EU seeks a dig­i­tal tax to stem ‘bags of money’ lost to loop­holes

Muscat Daily - - BUSINESS - (Bloomberg)

Tallinn, Es­to­nia - Euro­pean Union fi­nance min­is­ters are de­vel­op­ing a new way to tax dig­i­tal com­pa­nies such as Ama­zon and Face­book to raise money from an in­dus­try that they say pro­vides less than it should to public coffers.

French Fi­nance Min­is­ter Bruno Le Maire told col­leagues at a meet­ing in Tallinn, Es­to­nia, that the bloc should agree to a tax on rev­enue - rather than prof­its - of the dig­i­tal in­dus­try by mid-2018. Ten coun­tries, in­clud­ing Ger­many, Italy and Spain, back the ini­tia­tive. They’re con­cerned that tax­ing prof­its is too com­pli­cated un­der in­ter­na­tional rules, al­low­ing com­pa­nies to skirt tra­di­tional levies.

“We are re­spon­si­ble to our tax­pay­ers to deal with it, we can’t just watch how bags of money are trans­ferred else­where,” Slo­vak Fi­nance Min­is­ter Peter Kaz­imir said in an in­ter­view. “I favour im­pos­ing im­me­di­ate levies, sim­i­lar to sales tax, but only as a tem­po­rary so­lu­tion be­fore we reach a global agree­ment.”

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 un­co­or­di­nated Euro­pean reg­u­la­tion.

Even as na­tional govern­ments ac­cept that the cur­rent tax­a­tion sys­tem needs to be al­tered, the path for­ward is fraught with dif­fi­cul­ties, with Dan­ish Fi­nance Min­is­ter Kris­tian Jensen say­ing, “this is an area where we should be very care­ful.” He warned that a new levy could dis­cour­age dig­i­tal use and push cus­tomers to prod­ucts out­side of Europe.

Aus­trian Fi­nance Min­is­ter Hans-Jo­erg Schelling pro­posed that cur­rent dis­cus­sions only ap­ply to a tem­po­rary so­lu­tion be­fore pass­ing that out­line on to the Or­gan­i­sa­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment for a more com­pre­hen­sive fix.

French Fi­nance Min­is­ter Bruno Le Maire (left) speaks to Mario Draghi ahead of a Eurogroup meet­ing in Tallinn, Es­to­nia, on Fri­day

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