Commission on track for digital levy proposal by June

The European Commission will stay on track with plans to present a 'digital tax' by June this year, despite recent progress at the level of the Organization for Economic Cooperation and Development (OECD), the Commission's Executive Vice-President Margrethe Vestager said on Tuesday (23 March). 

The Commission's Executive Vice-President Margrethe Vestager. [Shutterstock]

The European Commission is on track with plans to present a digital tax by June despite recent progress at the level of the Organization for Economic Cooperation and Development (OECD), the Commission’s Executive Vice-President Margrethe Vestager has said.

Speaking to MEPs in the European Parliament’s tax subcommittee on Tuesday (23 March), the EU’s digital chief welcomed efforts by US President Joe Biden’s administration to drop some of the previous red lines put up by his predecessor as part of talks on the international stage.

EU finance ministers were buoyed earlier this year when the incoming Biden administration said they would drop the so-called Safe Harbor position, which stipulated that large tech firms would only have had to abide by the new levy on a voluntary basis.

“We very much welcome the change in the US position,” Vestager told EU lawmakers. “In particular, the withdrawal of the proposal for a Safe Harbor … We are optimistic that the new US administration is really serious about reaching an agreement.”

June target

The Commission would prefer an international agreement at the OECD, however the recent good news from the US will not hinder the EU’s plans to come forward with their own proposal for the digital levy, Vestager said.

“We intend to table the proposal by June this year, with the aim to make the levy operational from 2023 onwards,” she said, highlighting the importance of adopting swift agreement on the plans, due to the tax contributing to the bloc’s ‘own resource’ purse as part of Commission’s €750 billion recovery fund.

The Commission launched a public consultation on plans for an EU-wide digital tax earlier this year, due to close on 12 April.

Vestager also revealed that in the Commssion’s drawing up of its new digital levy, it wants to avoid any interference with the OECD process, and it does also not want the new plans to come across as “discriminatory,” ensuring that it “does not fuel trade tensions in any way.”

The US government had previously threatened to issue 25% tariffs on certain French imports after the country decided to put forward its own digital services tax last year.

However, in January, the Biden administration decided to suspend the foreseen tariffs, pending a more detailed investigation by the US Trade Representative’s office on whether both France’s and other tariffs are discriminatory against US firms.

EU’s previous attempt at a digital tax 

Attempts to introduce a bloc-wide digital services levy faltered in 2019, following opposition from Ireland, Finland and Sweden among others to a planned 3% levy on companies earning €750 million in revenue€50 million of which would need to be EU taxable revenue.

After 2019’s failure to introduce a single EU digital tax framework, some member states have since pursued their own efforts in the field, including France, Spain, Italy and Austria.

Past failures at the EU level have in turn led some MEPs to question how tax legislation is voted on in the Council – with current rules as set down in the treaty requiring matters concerning tax to be supported by all EU-27 nations.

Economy Committee report

However, there has been no shortage of MEPs in Brussels who would like to see changes in this area. Parliament’s Economy Committee on Tuesday adopted a resolution to this end, noting that the Commission should consider “all options provided for by the Treaties if no unanimous agreement can be reached.”

“All options” in this sense refers to the possibility of invoking Article 116 of the treaty, which would potentially allow for qualified majority voting to take place in the Council rather than unanimity, regarding such issues.

[Edited by Josie Le Blond]

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