The strain imposed on Europe’s economy as a result of the coronavirus outbreak highlights the importance of agreeing on a global framework for digital taxation, the EU’s Economy Commissioner Paolo Gentiloni has said.
Speaking at a Brussels event by videolink on Monday (6 April), Gentiloni said that while the aim is still to come to an international agreement on a levy imposed on digital giants, 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.
Talks on the digital tax are set to continue at international level at a G20/OECD plenary session scheduled for 1-2 July in Berlin.
Meanwhile, the idea of establishing a digital tax as a means of mitigating the economic fallout from the outbreak is a line also taken up by the Socialist group in the European Parliament.
On Monday, an S&D spokesperson in Parliament’s Economic Affairs Committee, Jonás Fernández, said that new corporate and digital taxes could be used as a means to repay a potential joint debt issued by a new mechanism floated by the French, similar to the European Financial Stability Fund.
EU level and US pressure
At EU level, moves to establish bloc-wide taxation on the digital giants fell flat last year, as it requires unanimous agreement in the Council.
A proposal had been on the table that involved a 3% levy on companies earning €750 million in revenue, €50 million of which would need to be EU taxable revenue. However, countries such as Ireland, Finland and Sweden stood against the measures.
On the other side of the coin, France, Spain and Austria all made their intentions clear with regards to pushing forward with a digital services tax, following the failure to agree on bloc-wide measures.
France, which has passed its own measures to impose a 3% levy on digital giants, has agreed to postpone collection of the new tax after a spat with the US earlier in this year, in which the latter threatened to impose tit-for-tat tariffs.
However, US industry did not hold back in March after the UK signalled its intention to establish its own 2% levy on certain online services, applying to firms with global revenues of more than £500 million, £25 million of which coming from UK users.
“At a time when the U.S. is poised to begin negotiations with the UK on a comprehensive free trade agreement, the UK’s decision to follow other countries in pursuing discriminatory taxes against US exporters is unfortunate and will threaten the strong US-UK trade-in-services relationship,” a statement from Matt Schruers, President of the Computer & Communications Industry Association said.
In February, the Spanish Council of Ministers approved their plans in the field, while Austrian Chancellor Sebastian Kurz told Facebook CEO Mark Zuckerberg that European big tech companies should “contribute their fair share in taxes”, having already introduced their own 5% levy.
However, other European nations have come under direct pressure from the US to avoid making their own plans in the digital tax field.
US ambassador to the Czech Republic Stephen B. King warned Czech MPs against adopting the government’s proposal introducing a 7% digital tax towards the end of February, instead urging the Czechs to wait for an agreement at OECD level.
[Edited by Sam Morgan]