The EU has been considering a temporary turnover tax on the revenues of large companies’ turnover from certain digital supplies, whilst waiting for a more permanent solution to arise out of the ‘Base Erosion and Profit Shifting (BEPS) project running under the auspices of the OECD and G20.
Indeed, the UK announced a 2% version of such a tax, in October as part of its 2018 Budget. The tax is not a tax on on-line ordering of goods or general on-line advertising. Rather it is based on turnover where there is significant participation from UK users.
BRUSSELS – A group of European Union countries rejected on 30 November 2018, 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.
In March 2018, the EU’s executive Commission proposed that EU states charge a 3% 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 – which was dubbed a “a quick fix” and was meant to address low taxation on digital giants like Google or Facebook.
A compromise proposal was put forward by Austria (which holds the EU presidency until the end of the year). It sought to allay concerns, by postponing the “quick fix” commencement date to 2022. This was to be sealed by 4 December 2018, but it was derailed on 30 November 2018, according to various diplomats.
A French finance ministry official remained optimistic, saying: “We are close to the objective but we are going to need a few more weeks of talks before we get there.”
The compromise plan was blocked by these disaffected states, because any the tax requires requires approval from all 28 EU states.
- The proposal was 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.
- Ireland, Sweden, Denmark and Finland remained opposed to the tax at a meeting of EU diplomats.
- Germany, the Netherlands and Britain asked for more time.
- France is the keenest supporter of the tax, which French President Emmanuel Macron has put at the top of his agenda.
Italy, Spain and Britain have already readied their national digital tax plans. Another 8 countries have similar measures in place or in the pipeline, EU officials said.
CPD (comprehension) questions
- Has a permanent plan to tax revenues from various digital supplies been resolved under the BEPS project?
- Is a turnover tax, on some definition of these revenues, being considered as a temporary solution?
- What percentage levy did the EU executive Commission propose?
- What was the compromise element, in the plan that was defeated?
- What was the target date for approving this temporary plan?
- On what date did it become clear that there were a block of countries that would not agree to the compromise plan?
- How many countries are mentioned as having ‘readied’ their arrangements for a digital turnover tax?
- How many are mentioned as having such arrangements ‘in place or in the pipeline’?