Dig­i­tal tax by Christ­mas, says Moscovici

Financial Mirror (Cyprus) - - MARKETS - By Sa­muel Stolton - EURACTIV.com

The EU’s Eco­nomic and Fi­nan­cial Af­fairs Com­mis­sioner Pierre Moscovici has ral­lied the cause for an EU-wide dig­i­tal tax to be rolled out in time for Christ­mas, amid a raft of op­po­si­tion on the plans from mem­ber states, le­gal ex­perts and in­dus­try as­so­ci­a­tions.

Speak­ing to BBC News, Moscovici said: “It’s doable to have an agree­ment by Christ­mas… Why by Christ­mas? Be­cause af­ter that, we will en­ter into an­other tim­ing, which will be the po­lit­i­cal cy­cle – first, Brexit will ap­proach; sec­ond, there will be the Euro­pean elec­tions.”

As part of cur­rent plans, the Com­mis­sion pro­poses to tax dig­i­tal firms with to­tal an­nual rev­enues of EUR 750 mln or above and yearly EU tax­able rev­enues of EUR 50 mln, with a 3% levy on rev­enues.

Moscovici’s com­ments came af­ter it tran­spired that Face­book’s UK tax bill last year only ac­counted for around 1% of sales.

Big tech firms are able to avoid pay­ing high tax rates be­cause they are free to choose where to domi­cile their phys­i­cal head­quar­ters, which is nor­mally where they ac­count their fi­nances.

Moscovici also said there has been good progress on the plans to es­tab­lish a dig­i­tal tax across the EU.

His com­ments may come as a sur­prise to Ire­land, the Czech Repub­lic, Fin­land and Swe­den, the mem­ber states who re­cently signed a joint state­ment high­light­ing their op­po­si­tion.

The Fi­nan­cial Times also re­cently drew at­ten­tion to the po­ten­tial le­gal hur­dles that may pre­vent an EU dig­i­tal tax from be­ing es­tab­lished. More­over, many in the in­dus­try have been un­am­bigu­ous in their op­po­si­tion.

On the an­nounce­ment of the Com­mis­sion’s pro­pos­als for a dig­i­tal tax in March, Chris­tian Borggreen, vice pres­i­dent of the Com­puter and Com­mu­ni­ca­tions In­dus­try As­so­ci­a­tion Europe, said: “The pro­posed turnover tax aimed at on­line plat­forms is dis­crim­i­na­tory and ig­nores the global con­sen­sus that the so-called ‘dig­i­tal econ­omy’ should not be sin­gled out. Our economies are in­creas­ingly dig­i­tal and dig­i­tal com­pa­nies pay as high of an ef­fec­tive cor­po­rate tax rate as tra­di­tional com­pa­nies.”

Mean­while, mem­bers of the Euro­pean Par­lia­ment’s eco­nom­ics com­mit­tee said ear­lier this week they would ad­vo­cate for higher tax rates levied against big tech firms. The co-rap­por­teur for the dig­i­tal tax di­rec­tive, S&D’s Ger­man MEP Paul Tang, said the cur­rent state of play per­mits the largest com­pa­nies in the world to pay some of the low­est rel­a­tive rates. Euro­pean Com­mis­sioner for Eco­nomic and Fi­nan­cial Af­fairs, Pierre Moscovici

The OECD is cur­rently work­ing through a set of plans to ap­ply a global tax frame­work to com­pa­nies op­er­at­ing dig­i­tally, but progress has re­cently stalled, frus­trat­ing many global min­is­ters and po­lit­i­cal of­fi­cials.

One of them is UK chan­cel­lor Phillip Ham­mond, who said the UK would “go at it alone” in estab­lish­ing a dig­i­tal ser­vices tax un­less suf­fi­cient progress was made at the in­ter­na­tional level.

While talks may have reached some­what of an im­passe glob­ally, those in the in­dus­try are more than happy to wait for the OECD to reach agree­ment be­fore an EU-wide dig­i­tal tax sys­tem is con­sid­ered.

“We en­cour­age the EU to seek in­ter­na­tional tax re­form through the OECD rather than pur­sue dis­crim­i­na­tory, uni­lat­eral ac­tions with risks to Europe’s dig­i­tal econ­omy and in­ter­na­tional trade re­la­tions,” Borggreen said.

In Septem­ber, French Fi­nance Min­is­ter Bruno Le Maire, a staunch ad­vo­cate of the dig­i­tal tax plans, at­tempted to mol­lify op­po­si­tion by sug­gest­ing that the dig­i­tal tax plans should in­clude a “sun­set clause.”

Such an in­clu­sion in the di­rec­tive would re­sult in the new EU tax end­ing once a deal is reached at the global level.

Aus­trian Fi­nance Min­is­ter Hartwig Loeger has sup­ported the idea of a sun­set clause and sees it as a so­lu­tion for mak­ing progress at the EU level whilst agree­ment is still sought in the OECD.

In or­der to be adopted, the EU’s dig­i­tal tax re­forms re­quire unan­i­mous agree­ment in the Coun­cil, which could take some time. How­ever, the Com­mis­sion may be keen to hurry the process along and tie up any loose ends in the dig­i­tal sin­gle mar­ket be­fore the end of its man­date next year.

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