Group of EU states reject compromise on digital tax as deadline looms

A group of European Union countries rejected on Friday a new compromise plan for the introduction of an EU-wide tax on digital revenues of large companies, diplomats said, making it increasingly difficult to meet a year-end deadline for a deal.

Under a proposal from the EU’s executive Commission in March, EU states would charge a 3 percent levy on the digital turnover of large firms that are accused of averting tax by routing their profits to the bloc’s low-tax states.

The tax plan was dubbed “a quick fix” and was meant to address low taxation on digital giants like Google or Facebook in the short term before a more comprehensive global solution on how to tax digital business emerged.

But the project, that needs approval from all 28 EU states, has so far been derailed by fierce opposition from countries that fear losing tax revenues, like Ireland, where many digital multinationals have their headquarters in Europe.

Germany and Scandinavian countries also oppose the levy fearing retaliation from the United States, where most targeted companies come from.

The latest attempt from Austria, who holds the EU presidency until the end of the year, to allay concerns by postponing the entry into force of the “quick fix” to 2022 has also been met with opposition on Friday, diplomats told Reuters.

Ireland, Sweden, Denmark and Finland remained opposed to the tax at a meeting of EU diplomats, while Germany, the Netherlands and Britain asked for more time.
A meeting of EU finance ministers on Dec. 4 which was supposed to seal a final deal on the matter is now unlikely to be successful.

“We are close to the objective but we are going to need a few more weeks of talks before we get there,” a French finance ministry official said.

Paris has been the keenest supporter of the tax, which French President Emmanuel Macron has put at the top of his agenda.

Most EU countries support the EU-wide tax that, if not adopted, could be replaced by similar national levies in what would be a negative development for the EU internal market.

Italy, Spain and Britain have already readied their national digital tax plans. Other eight countries have similar measures in place or in the pipeline, EU officials said.