Germany and France agree on European Union digital tax

Content image- Phnom Penh Post

The proposal made by France and Germany at a meeting of EU finance ministers on Tuesday envisages a 3 percent tax on European advertising sales by digital companies, rather than the broad tax on the total revenues of large digital firms originally suggested.

The European Commission in March proposed a temporary tax measure.

In the original European Commission proposal, the tax was meant to be a temporary "quick fix" until a broader solution could be found among OECD members. Nations such as Ireland have been luring IT companies to their countries with lower rates. France has held up the digital tax as an opportunity to show voters ahead of European Union elections in May that establishment parties are capable of action to make global corporations contribute a fair share to public coffers.

The setback is a blow to French President Emmanuel Macron, as his government had invested considerable political capital in the tax.

But this was opposed by Ireland and some Nordic countries, leading French and German finance ministers to focus exclusively on online advertising revenues instead.

European Commissioner for Economic Affairs Pierre Moscovici stated at a meeting of the bloc's finance ministers that they can't make the new legislative proposal that France and Germany have pleaded for.

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The European Commission had originally proposed to charge for digital companies such as Google and Facebook with a global annual turnover of at least Euro 750 million as well as an online turnover of 50 million euros in Europe, three percent income tax.

"I continue to have strong, principled concerns about this policy direction", Irish Finance Minister Paschal Donohoe told his counterparts.

USA lawmaker Kevin Brady, chairman of the tax-writing Ways and Means Committee in the House of Representatives, welcomed the failure of the proposal, calling the tax a "revenue grab" aimed at an industry dominated by American firms.

"As other countries mentioned, the right and safest way to deal with this is through the OECD to find consensus on global matters".

The new Franco-German proposal would still impose a 3 percent levy, but not cover data sales and online marketplaces since it would be focused on advertising revenues. It is set to enter into force in 2021, if the OECD, which is now working on the regulations, fails to come up with global rules. "They'll say it's not enough and I can understand them", France's finance minister Bruno Le Maire said.

The Franco-German proposal calls for a deal by March.

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