Germany rocks the European consensus on the ‘Google tax’

As part of its investigation against American tech giants, the US Department of Justice announced last month that it would focus on the growth of dominant tech companies and their expansion into new sectors. [Tongcom photographer/Shutterstock]

The “Google tax” will return to the EU finance ministers’ agenda on 7 September. However, whereas France and Spain are arguing in favour of the European plan, Germany seems to be hindering its adoption. EURACTIV France reports.

The thorny issue of taxing online giants will return to the European stage on 7 September. The EU finance ministers are meeting in Vienna to discuss the Commission’s bill which aims to introduce a tax on digital companies, who are known as the champions of tax optimisation.

In late March, the European Commission proposed the speedy establishment of a 3% tax on the turnovers of the GAFA companies (Google, Amazon, Facebook and Apple). It was a measure aimed at rebalancing the effective rate of taxation of these digital giants, which remains at 9.5% against an average of 23.2% in the traditional European business sectors, according to figures from the Commission.

Brussel’s proposals displeased certain member states that benefit from GAFA optimization schemes, such as Ireland, which hosts Google’s European headquarters, or Luxembourg, which benefits from Apple’s one.

If it is implemented, the new tax on digital companies could affect between 120 and 150 businesses – half of whom are American tech giants – and generate approximately €5 billion per year to member states, according to Commission estimates.

Faced with the hard work of improving public finances in their respective countries, France and Spain are arguing in favour of the interim solution of a “Google tax” and met this week in Paris to get their act together.

Bruno Le Maire, the French Minister of Economy and Finance and Nadia Calviño, his Spanish counterpart, have “reiterated their desire to see the European Commission’s tax proposal on digital services adopted by the end of 2018”.

German opposition

However, a confidential document from the German Federal Ministry of Finance, which is quoted by the German newspaper BILD, condemns the “demonization of the large internet companies”, which is reportedly considered “ineffective” by Berlin.

“Olaf Scholz seems to be losing all sense of fiscal justice. If he abandons addressing this injustice and this unfair competition, the German minister will then be protecting the privileges of the digital giants at the expense of the public interest.

“And he will be contributing to depleting public funds,” Eva Joly and Sven Giegold, MEPs in charge of economic and fiscal matters for the Greens/EFA, said.

“This latest reform has already been approved by the European Parliament, while the member states are dragging their feet. We demand that France and Germany move these fiscal reforms forward, in accordance with June’s common Meseberg declaration,” the MEPs continued.

In this declaration adopted by the French and German leaders in June, Emmanuel Macron and Angela Merkel had committed “to reach an EU agreement on a fair digital taxation by the end of 2018”.

Responding to the Bild article, the German Federal Ministry of Finance denied that there had been a decision to discontinue the tax plan. “No decision has yet been taken by the minister or the ministry,” assured a ministry spokesperson when questioned about the Bild article, according to AFP.

“The federal government always wants to ensure the fair taxation of the internet sector.”

Crucial meeting

In the debate about the fairer taxation of digital companies, two schools of thought are in opposition and will have to find a common ground at the European level.

On one side, there are the supporters of an urgent solution which specifically targets the online giants. This would be a short-term solution to tax evasion until the introduction of the broad tax reform on European companies (CCCTB).

This solution, which is favoured by Brussels, provides for the introduction of a tax targeted at digital companies in order to rebalance the taxation of the GAFA companies.

Supporters of the second solution reject the specificity of a tax on the digital sector and want to wait for the overhaul of the tax system on companies at the European level. One of the objectives of this overhaul is to take greater account of the specific characteristics of the digital economy and improve its taxation. However, this reform will not come to fruition for several years.

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