Varadkar confident of facing down digital tax plan

LEO Varadkar is confident of facing down calls from within the EU to introduce a digital tax – in light of the fact that at least ten member states have serious reservations about the move.

At a meeting to discuss the issue at the European Council summit in Brussels last night, the Taoiseach is believed to have outlined his view that the imposition of the tax is not timely, not useful and should be done on a global scale, rather than by the EU.

Mr Varadkar has publicly backed the base erosion and profit sharing (BEPS) approach proposed by the Organisation for Economic Co-operation and Development – which would introduce a standardised global rule – ahead of measures that would be only Europe-wide, which he fears would damage the EU’s competitiveness.

The proposals were initially introduced by French president Emmanuel Macron, and it is estimated they could bring in as much as €5billion a year for the EU. However, Ireland, which acts as the European hub for several of the world’s top digital firms, stands to lose upwards of €250million a year in corporation tax if the measure is introduced, and there are wider fears that companies based here could relocate.

Germany, having initially backed the proposals, has got cold feet over fears the move specifically targets US companies and would be likely to provoke a reaction from Donald Trump.

Ahead of yesterday’s discussion, Mr Varadkar said: ‘We very much acknowledge that economies are changing, economies are becoming increasingly financialised and increasingly digitised, and for that reason we will need to reform our tax systems.

‘We also need to get it right and we think the proposal put forward by the Commission is flawed on a number of counts. I think it targets US companies and that will no doubt result in a reaction from the United States – they have already indicated that.’

The proposals require the backing of all 28 member states to succeed. Government sources said ten like-minded countries – including Denmark, Luxembourg and the Netherlands – spoke out at last night’s meeting, sharing Ireland’s concerns.

Mr Varadkar said: ‘Speaking among other heads of government, there are at least ten if not more than ten countries that have lots of questions... about this proposal, lots of reservations about it.’ However, European Commission president Jean-Claude Juncker said the disparity between the tax rate paid by digital corporations compared to others could not be allowed to continue, and that talks on the issue would resume at the next EU summit in June.