Ireland’s scrap over EU digital tax heats up
The scrap among EU countries, with Ireland very much at the centre of the fight, over a proposed tax on tech giants, is set to resume later today when finance ministers try to strike a balance between luring business and addressing popular discontent about companies not paying their fair share.
Finance ministers meeting in Brussels will try to push forward a legislative proposal for a 3% levy on the European sales of companies with a global annual revenue of €750m or more, such as Facebook, Google, and Amazon. The tech industry has pushed back against the tax, saying it would chill investment.
Spearheaded by France, the plan has met resistance from Dublin and Stockholm, which question the wisdom of the EU going it alone given the global nature of digital services. Complicating things further, the tax risks triggering the ire of US president Donald Trump in the midst of a transatlantic trade spat, as most of the affected companies would be US-based.
Under the commission’s plan, companies with significant digital revenues in Europe will pay a 3% tax on their turnover in the EU, bringing in an estimated €5bn. Many Irish analysts bolster Finance Minister Paschal Donohoe’s opposition to the EU tax, saying it could mark the start of the unraveling of the country’s corporate tax regime.
The Government depends on the corporate tax paid by multinationals to fuel its public spending plans.
Labour leader Brendan Howlin told his party conference over the weekend he favoured a digital service tax for internet companies to pay their fair share. The UK, often seen as a tech-friendly hub, last month announced plans to introduce its own tax on the largest internet companies, with the goal of raising £400m (€455m) a year. The move was seen as undermining Dublin’s pushback against the EU-wide tax.
Countries from South Korea to Australia are also closing loopholes that allow companies to reroute profits to lower-tax jurisdictions. Traditional tax rules have failed to capture these companies’ activities, fuelling anger from voters disgruntled after years of austerity and meagre wage growth.
The idea behind the proposed EU tax is to focus on where tech users are based, rather than where a company places its headquarters. That is widely seen as attacking the principle of Ireland’s competitive tax regime. Some countries disagree over whether the “sale of user data” should also be taxed, according to an internal memo circulated to national governments. The Austrian presidency of the Council of the EU is pushing for a deal by year-end.
Governments also disagree on whether the tax should have a fixed expiry date or a review clause linked to global developments, according to one of the documents. All national delegations agree that the tax would be repealed if the Organisation for Economic Co-operation and Development or the Group of 20 nations reach a deal for a coordinated solution to tax tech companies, according to the document.
Prior to today’s meeting, some countries expressed doubts about whether the initiative would violate existing treaties on avoiding double taxation. As unanimity is required, the plan could end up being shelved.
