EU tech tax talks teeter on brink – reports

As OECD strikes positive note on prospect of global consensus

Hopes that European countries will imminently agree on measures for a digital services tax are foundering – but G20 nations have been told a global consensus is still possible by 2020.

Finance ministers are due to meet tomorrow to debate the matter, which has seen member states split over whether, and how, to claw back more cash from tech giants whose business models pose a challenge to national tax authorities.

However, reports have suggested the chances of reaching a consensus by the close of tomorrow – the last opportunity if the group is to meet its self-imposed deadline of the end of the year – are slim.

According to Reuters, an official from the French finance ministry – which has been pushing for the measure – said the group is "close to the objective" but still "need a few more weeks of talks" to get there.

The European Union's has proposed a 3 per cent levy on firms with a global annual turnover of €750m and annual EU revenue of at least €50m. This would hit around 200 companies and boost member states' coffers by about €5bn.

However, opponents including Ireland, Sweden and Denmark have branded the plan as fundamentally flawed, and others have feared repercussions from the US, as lawmakers Stateside perceive it as targeting American tech firms.

The delays in reaching a consensus have caused some nations to go it alone – the UK having most recently decided to charge a 2 per cent tax on the UK revenues of the digital businesses of large firms that derive "significant value" from British users.

The UK's focus is on companies that benefit from user participation – the argument is that users build value for business by generating content, deepening engagement, increasing their network and boosting brand awareness.

But critics have slammed these unilateral actions, saying it will hinder the global talks that are being led by the OECD – and which all countries claim they want to see implemented.

These talks have struggled to get off the ground due to similar disputes between countries – and of course there are almost 100 more nations involved in the OECD negotiations than the EU discussions.

Despite this, the OECD struck a more positive chord ahead of the G20 meeting in Argentina this week.

In a report (PDF) to G20 leaders, OECD secretary-general José Ángel Gurría said "it is clear that the dynamic of the discussions has shifted, with the potential for an agreement in sight".

The challenge, the report said, would be finding a solution that sits between the various proposals from the nations – and the G20 summit would be an ideal place to push for agreement ahead of OECD meetings in December and January.

"The G20 has an opportunity to seize the moment by maintaining the political focus on reaching a global, consensus-based solution," said Ángel Gurría.

"A strong showing of unity and commitment to work together at the highest political level will be a key ingredient in finding the common ground that we are seeking."

A timetable indicated that in June 2019 there would be an update to a March interim report from the Task Force on the Digital Economy, with a final report due the year after.

"My hope is that at that [the 2019] Summit you will be able to celebrate an agreement on the what and how of a long-term solution to be delivered in 2020," he said.

If an international deal were struck by 2020, the UK's proposed tech tax wouldn't come into force – which has led some to question whether it is worth the government's time consulting on, and drawing up, national proposals when it already has a packed legislative agenda. ®