At the European Council, “there are at least ten countries, if not more, that have a lot of questions and reservations about the European Commission's proposal to tax the activities of the giants of the Internet”, the Irish Taoiseach, Leo Varadkar, told a European summit on 22 and 23 March 2018 (see EUROPE 11982, 11983).
“We think the proposal put forward by the Commission is flawed on a number of accounts. I think it targets US companies and that will no doubt result in a reaction from the United States”, he added.
The European Council was waiting for a signal from Washington over the announced taxes on steel and aluminium and a number of delegations, among them Germany, had concerns at the possible fallout of the announcement of a European tax on digital activities, as the sector is dominated by US companies.
For its part, the European Commission opted to announce that half of the countries had responded positively to the proposal. The number of member states in favour of the tax and a decision at European level is rising, the acting President of the Italian Council, Paolo Gentiloni, said on Friday 23 March, adding that the discussions at the 'Finance G20' of Buenos Aires had shown that a decision at international level was virtually impossible (see EUROPE 11986).
France, which was the first to call for the tax, is prepared to use a great deal of leverage to push it through. For instance, diplomats have noted that the Commission's calculations put the anticipated revenue from the tax at €5 billion a year, or around half of the British contribution to the EU budget – which will have to be made up for following Brexit.
“For the purposes of the budget and European symbolism, it would be logical for the resources to be allocated to the European budget”, a French source explained. As Ireland is to become a net contributor to the budget as a result of Brexit, a number of sources consider that a gesture could be made towards Dublin in this context, in exchange for its support for the tax.
The fact remains that in general, the 'small' countries consider that the tax will work to their disadvantage. And they have good reason for thinking so, as it will be divided up on a pro rata basis relating to the number of users (and deductible from corporate tax).
The chances are also very high that it would fall to Ireland, for instance, to collect tax from the companies on its soil (such as Apple) and redistribute it between the countries in which it is payable. It is also worth noting that the tax may be levied only on the basis of the voluntary declarations of the companies in question, in the absence of public country-by-country reporting. A specific text is on the table, but it is not making very much headway at the Council.
On 16 May, on the eve of the Balkans Summit, discussions are expected to be held on digital and innovation, at which the tax may be discussed.
The summit furthermore provided the Czech Prime Minister, Andrej Babiš, with the opportunity to reiterate the urgent need to tackle VAT fraud. According to our information, the Netherlands, Austria and Poland supported the Czechs. (Original version in French by Élodie Lamer with Mathieu Bion)