Tuesday

18th Jun 2019

New EU digital tax to let most US giants off the hook

  • US online retailers such as Apple and Amazon would be excluded from Franco-German plan (Photo: Rami Al-zayat)

US tech giants AirBnB, Amazon, Apple, and Swedish company Spotify look set to get off the hook on new EU taxes, but Facebook and Google are still in the crosshairs.

That was the net result of EU talks so far on a new "digital tax" designed to stop global firms from paying next to nothing in Europe via accountancy tricks, even though they generate billions of euros in profits there.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Google and Facebook not playing fair on online adds, US firm told Margrethe Vestager (Photo: European Commission)

France had pushed for a new three percent tax on all online sales and services in the EU by companies with a global turnover of €750m or more, and online sales of €50m or more in Europe.

Its plan, put on paper by the Austrian EU presidency, needed unanimity to go ahead.

But it was scuppered last week when Ireland, home to Apple's HQ in Europe, and Luxembourg, which has also cut sweetheart tax deals with multinationals, opposed it.

Denmark, Finland, and Sweden also said no, while Germany sat on the fence, amid concern that US leader Donald Trump would retaliate if the EU went ahead and that the new measures might harm growth in the digital economy.

But France and Germany circulated a new proposal as EU finance ministers met in Brussels on Tuesday (4 December).

Their watered-down idea was to impose a three percent tax on revenues from online ad sales only, catching far fewer companies in what their proposal, which was seen by the Financial Times, a British newspaper, called its "minimum common scope".

The Franco-German text urged adoption "without delay and in any case before March 2019", so that the tax could snap into place in 2021 if the OECD, a Paris-based club of wealthy nations, did not table its own rules on the matter by then.

"What matters for France is that there is a legally-binding instrument that can be adopted as soon as possible," French finance minister, Bruno Le Maire, said on Monday.

Paris and Berlin were "working hard" to "pave the way for a consensus on the digital services tax", he added, amid violent protests in France against financial inequality and globalisation.

The original French proposal was expected to rake in €5bn a year in extra income for EU capitals.

The watered-down Franco-German one did not mention a figure.

But the likes of Apple and Amazon are unlikely to get away with paying nothing extra, amid plans in the UK and other EU states, including Italy and Spain, to impose new national-level taxes.

The UK digital services tax is to claw back €450m a year, British finance minister Philip Hammond has said.

Anti-trust threat

Taxation aside, Facebook and Google, the two biggest online advertising giants, might also face new EU anti-trust action.

The threat comes after Brave Software, a small US firm which makes an ad-blocking browser, filed a complaint with EU competition commissioner Margrethe Vestager.

The online ad market was "opaque" and prone to being "distorted by severe concentration issues, and perhaps by anti-competitive behaviour", the firm said in a letter, seen by the Bloomberg news agency, calling for an EU inquiry.

Tech giants also "create barriers to entry for existing and potential competitors and create a serious competition issue" by gaining an unfair advantage from the user data that they own, Brave Software added.

Vestager has already hit Google's 'Alphabet' ad service with €6.7bn of fines in a previous probe and is close to another decision on its 'AdSense' service.

She has also gone after firms such as Amazon, Apple, and McDonalds in Ireland and Luxembourg on grounds that their tax deals constituted illegal state aid.

EU banks cheat taxes too

The EU finance ministers will, also on Tuesday, urge Italy not to break EU fiscal rules by overspending on welfare.

They plan to adopt new anti-money laundering measures after Denmark and Germany's top lenders, Danske Bank and Deutsche Bank, got involved in a €200bn dirty money scandal.

But EU banks are also guilty of helping wealthy clients to dodge taxes, according to a recent investigation into so-called "cum-ex" trades, which enabled customers to claim back €55bn in false refunds between 2001 and 2016.

The affair, which dwarfs France's original €5bn digital tax, involved Germany's Commerzbank, Hypovereinsbank, Landesbanken, and Warburg Bank, British lender Barclays, and French bank BNP Paribas, among others.

It is currently the focus of a European Parliament probe, but has yet to make the agenda in the EU Council, where member states meet.

Opinion

The EU's tax haven blacklist - impressive or impotent?

One year ago, the European Union published its first ever blacklist of tax havens. It is crucial that EU governments help end the era of tax havens to ensure the billions currently hidden from public coffers.

EU 'tax lady' hits Google with record fine

Margrethe Vestager has fined the US tech giant with €4.34bn for abusing its market dominance in mobile operating systems - but assured US president Donald Trump that it is not because she does not like America.

Opinion

Nordic states urge U-turn on EU digital tax plans

Finance ministers of the EU's three Nordic countries have urged partners to shelve plans to tax large corporations for their digital turnover. The digital economy should be taxed where value is created, they say.

News in Brief

  1. Swiss stock exchange could lose EU access in July
  2. Austria's Strache will not take up EU parliament seat
  3. Tanker attacks pose questions for EU on Iran deal
  4. Johnson skips TV debate for UK prime ministership
  5. Slovakia's first female president takes office
  6. Irish immigration officers flew back business class
  7. Catalan MEP denied taking seat in European Parliament
  8. EU plans to restructure eurozone bonds

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Nordic Council of MinistersNo evidence that social media are harmful to young people
  2. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  3. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  4. Nordic Council of MinistersEducation gets refugees into work
  5. Counter BalanceSign the petition to help reform the EU’s Bank
  6. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  7. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  8. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  9. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  10. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  11. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  12. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody

Latest News

  1. Spain's Garcia set to be next Socialist leader in parliament
  2. Erdogan mocks Macron amid EU sanctions threat
  3. The most dangerous pesticide you've never heard of
  4. 'Russian sources' targeted EU elections with disinformation
  5. Top EU jobs summit dominates This WEEK
  6. EP parties planning 'coalition agenda' ahead of jobs summit
  7. MEP blasts Portugal over football whistleblower
  8. Catalonia MEPs are a judicial, not political, issue

Stakeholders' Highlights

  1. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  2. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  3. Nordic Council of MinistersNordic commitment to driving global gender equality
  4. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  5. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  6. Nordic Council of MinistersNordic talks on parental leave at the UN
  7. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  8. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  9. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  10. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  11. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  12. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law

Join EUobserver

Support quality EU news

Join us