The acronym GAFAM, often used in a negative connotation, indicates together the 5 major Western IT multinationals: Google, Apple, Facebook, Amazon, Microsoft. Although these multinationals are in direct competition with each other for the goods and services offered, their gigantism and the fact that they have become an obligatory, almost dictatorial choice, unites them and identifies them, making them the object of social criticism, abuse of dominant position, tax assessments, of intrusion into the private life of its users.
As announced last November, the European Commission aims at introducing a “digital European constitution” in a bid to tame tech giants known as GAFAM (Google, Amazon, Facebook, Apple, and Microsoft).
The plan provides for the introduction of new rules at European level for technology companies, including directives in the areas of online hate speech, disinformation and digital content. The plan provides for the introduction of new rules at European level for technology companies, including directives in the areas of online hate speech, disinformation and digital content. A second area concerns issues such as counterfeiting, the sale of dangerous products and respect for market competitors, a rule that could hold back the notorious Google algorithm that makes some services more visible than others in search results.
Tech companies that fail to adapt to these new rules could be severely sanctioned, up to fines equal to 6% of annual turnover. The different services offered within a technology company, such as online payments managed by Apple, Google or Facebook, will also have to be separated. While these options may be convenient for some users, there are concerns about the amount of data GAFAM is able to collect about users by expanding and combining multiple services under one brand. The plan is expected to be implemented within three years, following discussions and negotiations with the European Parliament and Member States.
But apart from these technicalities, the most critical point of the question concerns the fiscal area. Tech giants have changed our daily lives, but governments around the world agree that such digital habits are out of control. Google, Apple, Facebook, Amazon and Microsoft – nicknamed GAFAM – are accused of not paying enough taxes, unfair competition, theft of multimedia content and threatening democracy by spreading false information.
As the European Union unveils strict draft rules to curb them and dozens of US states hit Google with antitrust lawsuits, here’s a global overview of the attempts to regulate companies. The EU has not yet agreed to tax digital giants, only some of its member states such as France and Italy have imposed a 3% tax on their turnover. Austria imposed a tax of 5% on their advertising revenues while Spain imposed a tax of 3% on some activities.
Outside the EU, Britain has imposed a two percent tax on some digital services. Beyond Europe’s borders, India imposed a tax on online advertising in 2016 and Australia applied a 10% VAT rate on digital services such as streaming, game downloads and mobile streaming applications, and book and data storage.
However, these measures are not considered sufficient and work is underway to introduce an OECD negotiated global tax soon. Last year there was talk of a web-tax of around 75 billion dollars a year. With these revenues, the EU planned to pay the interest of the post-Covid EU recovery plan.
However, this negotiation did not go ahead and now negotiations are reopening. This tax should also prevent GAFAM from protecting its profits in tax havens and paying taxes where they are produced. Vice-President for Competition Margrethe Vestager and Commissioner for the Internal Market Thierry Breton said that the time has come for Europe to impose its own rules and take its own destiny in hand. For example, serious competition violations could now cost up to 10% of turnover.
Much awaited in Europe, the draft will impose obligations and prohibitions on a dozen companies recognized as the most powerful in the world. Also on the list are the famous GAFAMs (Google, Apple, Facebook, Amazon and Microsoft). In fact, these large groups have a habit of dictating their laws to their competitors.