European nations told to sort out 'digital tax' on tech giants by end of year

Tax 'em 3%, say some. Noooo! cry Luxembourg, Ireland

Warring European governments have been urged to quickly come to an interim agreement on a levy on tech giants’ revenues – and could drop plans to tax the sale of users’ data to get there.

The Austrian presidency of the EU is pressing for member states to agree to a temporary solution for the bloc. The presidency is reported to have issued a document setting out its intentions ahead of a finance ministers meeting in Vienna on Friday and Saturday.

There is broad agreement among lawmakers that the rules need to be changed so companies like Apple, Google and Facebook – which can have little or no physical presence in a country, station a HQ anywhere regardless of where their customers are, and easily shift profits to other countries – pay their fair share.

However, there is a divergence on how to go about it. The OECD is working on a global solution to the issue, but the European Commission has been calling for an interim digital tax since March.

That tax proposed a 3 per cent levy on firms with a global annual turnover of €750m and annual EU revenue of at least €50m, which would hit around 200 companies and boost member states’ coffers by about €5bn.

Since then, however, member states have been at loggerheads over the idea, with France, the UK, Belgium and Spain supporting the plans, while Ireland and Luxembourg are two of the strongest opponents.

However, according to Reuters, the document drawn up by the Austrian presidency warned an agreement needs to be reached soon.

The presidency is going to push for a “uniform approach” for an interim EU solution based on the Commission’s proposal. If the bloc waits for a global deal, nations “face the risk of erosion of the corporate taxation bases already now and might be tempted to act unilaterally,” it said.

The document also noted that members states are in the process of hatching their own plans, which could damage the EU common market.

Indeed, during a debate in the UK Parliament, Conservative MP Chris Philp said that if the European Union does not move quickly enough to implement the sales tax – within the next 12 to 24 months – the UK should take unilateral action.

In a bid to grease the wheels, the Austrian presidency is reported to have suggested narrowing the focus of the tax, and dropping the Commission’s proposal to tax the sale of users’ data.

Reuters said the Austrian plan still supported taxes on online advertising sales and on digital marketplaces.

That move would keep tech giants like Google, Facebook and Amazon in scope, but slip others, like market research firms, out of the net.

The Austrian plan is to agree with the Commission’s proposal that it will apply to firms with a global annual turnover of €750m and annual EU revenue of at least €50m.

Meanwhile, the German finance ministry was this morning forced to deny reports in the Bild newspaper that said the nation – which has been lukewarm about the taxation – was planning to abandon the plan altogether.

“The debate is still ongoing, also among the finance ministers of Europe and the G7/G20 countries. The Federal Government still aims to ensure a fair taxation of internet companies,” a spokesman told Reuters. ®