Day two of the meeting of the European finance ministers in the Bulgarian capital, on Saturday 28 April, saw an initial discussion and new reservations concerning the Commission’s proposal of a 3% tax on the gross revenue of the activities of the digital platforms (see EUROPE 11986) as an interim solution, before seeking a long-term solution based on an international consensus.
“There is a willingness to consider proposals seriously and to engage constructively, but there are many different views around the table”, said the European Commissioner for Taxation, Pierre Moscovici, after the meeting. As he went on to say that opponents are undoubtedly shouting louder than those in favour, he still feels that there is a “broad basis of support” for the proposal.
The member states’ positions are indeed taking shape, but it is still too early for them to have been set in stone. According to one source, 21 member states took the floor during discussions.
Unsurprisingly, the ministers from Malta, Luxembourg and Ireland expressed misgivings and urged the EU to work towards a global agreement through the OECD. It is worth noting that the Irish Minister, Paschal Donohoe, was less “virulent” in his comments than expected according to the same source.
Denmark, Lithuania Finland, Sweden and, even more surprisingly, the United Kingdom reportedly rallied to this position.
The British finance minister, Philip Hammond, is reported to have made the case for an international solution, even arguing that this was the only option - unexpected comments that contradict previous stances (see EUROPE 11986). “I don’t see what could have led the UK to change its mind”, the French minister, Bruno Le Maire, commented at a press conference.
European reservations meet with France’s “anger”
Reservations voiced by the ministers apparently led to “anger” from France, which has been a determined sponsor of this dossier from the beginning, according to a European source. Speaking last during a tour de table, Le Maire reportedly called on the EU to stand strong and independent and define and defend its own interests.
“If you want to go to the EU elections next year with a message to voters that we have talked a lot, that we have debated a lot, but taken no action – well, good luck”, he said to his colleagues, according to the same source.
Among its allies, France can count on the support of Portugal, Poland and Spain. It is worth noting that Italy’s position is fairly ambiguous, compared to the support previously expressed.
“I just promised Bruno Le Maire, our French colleague, that we are very enthusiastic and we would like to introduce such kind of tax”, said the Slovakian minister, Peter Kažimír, upon his arrival.
German position still awaited
To make progress on this dossier, all eyes are also turned to the position of the new German finance minister, Olaf Scholz. Readers may recall that Germany was one of the signatories of the letter to the Commission in September calling for a turnover tax (see EUROPE 11859).
Several sources confirmed that Germany did not take the floor during discussions. When questioned on the subject at a joint press conference with his French colleague, Scholz gave a few vague explanations, referring to the debate underway at national level on how to respond to this new phenomenon.
One source said that although the political will is there, the minister seems to prefer to await a technical position from Berlin before formally taking position at European level said.
“A new minister is always going to bring his own style and touch and I gradually see that what he is able to do is what he’s already doing and is what he will do more and more. There will be an Olaf Scholz style, I am certain of it, which will be different from Wolfgang Schäuble’s style”, Moscovici said, when asked about the continuity of the German positions.
OECD wishes to bring final report forward to 2019
The Secretary General of the OECD, Ángel Gurría, made the announcement on his arrival. “We are supposed to come up with a blueprint of 2020, we are considering the possibility of advancing it to 2019 so that we can reduce maybe this need for countries to feel that they have to take short-term decisions”, he told the press.
Readers may recall that in its interim report on the taxation of digital businesses published on 16 March of this year (see EUROPE 11983), the OECD concluded that there was, as yet, no international consensus on the need to bring the international tax rules into line with the digital age.
Gurría reported this news to the ministers during the meeting, but made no promises and asked the Europeans for their help to move forward on the matter. He is also reported to have spoken of “openness” on the part of the US and China to a possible agreement.
On the need for a multilateral approach, Gurría repeatedly stressed that the matter was “too important to be urgent”. Moscovici, conversely, takes the view that it is “too urgent to be delayed”, hence justifying European action.
This announcement was welcomed by many member states during the meeting, some of them even going as far as to consider that if there was an international agreement in 2019, there would no longer be any need to act on a European level.
But Commissioner Moscovici warned: “if I would be sure that there would be an international consensus in 2019, well my position would be a little different. Let’s not have an illusion, we might have a report in 2019, but this is more than unlikely that we have an agreement in 2019. This must not be a pretext to renounce our very strong political will as Europeans to act in the short term”.
At the same time, the Commissioner said that more discussions with the US were needed to establish “where they are ready to go, with us or not”, thereby answering calls made during the meeting by several member states, notably Luxembourg, which fear that this proposal will be seen on the other side of the Atlantic as an “act of hostility”.
Despite falling numbers of allies and an initial exchange of views that indicates that the dossier still has a long way to go until it can win all parties over, the Commission and France are not giving up on the aim of an agreement no later than in 2019.
“The complexity of finding a solution must not detract from the principle that everyone must pay its fair share of taxes”, Moscovici summed up. (Original version in French by Marion Fontana)