By Pádraig Hoare
The proposed EU digital tax could cost the exchequer at least €75m a year if implemented, calculations from Revenue have revealed.
At the Oireachtas Finance Committee, Revenue officials said based on preliminary analysis on the top 10 companies likely to fall into the digital tax bracket, it would cost the State €120m to €160m in tax handed over to the EU every year, with around €45m recouped.
Plans were unveiled by the European Commission for a digital tax of 3% on the turnover of online companies to bring in €5bn. Companies with significant digital revenues in the EU would pay a 3% tax on their turnover on various online services in the EU, as opposed to profits.
It published two proposals — a common reform of the EU’s corporate tax rules for digital activities, and an interim tax on certain revenue from digital activities.
Despite enthusiastic support from France, it has hit stiff opposition from the Government, as well as smaller EU member states. Germany, despite early support, is now said to be backing away from the proposal, which must get unanimous approval across the bloc.
The Government has said the EU should hold off on the proposal until the Organisation for Economic Co-operation and Development (OECD) unveils its own plan.
Emphasising that they were still rudimentary calculations, Kate Levey of Revenue’s international tax division told the Finance Committee it was conceivable that of the €5bn that would probably be collected by the EU in digital taxes annually, the Irish slice of the yield would be about €45m.
“Our analysis is based on the fact that the digital tax would be fully deductible against taxable income in Ireland. An analysis of 20 companies engaged in digital activities was performed. Each has gross revenues of over €750m and EU revenues of €50m. These companies had combined revenues of around €56bn in 2017, with the top 10 accounting for 95% of the top total.
“We focused on the top 10 companies and estimated the tax could apply to 60% to 80% of their revenues. This gives a range of potential cost between €120m and €160m per annum, in respect of the deductibility of the digital tax in member states,” she said.
Levey said because it was a preliminary analysis, the estimates could be under- estimated or overestimated, such were the factors still under consideration by the Commission. She said the €45m estimate was garnered from the Irish population relative to the rest of the EU. If the tax was applied, it would cost around another €2.5m to administer, said Levey. Principal officer at the Department of Finance, Brendan Crowley said there was optimism that the OECD could find a digital tax solution that would be accepted by all nations.
Fianna Fáil senator Gerry Horkan criticised the proposal, saying it could needlessly exacerbate tensions with the US when trade tariffs were being mooted. The digital tax would largely focus on US giants, which could lead to “tit for tat” retaliation from the Trump Administration, he said.
He said the tax would hurt the consumer and the Government if implemented, with the companies in question likely to pass on the 3% to its customers.
“The consumer will lose, the country will lose, but shareholders won’t,” he said, saying the other winners would be bigger countries like France.