Published: Thu, December 06, 2018
Worldwide | By Isabel Fisher

Digital tax kept alive by France and Germany

Digital tax kept alive by France and Germany

Germany and France want to enforce with a joint compromise proposal, the controversial digital tax in Europe. It would have imposed a 3 percent levy on revenues made by major IT firms in the European Union market. But this is opposed to an initial plan to set a levy on all digital revenues of large multinationals.

The narrowed-down approach is also viewed as an attempt to ease opposition from Ireland, Denmark, Sweden, and Finland, who have pushed for a global solution instead of a European "quick fix", as the draft needs the support of all EU states.

The new proposal, which was obtained by Politico prior to yesterday's meeting, effectively ends the European Commission's proposed "digital services tax".

The new plan would generate about half the revenue previously planned and mainly hit Google and Facebook, which dominate the online ad market, according to an official with knowledge of the matter.

The digital tax initially was to cover a wide swathe of the digital economy, potentially capturing companies such as Amazon, AirBnB and Trip Advisor.

He said: "Like any European compromise, some will be disappointed".

"I prefer to check our ambitions (...) We have adopted a more conciliatory attitude", French Finance Minister Bruno Le Maire told journalists after the meeting.

France's finance minister Bruno Le Maire has attempted to play down concerns some countries, including Ireland, might have.

Donohoe added that it would be better to deal with the taxation of large digital companies seeking a broader worldwide deal at the Organisation for Economic Cooperation and Development (OECD).

"As other countries mentioned, the right and safest way to deal with this is through the OECD to find consensus on global matters".

The blueprint calls on the bloc's members to agree on the plan "without delay and in any case before March 2019". "I promise to be constructive and I'm ready to look at the proposal, but I still have serious concerns with it", said Finnish Finance Minister Petteri Orpo.

Major compromise: The inital proposal was much further reaching, aiming to tax all online revenue made in the European Union by firms with a worldwide annual turnover of at least €750 million ($850 million) and an online turnover of €50 million in Europe.

The latest proposal is meant to come into force in January 2021, but only if the Organisation for Economic Co-Operation and Development (OECD) fails to reach a consensus on a global approach by then.

The new proposal, which requires unanimous backing by the European Union member states, is set to be formally put for approval by ministers in March.

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