EU’s digital levy proposal to run parallel to OECD talks, Commission official confirms 

By Doug Connolly, MNE Tax

The EU’s proposed digital levy would be in addition to any agreement on taxing large digital companies that arises from OECD talks this year, but the levy will be modest, according to Benjamin Angel, the European Commission’s Director of Direct Tax Policy and acting Director of Indirect Tax Policy.  

Speaking April 21 at an international tax seminar held by Ireland’s Department of Finance, Angel also expressed enthusiasm for the US proposal under the OECD “Pillar One” talks while simultaneously voicing concerns about implementation within the EU of a “Pillar Two” global minimum tax. 

Other featured speakers at the seminar included the OECD’s Pascal Saint-Amans, who spoke about meeting the ambitious timeline for new global tax agreements, and Irish Finance Minister Donohoe, who expressed Ireland’s resistance to a global minimum tax.  

Digital levy 

Despite a similar focus on generating additional tax revenue from digital companies, the digital levy being considered by the European Commission “has nothing to do with” the OECD talks, Angel said. EU officials have previously indicated that they intended to move ahead with a digital levy regardless of OECD talks, although some have wondered if the EU levy might undermine those talks.  

Angel explained that the digital levy would serve as a new source of tax revenue for the Commission.  

Angel declined to divulge details of the digital levy proposal, stating that they were still working on it. However, he did claim that it would be a “soft touch” and the rate would be a “modest one,” stressing that they do not want to “create obstacles for the digitalization of our economy.” In addition, he said the levy would be constructed in a non-discriminatory way “to avoid any even remote risk of trade tension.” 

He noted that digital companies have become a significant part of the economy and that they benefit from some natural competitive advantages compared to traditional brick-and-mortar companies. He suggested that it is time for taxing authorities to recognize this shift in the economy and ensure that digital companies are making a “fair contribution to the recovery.” 

EU response to US proposal in OECD talks 

Angel said the European Commission strongly supports the OECD talks seeking global agreement on new international tax rules and wishes for swift agreement. He agreed with Saint-Amans that the new US proposal had given impetus to the talks.  

The US proposal under Pillar One would be more manageable and simpler to handle, Angel said. Pillar One would alter the global rules for allocating multinational group profit and related taxing rights among countries. The US proposal would apply the rules broadly to the largest global companies and not solely to digital companies – which had been a sticking point for the US in earlier talks.  

Angel noted that Europeans envisioned a more direct focus on digital, but that the US proposal was “constructive,” would undoubtedly be a positive development if agreement could be reached, and would bring “a very respectable volume of profit” into the tax pool. 

Angel noted that Europeans envisioned a more direct focus on digital, but that the US proposal was “constructive,” would undoubtedly be a positive development if agreement could be reached, and would bring “a very respectable volume of profit” into the tax pool. 

Angel was more guarded in his response to the US proposal under Pillar Two to reach multilateral agreement on a global minimum tax to parallel the Biden Administration’s proposed 21 percent “GILTI” global minimum tax on US corporations.  

He said the US plan is “ambitious” and that Pillar Two is important to ensure “fair taxation, fair competition” and to end the “distortive practices of some tax havens.” Nonetheless, he did not specifically weigh in regarding whether, or how well, the US proposal met that aim. He did say that the European Council is ready to transpose Pillar Two “quickly, as soon as there is an international agreement.” 

Angel also addressed the implementation of both pillars within the EU following an agreement. Pillar One, he explained, would require action both by member states, to sign and ratify the convention, and by the EU, to ensure equal impact. Regarding Pillar Two, he suggested implementation would be complex and would also require EU law. He said a situation where some member states adopted it but not others “would likely create problems in the European Court of Justice.”