European Commissioner for Economic Affairs Pierre Moscovici stated at a meeting of the bloc’s finance ministers that they can’t make the new legislative proposal that France and Germany have pleaded for. He urged the EU to reach a compromise on the revenue levy for digital giants by March. He also pointed out that there’s room for manoeuvre along the lines of the new draft.
Germany and France reportedly narrowed the focus of the proposed tax on digital advertising revenue instead of the initially proposed 3 percent tax on online earnings. The new draft, the FT says, is expected to be presented on 4 December, when the EU's Economic and Financial Affairs Council meets in Brussels to discuss the issue.
The blueprint calls on the bloc’s members to agree on the plan “without delay and in any case before March 2019”. It is set to enter into force in 2021, if the OECD, which is currently working on the regulations, fails to come up with international rules.
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In contrast to the earlier wide-range plans presented in March, the new compromise draft excludes taxation of data sales and online platforms, which bring the tech firms an estimated €5 billion a year.
This would let giants like Amazon, AirBnB, Spotify, and Apple avoid new duties, while Facebook and Google are likely to be targeted. The British outlet cites diplomats saying that the moderation was intended to ease German concerns over possible reprisals from the US, where many digital companies have their headquarters, such as car import taxes.
The narrowed-down approach is also viewed as an attempt to ease opposition from Ireland, Denmark, Sweden, and Finland, who have pushed for a global solution instead of a European “quick fix”, as the draft needs the support of all EU states.
Meanwhile, countries like Ireland, with its low taxes, have benefited from transnational digital giants funnelling their profits from other EU states through them.
The EC's proposal for an interim tax, actively lobbied by France and President Emmanuel Macron personally, has prompted a strong reaction across the Atlantic. Politicians in Washington oppose the introduction of a digital tax and argue that it is an unnecessary and repetitive measure, as the EU already has a VAT, an income tax based on the location of the customer.