Signs of compromise in European Union digital tax dispute

Finance Minister Paschal Donohoe said the proposed new digigal tax would set a negative precedent for Europe

France, backed by EU-presidency holder Austria, wants a law proposal by the end of the year leaving little time to get opponents on side as European tax rules require unanimous backing by all EU members.

In March, the European Commission proposed that EU countries should impose a three percent levy on the digital turnover of large firms such as Google and Facebook, which are accused of sending profits to countries with low taxation, such as Ireland and Luxembourg.

(From left to right) European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici, France's Finance Minister Bruno Le Maire, European Commissioner for Euro and Social Dialogue Valdis Dombrovskis and Spain's Finance Minister Nadia Calvino speak as they attend the Eurogroup Finance ministers meeting, in Brussels, on November 5.

France has offered to delay an EU-wide tax on tech giants in a bid to salvage the levy, which faces fierce opposition from Ireland and the Nordic countries, in an embarrassing setback for Emmanuel Macron in Brussels. "We are open on that question, because we know there is work done by the OECD", he said.

"What kind of reaction would this bring if this was a model that was imposed on us?"

The tax has been championed by French president Emmanuel Macron as a way of appeasing voters' indignation at the low tax bills of large USA internet companies such as Amazon and Google, ahead of European Parliament elections next year.

The news follows comments made by United Kingdom chancellor Philip Hammond last night, which defended the country's digital services tax global reach.

The U.K., 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 400 million pounds ($521 million) a year. At a meeting of European finance ministers yesterday Germany urged for the first time a revision that would exclude activities that could be linked to carmakers.

Initiatives to tax the giants of the digital have already been taken in the United Kingdom, India and Singapore, and plans are now in progress in Spain and Italy.

Austria, which holds the rotating European Union presidency, said it will make its last attempt for an agreement at a meeting of finance ministers in December, but that divisions now appeared to be so deep that chances for a deal had narrowed considerably.

German Finance Minister Olaf Scholz also said the tax should not be applied until the summer of 2020, and only if no global deal was reached on the same issue.

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