tech companies that have European operations, according to Bloomberg, and imposition of the new tax could exacerbate tensions between the Trump administration and Europe.
It wasn’t clear if the revenue tax would also be levied against startups. If so, it would certainly place an undo burden on their growth prospects.