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