EU stumbles in plan to levy 3% digital tax on major firms
A European Union plan to tax Google, Facebook and other internet firms risks failure after a handful of member states announced their opposition.
EU countries are studying proposals to levy a 3% tax on big internet companies that make money from user data or digital advertising, in a bid to level the playing field with bricks-andmortar companies that pay more tax.
But the idea, which must be agreed unanimously by all 28 member states, is running into serious opposition, as Ireland, Sweden and Denmark made their criticism public on Tuesday.
Germany had initially supported the idea in a joint agreement with France, but is now seeking to water down and delay the proposals, moves that are causing deep frustration in Paris.
A dozen countries are moving ahead with their own national digital taxes, with Spain and the UK among the recent converts.
The chancellor, Philip Hammond, announced last week that the UK was prepared to go it alone, with a “narrowly-targeted” digital services tax that is expected to come into force in April 2020 and raise £400m for the exchequer.
Opponents to the digital tax fear the wrath of Donald Trump’s White House, which regards the EU’s efforts to ensure “fair taxation” of internet giants as an attack on American companies, a charge the EU rejects.
Denmark’s finance minister, Kristian Jensen, said that given the way that the tax “has been framed as aiming at US companies, of course there will be a reaction from the United States.”
Ireland, which hosts big tech firms including Apple, Facebook and Google, is also opposed. “What kind of reaction would this bring if this was a model that was imposed on us?” Irish finance minister Paschal Donohoe asked his counterparts during the live-streamed debate.
The French finance minister, Bruno Le Maire, argues that an EU digital tax could spur efforts for an international agreement, led by the the Organisation for Economic Co-operation and Development thinktank.
Paris fears that failure to agree such a high-profile proposal before May’s European elections will be a gift to antiEU populists, such as Marine Le Pen, the leader of the National Rally, formerly the Front National, who claim the EU is in hock to big business.
But Le Maire offered a big concession, when he announced on Tuesday that France would support delaying the introduction of an EU tax to allow the OECD to make a comprehensive proposal. Behind the scenes, Paris is deeply disappointed that Berlin has gone cool on the idea after the two countries agreed the initiative more than 18 months ago and reaffirmed it in June in the Meseburg declaration, a Franco-German vision of the EU’s future. It stated the two would aim for “an EU agreement on a fair digital taxation by the end of 2018”.
The French government is unconvinced that US reaction is any reason to delay, arguing that Germany has no excuse if even the UK, traditionally seen as Washington’s closest ally in Europe, can propose a digital tax.
Le Maire still hopes for an agreement in December, but interventions from other member states suggests that is a tall order.
Sweden’s economy minister, Magdalena Andersson, said her country could not support the proposal. “I see no government in Sweden that would have any other opinion on this issue.”
Hartwig Löger, Austria’s finance minister, who chaired the meeting, put a brave face on the divisions, arguing more clarity was needed on whether countries had technical or political objections. “There is the motivation to find a harmonised solution for Europe,” he said after the meeting. “Even now we have 11 countries – soon it will be 12 with Spain – which have national individual solutions on digital taxation.”