by Julie Martin, MNE Tax
The EU’s proposed digital services tax is not aimed US tech companies; rather, the interim tax is designed to level the playing field for all businesses wherever located, Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs, said April 19.
Speaking in Washington at an AEI conference, Moscovici said that the temporary three-percent tax on digital firm revenue, proposed by the EU Commission on March 22, would apply to only about 180 firms. Half of these firms would be American; one-third would be European, and the rest would be Asian or from other parts of the world, Moscovici said.
While it is undeniable that US firms are tech industry leaders, the proposal is not an “anti-American approach,” Moscovici asserted.
The interim tax is designed to be a stop-gap measure that would apply until a longer-term solution to the taxation of digital firms is reached internationally. According to Moscovici, though, a long-term fix to the international tax system is not likely to be agreed to by nations any time soon.
“Let’s be honest,” Moscovici said, “the international progress does not give cause for much optimism.” Meanwhile, EU countries want action now, he said.
Moscovici said that about EUR 5 billion is expected to be collected annually from the proposed interim tax. He characterized this amount as “proportional” and said the tax is unlikely to create any dislocations.
He said he favored a proposal to apply the funds as a resource for the EU. The EU will lose about EUR 10 billion from BREXIT, he noted.
He also said that if the EU States don’t reach agreement on a short-term measure, many EU states will likely enact unilateral measures.
While Ireland and Luxembourg are vocal opponents, 20 EU countries favor an interim tax, he said. Those supporting the initiative include Europe’s five biggest economies, namely, France, Germany, Italy, Spain, and the UK.
He also said that it is important from a political standpoint for the EU States reach a compromise by year-end, given elections coming in May and that a new Commission will take over November 19. He said that there is a “reasonable chance” that compromise will be reached and the measure passed.
The effective date of such a measure could be 2020, Moscovici said.
The OECD expects to produce its final report on the taxation of the digital economy in 2020, as well.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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