An EU Turnover Tax on Tech Giants Is a Bad Idea

Ten European Union countries' finance ministers have signed a letter calling for a tax on the revenues of multinational tech companies that have been hiding away their European profits. But European leaders should proceed with caution, because a turnover levy may not be the best solution to this multibillion-dollar problem.

The name proposed for the new levy -- an equalization tax -- suggests that the idea is to take cross-border tax optimization out of tech companies' business planning. The size of the new levy would "reflect some of what these companies should be paying in terms of corporate tax" and would bypass the companies' multilayered tax arrangements in Europe's low-tax jurisdictions such as Ireland and Luxembourg, as well as in Caribbean tax havens.