The European Union’s ambitious plan to impose bloc-wide tax regulations on digital companies was on the verge of failure on Tuesday.
Tech giants such as Facebook and Google pay remarkably little tax by shifting profits to low-tax member states, but plans to fix that have been deeply divisive in the EU.
EU finance ministers presented widely differing views on a plan to charge tech firms a 3 percent levy on digital revenues in all EU states:
- Key proponent France agreed to postpone implementation to 2020 if it meant saving the plan, but insisted on signing it by December.
- Ireland and Sweden remain sceptical, especially if the deal is not anchored in a global tax framework.
- Germany wants an OECD-backed global deal, but supports a 2020 EU back-up plan, if it doesn’t affect car makers.
- Spain and the UK reiterated their plans for national schemes.
- Italy said it would impose a national plan if no EU plan was signed by December.
Possible US retaliation
“It is very difficult to see an agreement on the digital tax because so many technical issues are not solved yet,” Danish Finance Minister Kristian Jensen said, warning that the US could retaliate given it targets mostly American firms.
Irish Finance Minister Paschal Donohoe, who fears reduced tax revenue in his country, said the tax would set a negative precedent for Europe, as it would be imposed in states where consumers are located rather than where services are produced.
“We are net exporters. What kind of reaction would we have if this model was imposed on us?” he told ministers.
EU Economics Commissioner Pierre Moscovici warned: “If we do nothing, the EU will be split up like a puzzle and our European businesses will be the first to suffer.”
Where do we go from here? Current EU presidency holder Austria said it would lead a final push in December but was pessimistic about members’ appetite for compromise.