EU leaders split on plans for a European digital tax

Mae Love
November 9, 2018

"It is very hard to see an agreement on the digital tax because so many technical issues are not solved yet".

Complicating things further, the tax risks triggering the ire of President Donald Trump amid a transatlantic trade spat, as most of the affected companies would be US-based.

A proposal gaining traction in Brussels would delay the launch of the European Union digital tax until 2021 and scrap it if a global tax deal is reached before then.

At a meeting in Brussels yesterday (6 November), Germany said it wants to delay a decision until a new report from the Organisation for Economic Co-operation and Development (OECD) is delivered in 2020, ushering in a potential global standard.

The digital tax, sometimes called the "Google tax" for the impact it would have on Google and cohorts Apple, Facebook and Amazon, is deeply controversial.

The EU proposal is also meant to stop other countries going it alone with their own digital tax and creating a patchwork of schemes across the continent.

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"There must be the adoption of a directive on digital taxation by the end of the year", said Finance Minister Bruno Le Maire. Traditional tax rules have failed to capture these companies' activities, fueling anger from voters disgruntled after years of austerity and meager wage growth.

The German minister added that "a very good approach" would be to agree by this December about what the digital service tax would look like should global agreement not be reached. The levy would apply on revenue from "targeted advertising" and "intermediation services", while the tax will be imposed on turnover, irrespective of profit or loss, and won't be connected to or "creditable".

On Monday, Le Maire's German counterpart Olaf Scholz backed a European tax, but only if a broader solution was not found by summer 2020.

In the run-up to Tuesday's meeting, some countries also expressed doubts about whether the initiative would violate existing treaties on avoiding double taxation.

The Council of ministers said in a statement that while "progress has been achieved on a number of issues such as definitions, tax collection, and administrative cooperation, there are still differences between member states on several issues, including the precise scope of services which would be subject to the future tax". The plan requires all 28 states to approve the measure, but a large number now oppose it, anxious about the technical complexity of the process and that the U.S., where most of the firms are headquartered, would retaliate with changes to its own tax structure.

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