€5bn digital tax ‘bad news for Ireland, again’

Plans unveiled by the European Commission for a digital tax of 3% on the turnover of online giants to bring in €5bn is “bad news for Ireland, again”, a tax expert has said.

€5bn digital tax ‘bad news for Ireland, again’

By Eamon Quinn

Plans unveiled by the European Commission for a digital tax of 3% on the turnover of online giants to bring in €5bn is “bad news for Ireland, again”, a tax expert has said.

Brian Keegan, director of public policy and taxation at Accountants Ireland, said the commission was targeting its new tax to raise money in the countries where advertising transactions take place, and not in the chosen location of the company’s base, “and it is bad news for Ireland, again”.

“Whatever this country does on tax, “it is never enough” for some bigger countries, Mr Keegan said. The commission proposals are aimed at getting more money out of US technology giants such as Google, Facebook, and Amazon. However, many EU leaders, who will debate the issue of how to claw taxes from the elusive new digital economy at a Brussels summit today, including Ireland, oppose the proposals.

Despite support from big powers Germany and, especially, France, that risks making it very hard to turn the idea into European law.

Under the commission’s plan, companies with significant digital revenues in Europe will pay a 3% tax on their turnover on various online services in the EU, bringing in an estimated €5bn. EU Economics Commissioner Pierre Moscovici brushed off accusations he was going after rich American tech companies to enrich EU coffers at a time when the bloc is at odds with the Trump administration over trade and tax issues.

“This is neither a Google, Apple, Facebook and Amazon attack nor an anti- US attack proposal that will target any company or any country,” he told a news conference. The tax would apply to large firms with annual worldwide revenue above €750m and annual “taxable” EU revenues above €50m.

The legislation comes as the US unsettles Europe with its own tax reform and the threat of a trade war along with reports that Facebook user data was accessed by a consultancy to help president Donald Trump win the 2016 election. Taoiseach Leo Varadkar called the measure “ill-judged” and urged Brussels to wait and take its lead from global proposals planned by the OECD.

The measure was “crude” and appears targeted at Ireland’s “largest trading partner, the US”, said Joe Tynan, head of tax at PwC Ireland. Lossmaking firms will be taxed the same as very profitable companies, he said, saying that at a time of tension over trade “it is mostly US companies that will be subject to the tax”. Peter Brown, founder of Baggot Asset Management, said the tax raises “all sorts of issues” about the direction of economic policy here.

“Picking off industries doing well seems to be a very short-term approach when Europe needs a long-term approach for technology companies and their tax,” he said. Kieran McQuinn, professor at the Economic and Social Research Institute, said any global trade war would be a big risk to the economy because the economy is exposed to any downturn in world trade.

Grant Thornton tax partner Peter Vale x Partner, said the plan could have “a significant adverse impact on Irish corporation tax revenues”.

Finance Minister Paschal Donohoe said: “Ireland will work with other member states to critically assess the proposals from the commission. This is the beginning of a process that will go on for some time in parallel with the work of the OECD.”

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