EU finance ministers remain divided over a raft of issues in the European Commission’s digital services tax (DST) plans after a meeting on Tuesday (6 November) drew attention to a plethora of challenges in reaching a consensus.
The EU’s finance commissioner Pierre Moscovici had rallied the cause for tech giants to fairly pay their way while Austrian Finance minister Hartwig Löger said the digital tax plans are a priority for his country’s presidency of the EU.
That didn’t stop Ireland, Sweden and Denmark from making their opposition to the plans clear, with all saying that they could not support the plans currently on the table.
The current proposal would require tech firms with total annual revenues of €750 million or above and yearly EU taxable revenues of €50 million to pay a 3% levy on revenues where such money is generated, rather than where the companies are domiciled for tax purposes.
Estimates say that the plans could generate as much as €5 billion annually.
Germany has clarified its position on the DST, after previously expressing concerns. Finance minister Olaf Schultz said on Tuesday that although his country is committed to an international solution, Germany would consider a revised commission proposal on an interim digital tax framework if an agreement at the OECD can’t be reached by summer 2020.
Discussions at the OECD have sought to find a global agreement on digital tax measures. But talks have slowed over the past few months, prompting the likes of the UK and Spain to embark on their own plans.
As part of his recent budget announcement, UK Chancellor Phillip Hammond laid out his own proposal, which includes a 2% levy on revenues on firms with global annual sales of £500 million (€560 million) and over.
Scope and sunset clause
Tuesday’s talks between finance ministers focused on two areas of the commission’s digital tax proposal: the scope of the levy and the subject of the ‘sunset clause.’
The commission’s proposal currently defines three areas which would come under the remit of the new levy. These include a tax on online advertising, web-based intermediation services and the sale of data.
The scope, as defined in the commission’s proposal, received broad support from delegates who agreed in principle with the DST.
However, the Finnish ministry came out against the notion of taxing the sale of data, an area which Greece’s Minister of Finance, Euclid Tsakaloto, emphasised the importance of.
The idea of inserting a ‘sunset clause’ was put forward by French Finance Minister Bruno Le Marie earlier in the year, and Dutch minister Wopke Hoekstra described it as an “essential element” of the DST.
Including such a clause would mean that any EU tax would cease to apply once a deal is reached at the OECD. Ministers from across the board said that any inclusion of a sunset clause would need to include a definitive ‘expiry’ date for the tax plans, although Croatian Finance minister Zdravko Marić said that this was a point he wouldn’t agree with.
The American question
US authorities have criticised the EU’s plans to introduce a ‘digital tax,’ describing the move as discriminatory ‘against US companies’ in a letter penned to European Council president Donald Tusk and Commission President Jean-Claude Juncker at the end of October.
US interest was not absent from Tuesday’s talks. Denmark’s Kristian Jensen remarked that the DST plans were “aimed at one specific country” and that EU policymakers should take into account the opinions and perspectives of US counterparts.
However, Le Maire, one of the most outspoken advocates for an EU-wide levy, said that he wanted to avoid a situation in which taxation becomes fragmented as member states embark on their own tax formulas.
A further round of talks is due to take place during the next gathering of EU finance ministers in December, by which time Löger hopes to reach agreement on the plans. That appears unlikely, give that any agreement on tax reform requires unanimous agreement from EU member states.