EU delays push to tax tech firms to help on wider agreement with US

European Commissioner for Europe: Insists that the EU would return to the digital levy plan in October 

The EU said it would postpone its push for a digital levy to focus on a negotiation over a broader minimum global tax deal struck by the world’s largest economies.

The US has lobbied against the levy on digital sales that was likely to hit Silicon Valley giants’ business in Europe. 

The EU had pledged to introduce a levy if there was no progress on a sweeping effort to tax corporations more uniformly. Such a pact now seems more likely after the Group of 20 endorsed the principles of a global  tax agreement.

Taxation is a hot topic in Europe with officials in Berlin and Paris taking aim at complicated structures used by multinationals, many of them American, that allow them to reduce their effective tax rates.

A global deal may help governments capture more tax from sales in their countries.

EU Economy Commissioner Paolo Gentiloni said he’d already told US Treasury Secretary Janet Yellen “of our decision to put on hold the proposal of the commission of a digital levy”. Delaying the EU plan will “allow us to be concentrated working hand-in-hand to achieve the last mile of this historical agreement”. 

Margrethe Vestager, the EU’s technology chief, insisted that the EU would return to the digital levy plan in October after the final outcome of the global pact is clear. The levy has a different focus from corporate taxation and intends to take a cut of company revenue and not profit, she said. 

Ms Yellen, who met with EU officials in Brussels, had warned against “taxes that are discriminatory against US firms”. 

The European Commission had already delayed the roll-out of the plan. G20 nations agreed on the outlines of a global corporate tax agreement. 

The deal is designed to stop major corporations from moving to low-tax jurisdictions and to establish a fairer system for distributing the taxation rights on multinationals, based on where they operate instead of where they are headquartered.

The tax agreement doesn’t have the backing of all EU nations, with Ireland, Hungary and Estonia so far refusing to back it. 

Ireland, which has one of the EU’s lowest corporate tax rates, is the European base for many US tech giants, including Apple., Facebook, and Google.

  Bloomberg