Airbnb Faces EU Clampdown for Tax Avoidance

European Union Finance Ministers are reportedly in talks around ensuring home-sharing platforms – including Airbnb – pay their fair share of taxes. The talks come after the French Minister of the Economy, Bruno Le Maire, harshly criticized the platforms for failing to make appropriate tax contributions.

“These digital platforms make tens of millions of sales and the French treasury gets a few tens of thousands,” the minister said, deeming it to be unacceptable. “It is Airbnb’s right to operate in France, but it also our duty to demand from Airbnb and all digital platforms a fair contribution to the French public treasury. All companies need to pay their fair share in tax in all the countries they operate in. That’s not the case today.”

Airbnb specifically reportedly paid under €100,000 in tax in France last year – in spite of the fact that more 10 million people in France use the site. Critics have alleged that sites like Airbnb have a negative impact on local economies, as not only do they fail to pay their fair share of taxes, but they also negatively impact local housing markets and businesses. They argue that these sites constrain the supply of rental properties in major tourist cities, subsequently driving up the prices, while also hurting the business of hotels and traditional bed and breakfasts.

Airbnb, however, has insisted that it pays its fair share of taxes in all of the jurisdictions in which it does business, including France. “We follow the rules and pay all the tax we owe in the places we do business,” the company said in a statement. “Our France office provides marketing services and pays all applicable taxes, including VAT. The Airbnb model is unique and boosted the French economy by €6.5bn last year alone. It empowers regular people, boosts local communities, and is subject to local tax. It also makes Airbnb fundamentally different to companies that take large sums of money out of the places they do business.”

The EU Debates Corporate Tax

Le Maire’s comments are part of a wide debate in Europe around corporate tax. Specifically, European countries have been grappling with how to effectively tax US tech giants, particularly after the European Commission mandated that Ireland collect a staggering €13 million in back taxes from US tech giant Apple last year.

Le Maire has argued that France needs to take the lead in driving change, though the idea also has support from major EU players like Germany. “It’s time to change gear,” Le Maire said. “We want the EU to take the lead in tackling this global issue. And France is ready to put forward some ambitious ideas to move the debate forward.”

Cracking Down on Tech Companies

In order to force tech companies to pay their fair share of taxes in Europe, the European Commission is reportedly working on developing a common consolidated corporate tax base across Europe in an attempt to more closely link taxation to the jurisdictions in which companies’ profits are made. As part of this initiative, the Commission has set up an expert working group to evaluate how to best tackle the issue of tax and the digital economy. The French government is reportedly lobbying the Commission to include specific measures directed at digital companies.

However, it is unclear whether the push from Brussels will generate significant changes to tax structures across Europe. The problem is that while Brussels can suggest new tax initiatives, in order to be implemented, these initiatives must have support from all of the national governments in the EU, which often proves challenging.

While the debate at the EU level rages on in Brussels, some cities are taking matters into their own hands. For example, the Paris city council has ruled that all users of the site must obtain a registration number before posting a space to the site for rent. In theory, this will make it easier for local authorities to collect tax and also ensure that property owners aren’t surpassing the 120-day legal rental limit for primary residences. Other European cities are following suit, including Ibiza, where owners will face fines of up to €400,000 for failing to obtain the appropriate registration number.

Quote source:

https://www.ft.com/content/090a3160-7db8-11e7-9108-edda0bcbc928

https://www.theguardian.com/business/2017/aug/10/airbnb-faces-eu-clampdown-fair-share-tax