EU council hears doubts over digital services tax

The EU Economic and Financial Affairs Council (ECOFIN) has discussed the implementation of a digital services tax, with representatives disagreeing on how such a tax would work in practice and some countries calling for a delay until the OECD reaches a solution

Kristian Jensen, Denmark’s minister for finance, said that he believed that the tax proposed by France and Germany, which would apply a 3% levy on the revenues of digital companies, had broad support: ‘Despite the rhetoric, the disagreement here is not whether digital companies should pay tax or not but how this should be done fairly...and that the tax should generate revenue and not end up costing money’.

However several countries, including Finland and the Czech Republic, expressed reservations about the proposed tax and maintained that nothing should be done until the OECD had reached a decision. Lenka Dupáková, the Czech deputy minister for finance, said that ‘in the spirit of compromise’ the Czech Republic would support the proposal, despite an OECD proposal being preferred, ‘provided that this directive is applied for a very short time period’ and replaced as soon as a global solution is found.

Paschal Donohoe noted that Ireland had ‘strong, principled concerns about this policy direction’ and that ‘the right and safest way for us to deal with this matter is through the OECD and through a global approach to this issue’, and Hungary said that it viewed the proposed tax as it is ‘an issue affecting national tax sovereignty’ and refused to support it.

Mark Bowman, representing the UK, said that ‘The ultimate goal here is a global solution via the OECD process - but we know that will take time and we agree on the need for an interim solution.

‘We do agree on the need for coordinated European action and the UK supports the draft proposal, but we think further work is needed to make it more targeted and workable. More specifically the UK believes that the tax should be targeted at businesses that derive substantial value from their users’. He discussed the implementation of the UK’s digital services tax, announced in the Budget, but reiterated that cross-border cooperation was vital to its success.

‘We need to ensure that dividing the tax base between member states is fair and we need to ensure the tax is proportionate - and in that we need to take account of the fact that many of these businesses are high value but have low profit margins.’

Johan van Overtveldt, the Belgian finance minister, said that advertising and revenue should be clearly defined in the Directive and that it was very important ‘not to lose sight of the fact that the issue with respect to the giants of the internet is not just the taxes they should or should not be paying’. He brought up concerns about the privacy of data and the monopolies that many of the companies, such as Google, held over different aspects of the internet.

Toomas Toniste, the Estonian minister for finance, agreed that such a tax should work for the benefit of the countries and not be excessively costly, saying: ‘We agree that a lot of work has been done but we see a need for improvement. Concerning the joint proposal from France and Germany there is one certain issue that we know we will have difficulty in accepting - that is the restricted tax base.

‘We can only support a wider tax base. Moreover, Estonia maintains its position that the member states should be able their own minimum threshold, taking into account the potential revenue as well as the administrative costs’. Greater country-by-country control of the tax was also supported by several countries with less-developed tech sectors, including Slovenia and Romania.

Hartwig Löger, Austrian minister for finance and president of ECOFIN, summed up the arguments heard by saying: ‘We must continue our efforts to reach a suitable solution as soon as possible, especially for those member states which need clarity having implemented a similar tax on a national level - or will do so in the near future. It is important to be ready with a common solution on a European level.’

Report by James Bunney

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