Germany, France, Italy, Spain seek new EU tax on digital firm revenue

Finance ministers from Germany, France, Italy, and Spain want the European Commission to design a new EU tax on digital firms based on revenues, according to a document published by Politico on September 9.

In the document, released ahead of a September 15–16 informal EU finance ministers meeting, Germany’s Wolfgang Schäuble, France’s Bruno Le Maire, Italy’s Pier Carlo Padoan, and Span’s Luis de Guindos acknowledge that the EU has been unable to adequately tax the European profits of digital firms. These firms should not be allowed to operate in the EU while paying only minimal tax, the ministers said.

“Therefore we ask the EU Commission to explore EU law compatible options and propose any effective solutions based on the concept of establishing a so-called “equalisation tax” on the turnover generated in Europe by the digital companies,” the minister said.

The new tax would be a practical measure, designed to recover amounts that the digital firms should be paying in corporate tax, they said.

The ministers said that this new initiative would compliment work already in process, including OECD/G20 base erosion and profit shifting (BEPS) work on the digital economy and EU Commission work on a Common Consolidated Corporate Tax Base.

“We would like to move ahead quickly at EU level,” the ministers said.

While not recommending that countries adopt an equalization levy, the 2015 final BEPS report under Action 1 suggested that countries consider adopting such measures to equalize the tax burden imposed on domestic and remote suppliers of the same goods and services. In such cases, countries should respect existing tax treaty obligations or include new provisions in bilateral tax treaties, the BEPS report said.

Following the issuance of the BEPS report, India proposed an equalization levy. The tax has been in effect in India since June 2016.

 

 

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