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France, Germany advance compromise for EU-wide digital services tax-MNE

09 November 2018

"Where changes like this have been made in the past, they've been made on the basis of global consensus and cooperation through the OECD", Irish Finance Minister Paschal Donohoe said on November 5, referring to the Organisation for Economic Co-operation and Development.

The digital tax, sometimes called the "Google tax" for the impact it would have on Google and cohorts Apple, Facebook and Amazon, is deeply controversial.

A compromise is taking shape in the fight over a planned digital tax, with European ministers discussing delaying its launch until 2021, Handelsblatt has learned.

Finance Minister Bruno Le Maire said before Tuesday's meeting that France is now flexible on the implementation date.

German finance ministry officials have repeatedly warned their boss that the tax would be hard to implement, may hamper investment and, above all, could trigger U.S. retaliation.

Arriving at a meeting of the 28 Finance ministers of the EU in Brussels, The Mayor told AFP: "the directive must be adopted by December 2018 at the last european Council of this year, but we are open to a postponement of the entry into force to allow time for the OECD to make a more complete proposal".

According to confidential memos circulated among member states and seen by Bloomberg, the idea behind the proposed European Union tax is to focus on where tech users are based, rather than where a company places its headquarters.

The proposed launch date of 2021, provided no OECD deal is reached by then, would be a "face-saving solution" for everyone, said one German government official.

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The change of tack comes after France and the European Commission first advocated a provisional bloc-wide solution until an worldwide scheme is found at the Organisation for Economic Cooperation and Development, which groups major world economies.

France has offered to delay an EU-wide tax on tech giants in a bid to salvage the levy, which faces fierce opposition from Ireland and the Nordic countries, in an embarrassing setback for Emmanuel Macron in Brussels.

Paris claims the tax would be a vote-winner in next years European Parliament elections, which have been framed as a battleground between pro-EU and Eurosceptic parties.

"We can not support the proposed directive ..."

Danish Finance Minister Kristian Jensen warned that the proposed tax could lead to retaliation from the United States as the plan targets many USA -based companies.

"What kind of reaction would this bring if this was a model that was imposed on us?"

Initiatives to tax the giants of the digital have already been taken in the United Kingdom, India and Singapore, and plans are now in progress in Spain and Italy.

France, Germany advance compromise for EU-wide digital services tax-MNE