EU considers taxing U.S. Internet companies

EU considers taxing U.S. Internet companies

By Frances Robinson

Published: Jan 19, 2015 3:22 p.m. ET

BRUSSELS--The European Union is considering imposing a tax on U.S. Internet companies such as Google Inc. as part of a new plan to build a single digital market across the region, EU digital chief Günther Oettinger said.

Mr. Oettinger, the top German official in Brussels and the commissioner for the digital economy and society, said in an interview Monday that Europe is currently a "loser" in the information-technology sector but that the situation could be reversed with investment and by creating a level playing field for all digital companies. He stressed the importance of maintaining the region's edge in the automotive sector, which looks set to be disrupted by Internet companies.

"Taxing is an option but not the decided solution," Mr. Oettinger said of the EU's plan for a digital single market. The European Commission, the bloc's executive arm, is expected to announce the plans by May. Asked if Google might be taxed for using copyrighted material, he said yes.

The pursuit of a digital single market is central to efforts by the newly appointed commission to reinvigorate Europe's lackluster economy. "Twenty-eight fragmented markets are not good for investment, not good for start-ups, not good for developing new working places and not good for the user," Mr. Oettinger said.

When it comes to foreign technology companies, "if they are playing in our European market then we have some instruments to come to a guarantee that they are acting on the basis of our rules," he said.

The commissioner criticized U.S. companies that enter Europe by "investing in member states with a low level of data protection and [extracting] all the data they can get in the whole EU." The solution, he said, is to create a single set of European rules governing the protection of personal data. He didn't specify which countries he was referring to, but Germany's data-protection rules are among Europe's tightest.

A key part of the plan will be to make copyright rules that are fit for the 21st century, he said. Existing national laws, which differ widely from country to country, were forged in an era of gramophone records and music-hall composers.

Various European countries have looked at ways to levy taxes on U.S. technology behemoths such as Google. Germany has suggested Google should pay to post snippets from several large German newspapers, but the search engine simply stopped showing them. French tax authorities' argue that Google owes them possibly more than EUR1 billion ($1.16 billion), regardless of a corporate structure that many companies use in Europe to shield revenue from local taxation.

Mr. Oettinger warned that without greater protection of intellectual-property rights, there will be "no next generation of creative producers. Then they have to work with Shakespeare and Goethe."

Another challenge for Europe, he said, is the automotive industry. Car makers consider the push for so-called connected cars as an opportunity to update their image and attract new buyers. Vehicles would be connected to the mobile Web and interact with each other using a robust form of Wi-Fi and wireless telecommunications networks, enabling them to perform tasks as varied as avoiding crashes and driving their owners home automatically.

"It is a really challenging question," Mr. Oettinger said. In order to stay ahead of Silicon Valley, European auto makers should "integrate Google and Apple and Facebook services but not be overtaken by them, to create the next generation of cars."

Mr. Oettinger said he is in weekly contact with board members from across the automotive industry. He hails from Germany, home of auto brands such as BMW AG, Daimler AG's Mercedes-Benz and Volkswagen AG, which owns Audi, Seat, Porsche and Bentley.

"My expectation is that our European car producers are able, are willing to survive," he said. "They say Google, Apple and Facebook are invited--but not to have them take over, to have a clear partnership where our European companies are in the lead." Europe's prowess in engineering would be an advantage, he said.

At the North American International Auto Show in Detroit last week, the Mercedes-Benz F 015 Luxury in Motion concept vehicle showed off one vision of the automatically-driven future, while Nissan Motor Co., General Motors Co. and Tesla Motors Inc. have all promised limited autonomous functionality before the end of the decade. Google has autonomous prototypes vehicles running around Silicon Valley.

Mr. Oettinger insisted that the current dominance of the digital sector by U.S. companies is "not forever."

"I'm sure we can come back with investments in infrastructure, with human capital, with science and education and research and universities, with clear strategies to leverage start-ups," he said.

Mr. Oettinger said that after the terrorist attacks in Paris earlier this month, the European Parliament should be more inclined to support measures using data surveillance to fight terrorism.

In April 2013, the parliament's Civil Liberties Committee blocked the EU Passenger Name Records proposal. The measure would oblige airlines to give EU countries data about passengers entering or leaving the 28-nation bloc, on the grounds that it would help authorities investigate and prevent terrorist offenses.

"I'd say it's now or never," Mr. Oettinger said in reference to the parliament, which has been static on the proposal since the civil-liberties panel voted against it. He also said the parliament should be ready to agree to a new data-retention directive in the interests of security.

Access Investor Kit for Bayerische Motoren Werke AG


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