By Francesco Guarascio, Brussels
An EU plan to tax big internet firms like Google and Facebook on their turnover is on the verge of collapsing after several EU governments rejected it and announced national initiatives instead.
Under a proposal from the European Commission, EU states would charge a 3% levy on the digital revenues of large firms that are accused of averting tax by routing their profits to Ireland and other low-tax states.
However, it requires the support of all 28 EU states and is opposed by a number of them, including Ireland that have benefited by allowing multinationals to book profits there on digital sales to customers elsewhere.
While the harshest criticism had previously taken place behind closed doors, many EU finance ministers yesterday voiced their concerns at a meeting in Brussels that was streamed over the internet.
Finance Minister Paschal Donohoe said the new levy would set a negative precedent for Europe. “We are net exporters. What kind of reaction would we have if this model was imposed on us?” he told ministers.
Germany, which initially had backed the plan, urged for the first time a revision that would exclude from the scope of the new tax activities that could be linked to carmakers. German Finance Minister Olaf Scholz also said the tax should not be applied until the summer of 2020, and only if no global deal was reached on the same issue. France’s Finance Minister Bruno Le Maire, who has long been the main supporter of the tax, accepted delaying its implementation to the end of 2020, a major concession. He said the EU should still reach agreement by the end of this year, to avoid states applying their own national taxes, in moves he said would harm the EU single market.
Spain and the UK have announced their own national plans to tax digital companies, and reiterated their intention to move ahead without waiting for an EU deal. The Italian finance minister Giovanni Tria said Italy would also proceed alone if no EU agreement was reached by the end of the year. Austria, which holds the rotating EU presidency, said it will make its last attempt for an agreement at a meeting of finance ministers in December, but that divisions now appeared to be so deep that chances for a deal had narrowed considerably.
“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. He said the proposed EU tax was devised in a way that would hit mostly US companies and would attract US retaliation.