No Agreement on Digital Tax

Finance Minister Paschal Donohoe

Currently, the Gafa (Google, Amazon, Facebook, Apple), as well as other large multinational companies, manage to achieve more profits in the countries where the tax rate is the lowest. The original plan was to impose the digital services tax immediately and later remove the tax if the OECD succeeded in attaining worldwide agreement. Complicating things further, the tax risks triggering the ire of President Donald Trump in the midst of a transatlantic trade spat, as most of the affected companies would be U.S-based.

Ireland's Minister for Finance Paschal Donohoe, TD, said that the directive proposed by the European Commission (EC), with the strong support of Austria and France, would end up hurting small businesses and open economies.

"We are aware there are some technical issues and technical concerns, but these are technical concerns not political problems, so we still have three or four weeks before the next Ecofin (a regular meeting between European Union finance ministers) to fix those technical issues", Le Maire said.

"This is a clear red line for the French government", Bruno Le Maire, France's finance minister told reporters in Brussels as he prepared to discuss the issue with his European counterparts.

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The EU proposal is also meant to stop other countries going it alone with their own digital tax and creating a patchwork of schemes across the continent.

The plan is similar to the UK's recent proposal to put into place a 2 percent digital services tax in 2020 if no OECD solution materialises. The implementation of such a tax requires a unanimous decision and several member countries oppose the idea, as they fear that it would lead to rising consumer costs and discourage internet companies from doing business in Europe. The levy would apply on revenue from "targeted advertising" and "intermediation services", while the tax will be imposed on turnover, irrespective of profit or loss, and won't be connected to or "creditable".

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 ministry officials have repeatedly warned their boss that the tax would be hard to implement, may hamper investment and, above all, could trigger United States retaliation. All national delegations agree that the tax would be repealed if the OECD or the Group of 20 nations reach a deal for a coordinated solution to tax tech companies, according to one of the documents circulated ahead of the meeting. "Better have a European approach rather than patchwork of bad national taxes".

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