EU treads cau­tiously on tax­ing tech giants

The New Zealand Herald - - BUSINESS - Mark Deen and Vik­to­ria Den­dri­nou

France’s cam­paign to in­sti­tute a new levy for dig­i­tal com­pa­nies such as Ama­zon and ran into early dif­fi­cul­ties as the Euro­pean Union seeks to align its tax pol­icy with more mod­ern and tech­no­log­i­cally fo­cused busi­nesses.

French Fi­nance Min­is­ter Bruno Le Maire told col­leagues at a meet­ing in Tallinn, Es­to­nia, that the bloc should agree to a tax on the dig­i­tal in­dus­try by mid-2018 as a mat­ter of fair­ness.

Ten coun­tries, in­clud­ing Ger­many, Italy and Spain, have for­mally backed the ini­tia­tive. Eight others had reser­va­tions, he said, led by Ire­land.

“The very, very con­sid­er­able dif­fi­cul­ties in tax­a­tion of this sec­tor” be­came clear at this meet­ing,” Ir­ish Fi­nance Min­is­ter Paschal Dono­hoe told re­porters, ex­plain­ing that any such levy should in­clude the US and other Group of 20 coun­tries. Ire­land joined other na­tions in rais­ing “very big ques­tions about how such a mea­sure could be im­ple­mented”, he said.

Tra­di­tional tax­a­tion prac­tices have failed to cap­ture busi­ness from an in­dus­try where value added tends to be vir­tual rather than ma­te­rial and dig­i­tal com­pa­nies have sought to take ad­van­tage of loop­holes cre­ated by unco-or­di­nated Euro­pean reg­u­la­tion. Yet the op­po­si­tion mat­ters be­cause the EU re­quires una­nim­ity among its 28 mem­bers to im­ple­ment tax poli­cies.

France has pro­posed a tem­po­rary levy on rev­enue be­cause tax­ing prof­its is com­pli­cated un­der in­ter­na­tional rules. Im­ple­men­ta­tion of a new pol­icy would take years, mean­ing it could be a while be­fore any money was ac­tu­ally raised.

Den­mark and Luxembourg were among the coun­tries that urged the EU to pro­ceed with cau­tion. Malta raised the spec­tre of the fi­nan­cial trans­ac­tion tax, which var­i­ous French Gov­ern­ments have been lob­by­ing for since the fi­nan­cial cri­sis, with­out tan­gi­ble re­sults.

“I hope it’s not an­other fi­nan­cial trans­ac­tion tax,” Mal­tese Fi­nance Min­is­ter Ed­ward Sci­cluna said. “One has to look at it glob­ally rather than par­tially, be­cause it in­volves the US, it in­volves China.”

Dan­ish Fi­nance Min­is­ter Kris­tian Jensen warned that a Euro­pean tax could risk driv­ing busi­ness abroad.

“I’m al­ways scep­ti­cal about new taxes and I think that Europe is taxed heav­ily enough,” he said. The dig­i­tal in­dus­try was “the fu­ture”, he added.

Aus­trian Fi­nance Min­is­ter Hans Jo­erg Schelling pro­posed that cur­rent dis­cus­sions ap­ply only to a tem­po­rary so­lu­tion be­fore pass­ing that out­line on to the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment, a group that ad­vises its 35 mem­bers on pol­icy, for a more com­pre­hen­sive fix.

France’s Le Maire in­voked the EU’s need to counter anti-Euro­pean po­lit­i­cal move­ments in his cam­paign for the tax. The topic will be dis­cussed at the next meet­ing of EU fi­nance min­is­ters in Luxembourg in Oc­to­ber and Le Maire said the group should be ready to make a for­mal pro­posal by De­cem­ber.

“I’m not look­ing for con­fronta­tion,” he told jour­nal­ists af­ter the Tallinn meet­ing. “I’m con­vinced we’ll find a so­lu­tion.”

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