Published: Mon, March 26, 2018
Arts&Culture | By Kristi Paul

European Commission's Digital Tax Plan Is in for a Fight

European Commission's Digital Tax Plan Is in for a Fight

Unveiling the measures, the EU's economics affairs commissioner Pierre Moscovici said the "current legal vacuum is creating a serious shortfall in the public revenue of our member states". The commission, seeking to close loopholes created by uncoordinated European regulation, says digital firms have an average effective tax rate of 9.5 per cent, nearly half of that of traditional businesses.

Large EU states have accused the tech firms of paying too little tax in the bloc by routing some of their profits to low-tax member states such as Ireland and Luxembourg.

The proposed taxes will only apply to firms making annual profits of more than £650 million - and more than £40 million of it in the EU.

The question for Irish opponents of the tax plan in Brussels this week: why step ahead of the OECD when it has been undertaking effective and painstaking work under the base erosion and profit shifting project to close loopholes between national tax systems being exploited by multinational companies on global revenues?

Moscovici insisted it was "not an anti-GAFA tax nor an anti-US tax", referring to the popular acronym for Google, Apple, Facebook and Amazon.

The proposals still need backing from the European Parliament and the 28 EU member states.

"Putting a tax on digital firms' use of our data would go some way to making sure these firms pay back into society". "That's why we're bringing forward a new legal standard as well an interim tax for digital activities".

These numbers are, however, disputed by the tech giants, which have debunked the tax as a "populist and flawed proposal".

The proposal includes two major policy prescriptions: "Reform corporate tax rules so that profits are registered and taxed where businesses have significant interaction with users through digital channels", and the levying of "an interim tax which covers the main digital activities that now escape tax altogether in the European Union".

Spared are smaller European startups that struggle to compete with them.

In a rare joint statement, France, Germany, Italy, Spain, and Britain welcomed the commission proposal.

Arriving at a European Union summit, German Chancellor Angela Merkel said "thanks" to Malmstrom "for holding intensive talks with the United States and we will see what the result is". Although the EC said the tax is not specifically aimed at US companies, the biggest digital companies are American.

A majority of MEPs last week supported plans to set a minimum level of corporation tax and distribute income from firms based on where the revenue was generated.

Argentina, Australia, Brazil, Canada, Mexico and South Korea will also be exempt from the penalties of 25 percent on steel imports and 10 percent on aluminium, along with the European Union, he said.

Trump's exemption landed just before a Friday deadline, and came after eleventh hour talks in Washington between Malmstroem and top United States officials.

Latvia has already said it will make expulsions, EU President Donald Tusk said more steps were expected as early as Monday and German Chancellor Angela Merkel said further coordinated actions were "necessary" to respond to the attack.

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