This week, American tech giants Alphabet (GOOG),Amazon (AMZN) and Netflix (NFLX) have had their omnipotence seriously challenged — in Europe. As the American market becomes increasingly saturated with so many players in the space, it’s not shocking these tech giants would encroach on European territory. But regulators are pushing back.
Here’s a breakdown of the hurdles Google, Amazon and Netflix face in Europe.
Google’s Paris offices were raided by French investigators this week who suspected it owes €1.6 billion (~$1.8 billion) in back taxes. While Google’s European headquarters is called Google Ireland Holdings, its cost center is in Bermuda — where corporate tax doesn’t exist.
France isn’t the only country trying to get Google to pay up. This January, Google paid $145 million in back taxes to the UK government after an open audit by Her Majesty’s Revenue and Customs (HMRC). The amount was scrutinized for being a paltry sum, and the Parliament’s Public Account Committee concluded it “seems disproportionately small.” The chair of the committee, Meg Hillier, said this probe could have been an opportunity to reform international tax rules on a broader level.
“The bigger prize after a costly six-year investigation would have been to develop a new approach to the activities of internet-based companies,” Hillier said.
She insisted that HMRC should have cracked down harder in order to “see lasting and effective change in the international tax system.” Depending on the findings out of Paris, this change may be an impending reality.
According to the Financial Times, several banker sources said Apple will most likely target a streaming service “as it would make it easier for Apple’s services to continue to offer a wide range of content makers.”
With over 81 million members in 190 countries consuming 125 million hours of content per day on Netflix, it’s become a force to be reckoned with, and European regulators and officials have been less than thrilled insisting that it’s becoming increasingly difficult to “promote European identity.” Earlier in 2014 Netflix, prepared for its European expansion and were told by French filmmakers that there would be an “implosion of our cultural model,” according to the Wall Street Journal.
On Wednesday, the European Commission proposed a new set of rules that would mandate 20% of streaming services’ content be European-made. The proposed rules may end up forcing Netflix to invest more money into integrating European content into consumers’ queues — even though European films already account for 21% of Netflix’s current catalogue. Netflix even premiered its first original European series, crime drama “Marseille,” and is planning to launch a second show, “The Crown.” Still, European regulators want to make this European content mandatory.
European regulators also want to force Netflix to prevent the streaming of pornographic or violent content.
“The way we watch TV or videos may have changed, but our values don’t … We will uphold media pluralism, the independence of audiovisual regulators and will make sure incitement to hatred will have no room on video-sharing platforms,” said Guenther Oettinger, the EU commissioner for the digital economy and society.
With Amazon entering the sector of digital streaming, the European Commission is also targeting Amazon Prime — which has original shows like “Mozart in the Jungle” and five-Emmy Award winning “Transparent.” While 27% of Amazon Prime’s content is actually made in Europe, regulators fear Europeans are increasingly gravitating toward consuming content in the English language. The Royal Spanish Academy even launched a campaign this week that’s trying to stop advertising from adopting more and more Anglicisms.
Apart from Prime, Amazon faces another hurdle with the European Commission: the e-commerce retailer is being probed for a 2003 tax deal with Luxembourg — the European Commission initiated the probe nearly two years ago and will come to a decision later this summer. Similar to Google being accused of tax evasion by French and UK governments, Amazon may face being ordered to pay hundreds of millions of euros in back taxes; Reuters reported that the amount could be around $450 million.