Group of EU states rejects compromise on digital tax as deadline looms

French Finance Minister Bruno Le Maire (L) and German Finance Minister Olaf Scholz (R) hold a joint news conference after a Special Eurogroup Finance Ministers' meeting in Brussels, Belgium, 19 November 2018. [EPA-EFE/JULIEN WARNAND]

A group of European Union countries rejected on Friday (30 November) a new compromise plan for the introduction of an EU-wide tax on digital revenues of large companies, diplomats said, making it increasingly difficult to meet a year-end deadline for a deal.

Under a proposal from the European Commission in March, EU states would charge a 3% levy on the digital turnover of large firms that are accused of averting tax by routing their profits through the bloc’s low-tax states.

The tax plan was dubbed “a quick fix” and was meant to address low taxation on digital giants like Google or Facebook in the short term, before a more comprehensive global solution on how to tax digital business emerged.

Some countries 'more comfortable' with interim deal on digital tax, EU diplomats say

Some EU member states are likely to feel “more comfortable” with a temporary agreement on the EU’s digital tax plans rather than wait for international consensus, EU diplomats said on Monday (5 November), ahead of a meeting of EU finance ministers.

But the project, which needs approval from all 28 EU states, has so far been derailed by fierce opposition from countries that fear losing tax revenues, like Ireland, where many digital multinationals have their European headquarters.

Germany and the Scandinavian countries also oppose the levy fearing retaliation from the United States, where most targeted companies come from.

The latest attempt from Austria, who holds the EU presidency until the end of the year, to allay concerns by postponing the entry into force of the “quick fix” to 2022 was also met with opposition on Friday, diplomats told Reuters.

UK takes lead in digital tax standoff but diverts from EU plans

The UK is to roll out a digital services tax (DST) for tech giants from April 2020 in a move that breaks an international stalemate on the subject. The rates, however, differ substantially from the EU’s own DST plans.

Ireland, Sweden, Denmark and Finland remained opposed to the tax at a meeting of EU diplomats, while Germany, the Netherlands and the United Kingdom asked for more time.

A meeting of EU finance ministers on 4 December which was supposed to seal a final deal on the matter is now unlikely to be successful.

“We are close to the objective but we are going to need a few more weeks of talks before we get there,” a French finance ministry official said.

Paris has been the keenest supporter of the tax, which French President Emmanuel Macron has put at the top of his agenda.

Le Maire campaigning for a tax on tech giants

19 European countries now support introducing a tax on tech giants’ revenues but a handful of capitals are resisting, including Berlin. Campaigning so that the plan is successful, Bruno Le Maire, the French minister of economy and finance, has 60 days to convince them. EURACTIV France reports.

 

Most EU countries support the EU-wide tax that, if not adopted, could be replaced by similar national levies in what would be a negative development for the EU internal market.

Italy, Spain and Britain have already readied their national digital tax plans. Other eight countries have similar measures in place or in the pipeline, EU officials said.

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