Why is Ireland against the EU digital sales tax?
It seems like a sensible move from the European Union: introduce a digital sales tax, and force the big internet players to pay their fair share of tax on the enormous profits made from online advertising and the sale of user data. Surely every EU state would immediately sign up to this tax, and help put manners on those greedy internet giants?
Unfortunately, that’s not the reaction the EU got when it proposed a 3 per cent levy on digital revenues.
Some member states greeted it with the sort of scepticism usually reserved for a dodgy-looking email telling you that you were owed a big tax refund.
Ireland, in particular, was vehemently opposed to the proposed new tax, saying it would establish a precedent which would undermine Irish tax sovereignty, and discourage foreign direct investment – upon which Ireland is heavily reliant. The tax would be levied in the state where digital transactions take place, so states with larger markets would be quids in.
This week, Minister for Finance Paschal Donohoe doubled down on Ireland’s opposition to the tax, telling a meeting of finance ministers in Brussels: “I believe that a change like this . . . could have significant effects in relation to trade and transatlantic trade. And clearly, as a small, open economy, we are eager to avoid that happening.”
Donohoe believes the digital tax issue should be handled by the OECD on a multilateral basis.
The digital sales tax idea was raised by French president Emmanuel Macron at a gathering of EU leaders in Estonia last year. Calling the big internet companies “the freeloaders of the modern world”, he proposed that the EU tax their revenue in each member state, and not the profits posted at their low-tax headquarters.
Ireland just happens to house the HQs of Facebook, Apple and Google.
France’s minister for finance Bruno Le Maire went on an EU-wide charm offensive, and persuaded more EU states to back the digital tax. Even Germany, which has been holding out against it, has indicated that it will go along with the tax if there is no broader international agreement on digital taxation.
However, until the OECD comes up with a global strategy to force the big tech giants to cough up, the EU strategy may be a mere exercise in tilting at windmills.