Ecofin to debate digital tax harmonisation
New proposals for harmonised tax treatment of digital companies will be debated this weekend by European Union finance ministers in the Estonian capital, Tallinn.
The measures pose the usual challenge to the Republic of Ireland and its model of low corporate tax. Irish officials emphasise that all tax legislation has to be agreed by unanimity but say they are engaged constructively with the Organisation for Economic Co-operation and Development’s ongoing work on tax-base erosion and profit-sharing. They say they accept the fundamental principle that tax should be levied on companies in the countries where value is added rather than where they are notionally headquartered.
Corporate-tax harmonisation and its twin sister, a consolidated approach to corporate-tax bases, are hardy annuals for the finance ministers, strongly advocated by the European Commission and some member states, led by France.
The latter proposals are part of commission initiatives, launched last year, that are wending their way through the legislative process. Ireland remains concerned about the “consolidated” aspect of the tax-base proposals.
A discussion of digital-company taxation – and an EU input to the ongoing OECD discussion of the issue – had been scheduled for the informal Ecofin meeting by the Estonian EU presidency. France’s president, Emmanuel Macron, has now also persuaded Germany, Italy and Spain to sign up to an initiative advocating a shift from taxation of profits to that of turnover.
A joint letter states: “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries. Economic efficiency is at stake, as well as tax fairness and sovereignty.”
The OECD estimates that between $100 billion and $240 billion, or between €80 billion and €200 billion, of revenue is lost each year because of the gaps in international rules that allow corporate profits to be artificially shifted to tax havens.
In the digital economy, the four argue, an “equalisation tax” could recoup at least some of the tax the giant digital companies have not being paying.