Proposed EU Digital Tax Plans Face Defeat This Week

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The European Commission. Image credit: European Commission

Ireland and Scandinavian countries oppose plans for an interim tax on the biggest digital companies, while troubles also beset a more recent compromise

The EU’s proposed 3 percent tax on the revenues of large internet and digital companies is likely to face defeat this week, amidst continued opposition from Ireland and Scandinavian, while a more recent compromise plan also faced opposition.

The European Commission proposed the 3 percent tax on the revenues of large companies such as Google, Amazon and Apple in March over long-simmering concerns over the low tax paid by such companies.

The plan was meant as an interim measure while global changes to international tax rules are discussed.

But at a meeting of EU diplomats on Friday, Ireland, Sweden, Demark and Finland remained opposed to the tax, while Germany the Netherlands and the UK asked for more time, according to reports.

United front

Tax changes require a unanimous agreement from all member states, and the EU had hoped to reach an agreed position by the end of the year.

If no EU plan is put into place, a number of countries have indicated they would push ahead with national digital taxes, which would be a blow to the EU’s single market.

In November France and Germany said they would back a compromise deal that would see governments promise to work on an EU digital tax if an international agreement on new tax rules isn’t reached by 2020.

Such a declaration would push any action further back, but would put added pressure on the Organisation for Economic Co-operation and Development (OECD) to accelerate talks at a broader level.

It is similar to the UK’s proposal for a 2 percent national digital services tax in 2020 in the absence of an OECD solution.

But even that compromise faced opposition on Friday, Reuters reported.

The conflict means that no agreement is likely to emerge at a meeting of EU finance ministers on Tuesday, 4 December, although The Telegraph reported that Germany is at work on a last-minute arrangement that would be acceptable to all member states.

Ireland’s finance department said the country had “constructively engaged” with work on the proposal, but believes any digital tax would be “best addressed on a global level through ongoing work at the OECD”.

France has led the charge for the EU digital tax as a way of appeasing voters’ indignation over tech giants’ low tax bills ahead of European Parliament elections next year.

France’s president, Emmanuel Macron, has faced increased unrest in recent weeks over his domestic economic reforms, with violent riots breaking out in the centre of Paris over the weekend.

A French finance ministry official told Reuters that an agreement was “close” but that “we are going to need a few more weeks of talks before we get there”.

Italy, Spain and the UK have publicly proposed national digital taxes, while the EU said another eight countries have similar measures planned.

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