EU plan to raise taxes for in­ter­net firms hits snag

Business Standard - - WORLD - FRANCESCO GUARASCIO

A Euro­pean Union plan to raise more tax from digital multi­na­tion­als faced the first signs of scep­ti­cism on Satur­day, as smaller mem­bers of the bloc warned about the economic im­pact from such a move.

France wants to tax com­pa­nies like Google and Face­book on their turnover, rather than prof­its, to in­crease rev­enue from global on­line groups, ac­cused of pay­ing too lit­tle in Europe.

More than a third of the EU’s 28 mem­bers backed Paris on Satur­day at a meet­ing of EU fi­nance min­is­ters in Tallinn, the Es­to­nian cap­i­tal, but the move needs the agree­ment of all mem­ber states to re­duce the risk of le­gal chal­lenges. “We should be very care­ful,” Den­mark’s fi­nance min­is­ter Kris­tian Jensen said, warn­ing of the risks of push­ing in­no­va­tive com­pa­nies away from Europe.

His re­marks were echoed by Lux­em­bourg’s fi­nance min­is­ter Pierre Gramegna, who said any EU so­lu­tion would need global back­ing to avoid dam­ag­ing Europe’s com­pet­i­tive­ness. The Czech Repub­lic and Malta said a turnover tax would be tech­ni­cally dif­fi­cult to im­ple­ment.

If the di­vi­sions per­sist, a min­i­mum num­ber of ten EU states may ap­ply the tax on their own un­der a pro­ce­dure known as en­hanced co­op­er­a­tion. Coun­tries can also charge the tax uni­lat­er­ally.

“En­hanced co­op­er­a­tion is cer­tainly a legally pos­si­ble op­tion,” Valdis Dom­brovskis, vice pres­i­dent of the Euro­pean Com­mis­sion, told a news con­fer­ence at the end of the min­is­te­rial meet­ing.

But the ob­jec­tive at this stage is to reach an agree­ment among all mem­bers by the end of the year, fol­lowed by leg­isla­tive pro­pos­als next spring, he added. The com­mis­sion will out­line other le­gal op­tions to tax the digital econ­omy in a pa­per in the com­ing days.

French Fi­nance Min­is­ter Bruno Le Maire said the turnover tax was nec­es­sary to al­low EU coun­tries to move quickly. “Other­wise we risk a break­down with cit­i­zens across Europe,” he added.

Ten states signed a state­ment in sup­port of this ap­proach on Satur­day. In ad­di­tion to France, they are Ger­many, Italy, Spain, Aus­tria, Bul­garia, Greece, Ro­ma­nia, Slove­nia and Por­tu­gal.

Bel­gium and the Nether­lands pub­licly backed the ini­tia­tive. Oth­ers did so in pri­vate meet­ings.

The French plan was seen as a “quick fix” to ad­dress the is­sue, but Euro­pean of­fi­cials ac­knowl­edged it may have some draw­backs. It could be eas­ily ex­posed to le­gal chal­lenges, di­vide the EU and cause trou­ble with the United States, home to most ma­jor on­line com­pa­nies, they said.

REUTERS

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