On 20 September 2018, The Irish Times reported that EU countries could agree a new short-term digital sales tax to apply to many of the major tech firms before the end of the year, according to Pascal Saint-Amans, the OECD’s leading tax expert, whilst speaking at the PwC/Irish Times tax summit, in Dublin (on 20 September 2018).

Mr Saint-Amans expressed a personal view that the controversial proposal, though strongly opposed by Ireland, could get agreement by EU countries as a short-term, time-limited measure while other longer-term proposals are being considered.

The digital sales turnover tax, proposed by the European Commission would be:

  • levied the tax be levied at a rate of 3 per cent;
  • on the revenues of big digital players, such as Facebook and Google, with a global annual turnover of €750 million and annual EU revenue of at least €50 million;
  • collected where sales are made; and
  • would apply to online advertising and digital marketplaces.

Ireland opposes the turnover tax proposal as:

  • because they fear it will lead to longer-term measures to levy more tax where sales are made, rather than booking profits where companies have their European headquarters, many of which are based here
  • They fear this will involve losses to the Irish exchequer, because the big players would pay more tax in markets with more consumers. .

There is a big political push in the EU to introduce a temporary measure to tax the profits of digital companies such as Google and Facebook. He said taxation of such companies had become a hot topic, in part due to increased frustration over the lack of real progress on the issue, as well as factors such as forthcoming elections in Europe.

  • Some EU member states, in particular France, are pushing for the measure.
  • Germany has yet to fully show its hand.
  • Smaller nations, including Ireland and Nordic counties are strongly against such moves.
  • The new turnover tax would have to be supported by all member states.
  • Despite this, Mr Saint-Amans believes there is chance that such agreement will be reached.

Ireland still carries ‘repetitional baggage’, according to Mr Saint-Amans.

  • This is despite Ireland having been increasingly proactive in introducing measures to prevent (BEPS) multinational tax avoidance.
  • But the long phasing out period, for the double Irish tax relief has done some damage to the State’s reputation. The relief remains available, for those already using it, until 2020.

More generally, Mr Saint-Amans, said

  • In the long term, he did not believe that here will be a special set of taxation rules for digital companies because it would be too difficult to ring fence.
  • The debate triggered by the digitisation of the economy, will go beyond this turnover tax issue because of a “fundamental shift” from the US, in terms of its traditional thinking on tax reform, with consequences that cannot be measured as yet.
  • BEPS was progressing well, with 84 countries having now signed the multilateral convention, the latest of which, Saudi Arabia.
  • We are in the midst of full implementation of the BEPS package. It has moved from commitment to legal implementation and is now in the hands of the tax authorities.

FJM 28.9.18

[Irish times: Saint-Amans article; LTN 184, 24/9/18; Tax Month – September 2018]

 

CPD questions (answers available)

  1. Was the OECD’s chief BEPS organiser: Mr Saint-Amans foreshadowing the introduction of a temporary digital turnovers tax, in EU Countries, despite current opposition of countries like Ireland?
  2. Is France also opposed to the tax?
  3. Would the tax be imposed on digital sales, in the EU member state, of big digital players with global annual turnover of €750 million and annual EU revenue of at least €50 million?
  4. Is Ireland opposed to the tax because it would be based on where the sale is made and not on where the head office is based (as many head offices are based in Ireland).
  5. Is Ireland otherwise free of ‘reputational baggage’?
  6. Have 84 countries signed up to the ‘Multilateral Instrument Convention’ as part of the OECD’s BEPS package?

[Answers:1.yes;2.no(pushingForIt);3.yes;4.yes;5.no(longPhaseOutsOfExistingTaxRelief);6.yes]

 

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