Digital tax: Stage set for EU leadership after Trump’s OECD withdrawal

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

US President Donald Trump meeting EU leaders. [EPA/ROBERT GHEMENT]

Amazon does not need another massive handout, but that is what the Trump administration gave the US behemoth by withdrawing from international digital tax negotiations at the OECD. The timing could not be worse, write Christy Hoffman and Oliver Roethig.

Christy Hoffman is General Secretary of UNI Global Union and Oliver Roethig is Regional Secretary of UNI Europa.

While the details of the European Union’s plans for a €750 billion Covid-19 recovery plan are yet to be agreed, the new outlay recognises the scale of the issue. Concerns loom large over who will be paying this colossal loan back. To shore up critical services and our social safety nets in the pandemic’s aftermath, we must move towards a fairer tax system, not one that further advantages massive multinationals at working people’s expense.

Meanwhile, Trump’s withdrawal in the OECD over digital tax talks makes clear that the world cannot wait on the United States to be persuaded on the issue. We have to keep pushing to make companies like Amazon pay their fair share through an EU-wide digital tax, while not letting the Trump administration derail international negotiations.

The reason that progress towards an EU-wide digital tax had been put on hold in the first place was to fully commit to the OECD process. Now that Trump has upended that, it is crucial that the EU stand its ground and persevere in its original plan.

While individual European countries have been stepping up, they have come under huge pressure from a zealously aggressive US foreign policy. When even a country the size of France is forced to backtrack, it shows another approach is required. Together, the EU has the economic strength to pull it off.

Digital giants like Amazon are among the few big winners of the COVID-19 pandemic. They have seen demand for their services explode and the price of their stocks soar. In fact, between March 18 and June 17—while nearly half the global labour force risked losing their jobs—the collective wealth of Jeff Bezos, Mark Zuckerberg, and Bill Gates increased by a total of $87 billion.

And it is time that their companies pay their share of recovery.

Even before the pandemic, it was broadly recognised that the tech companies did not pay enough taxes in countries in which they earn revenue but have no physical presence.

According to the UK-based transparency group Fair Tax Mark, globally, Amazon, Facebook, Google, Netflix, Apple and Microsoft have avoided $100 billion (approximately €90 billion) over the past decade by shifting revenue and profits.

For comparison’s sake, that is three times the EU’s Just Transition Fund, which aims to bring about a socio-economic transformation in regions relying on fossil fuels and carbon-intensive industries towards climate neutrality.

For example, in Europe, Amazon pays almost no taxes; on the contrary, in the last two years Amazon Europe received tax credits for more than half a billion euros. It is estimated that Amazon avoided €250 million in European income taxes between 2006 and 2014.

This disadvantages the many traditional retailers and hypermarkets which compete with Amazon – to the brick and mortar stores employing many millions of UNI members—which pay a dramatically different, public service sustaining tax rate.

The coronavirus and the multi-month lockdown it caused have exacerbated this e-retail’s advantages as community-based stores struggle to stay open and our economies risk a recession of historic proportions.

As tax revenues from other sectors plummet and digital giant’s own revenues and power soar, these companies have an obligation to contribute back to society.

We cannot slip back into austerity because Amazon will not compete with brick and mortar stores on a level tax playing field. To avoid that fate, we must fairly tax digital services. The EU must not miss this historic opportunity to make that happen.

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