Digital tax - problem and progress

European countries want Internet giants such as Facebook, Amazon and Google to pay more to please: with the help of a digital tax. However, the question of how is still being debated in Brussels. And on the other side of the Atlantic, too, enthusiasm for the project is limited.

The EU states are abandoning plans for an EU-wide tax on Internet revenues from corporations such as Google and Facebook. Romanian Finance Minister Eugen Teodorovici said at a meeting of EU finance ministers that despite months of negotiations there was no agreement on a digital tax. Four states resisted: Denmark, Finland, Ireland and Sweden. Ministers, Teodorovici said, would now focus on finding a common position for a global solution by 2020. Romania currently holds the EU presidency.

Germany also wants to work on a global solution. "We are striving for a global minimum taxation", government circles had already announced on Monday. At the level of the 20 leading industrialised and emerging countries this target should be reached by summer 2020. If this is not achieved, Germany will coordinate closely with France. The government in Paris has already launched a three-percent tax for Internet giants. It is to take effect retroactively to 1 January and bring in 500 million euros annually. Austria also wants to introduce a digital tax at the beginning of 2020.
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Federal President Frank-Walter Steinmeier advocated the introduction of a digital tax. Digital companies should not avoid their tax liability, Steinmeier said at a celebration of the 100th anniversary of the International Labour Organization in Berlin. To shift profits to tax havens, which should actually be called non-taxation havens, "that must also have an end for digital companies", he demanded.

SPD deputy faction leader Achim Post pleaded for not waiting for a global solution. If necessary, "new paths must also be treaded, for example by Germany, France and other states willing to make progress", Post said. "Europe simply cannot afford not to politically impose fairer taxation on the Internet giants around Google, Amazon, Facebook and the like.
USA threatens WTO complaint
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At the EU finance ministers' meeting in December, Germany and France were unable to push through a joint compromise proposal according to which the planned levy would only be limited to the advertising revenues of the corporations. Tax decisions must be decided unanimously in the EU.

The background to the EU considerations is that many Internet companies generate high revenues in certain countries but pay only low taxes because profits are transferred across borders. For a global solution, there must be an understanding with the US, where the world's leading technology companies are based.
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But so far Washington has shown little enthusiasm for European aspirations. In this context, Paris recently rejected the US criticism of its own digital tax. Finance Minister Bruno Le Maire said that France is a "free and sovereign state that decides on its taxation and that decides freely and sovereignly". The US government's threat to lodge a complaint with the World Trade Organization (WTO) "absolutely does not call the planned digital tax into question", Le Maire assured.

The US commissioner for international tax issues in the Ministry of Finance, Chip Harter, had previously said in Paris that his government was investigating the "discriminatory effect" of a digital tax, as planned by France and Austria, among others. The project is "immature", the effect of the tax is "highly discriminatory for multinational corporations" from the USA, Harter criticised before a meeting of the Organisation for Economic Cooperation and Development (OECD). Washington therefore reserves the right to take action before the WTO.