Commission mulls digital tax to fund Europe’s multi-billion euro recovery 

European Commission President Ursula Von Der Leyen during a plenary session of the European Parliament in Brussels, Belgium, 27 May 2020. [EPA-EFE/OLIVIER HOSLET]

The European Commission is considering bringing back Europe-wide plans for a digital services tax in order to finance the bloc’s €750 billion recovery fund, the executive said on Wednesday (27 May).

“We are investing together in Europe’s future – and will pay everything back according to a known and well-tested formula through future EU budgets,” von der Leyen told the European Parliament.

“This is why the Commission will additionally propose a number of new own resources,” she said  – noting that these could be based on the planned extension of the emissions trading scheme, a Co2 border tax, or new digital tax plans.

The recovery fund proposed by the Commission on Wednesday includes €500 billion offered to member states through grants and €250 billion in favourable loans, in addition to the EU’s €1.1 trillion seven-year budget, or multi-annual financial framework.

Ships, planes could help EU pay for virus recovery

The European Commission’s €750 billion recovery fund could be covered financially by new sources of revenue, which include extending the EU’s carbon market to the aviation and shipping sectors, the bloc’s executive confirmed on Wednesday (27 May).

Von der Leyen’s comments on the digital tax plans received broad approval from a cross-section of MEPs, including EPP leader Manfred Weber.

Weber had cited the digital tax as a separate policy area while campaigning to become Commission President during the European Parliamentary elections in 2019.

A communication published by the Commission on Wednesday states that the executive “actively supports the discussions led by the OECD and the G20 and stands ready to act if no global agreement is reached.”

“A digital tax applied on companies with a turnover above €750 million could generate up to €1.3 billion per year for the EU budget,” it adds.

Following von der Leyen’s remarks, Commission Vice-President Maroš Šefčovič said the executive is “ready to go at it alone” should there not be an agreement via the OECD, who hope to reach an deal by October and then have it approved by G20 finance ministers,

Wednesday’s news comes after attempts to introduce a bloc-wide digital services act faltered last year, following opposition from Ireland, Finland and Sweden and others to a planned 3% levy on companies earning €750 million in revenue€50 million of which would need to be EU taxable revenue.

New rules on taxation require unanimous agreement between member states.

As a result of this, France, Spain, Italy and Austria made clear their intentions to push forward with a digital services tax, following the failure to agree on bloc-wide measures.

Rumours have been abounding in Brussels for weeks on whether the Commission would seek to bring back the divisive plans for taxation on digital giants.

Speaking at a recent Brussels event, the EU’s Economy Commissioner Paolo Gentiloni said that economic hardships prompted by the coronavirus could be a factor in persuading certain states to back a digital tax.

“Maybe the crisis will help to give a little bit more boost to multilateralism and international cooperation,” Gentiloni said during the event organised by the Bruegel think tank.

“What is clear from the European Union point of view is that we need a digital taxation and we are now working to have it at the global level, which should be the best way to avoid double taxation and other very complicated issues,” he added.

[Edited by Zoran Radosavljevic and Benjamin Fox]

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