Ecofin to de­bate dig­i­tal tax har­mon­i­sa­tion

The Irish Times - Business - - BUSINESS NEWS - PA­TRICK SMYTH Europe Ed­i­tor

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.

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