Europe’s largest economy considers imposing ‘digital tax’ on mostly US-based tech giants
Germany is considering introducing its own ‘digital tax’ on tech giants such as Facebook, Google and Amazon.
The country is considering the following the lead of France and the UK, by introducing a tax on the revenues that tech firms generate from online advertising.
It comes amid an ongoing debate as to whether tech firms are paying their fair share of tax, and whether countries are right to tax these firms, which often are headquartered in overseas territories.
According to a German media report, the German government is currently evaluating its options here as it currently has no powers to tax firms based aboard.
Reuters reported, citing an article in the Wirtschaftswoche magazine, that Germany’s finance ministry is looking into the possibility of a 15 percent special tax on online advertising revenue collected by foreign internet companies from German businesses.
It seems that the finance ministry is in the early stage of studying such a move.
Essentially, Germany is considering treating payments for online advertisements in the same way as licence fee payments. This would reportedly make German companies paying for advertising, subject to ‘withholding tax’.
These German companies that place online advertisements with platforms such as Google, would need to recover this withholding tax from the internet firms, as the revenue would be their original tax liability, the report said.
The German finance ministry had confirmed the plans, but stressed there was no agreement on how to proceed between federal finance authorities and individual states, the magazine reported.
Moves such as in Germany to tax digital giants could soon be unnecessary, as soon many European countries will require tech firms to pay more in taxes.
The European Union is reportedly close to reaching an agreement by March to implement a digital services tax.
The EU digital tax had been defeated in its previous form, due to opposition by Ireland, Scandinavian countries and Luxembourg. It needs unanimous approval by member states.
The European Union tax was only intended as an interim measure until a consensus was reached by the Organisation for Economic Co-operation and Development (OECD), across the world.
Frustrated at the delay, France implemented on 1 January 2019 a digital tax on tech giants such as Amazon, Google and Facebook after the European Union had failed to reach a compromise agreement before Christmas.
The UK has also proposed a national digital tax.
These moves come amid accusations that governments are failing to take action to rein in large tech companies, which are seen as paying minimal tax in Europe due to their use of accounting loopholes.
For their part, tech companies have previously defended their tax structures, and insist they abide by tax laws as they’re currently written.
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