In a new twist in the ministerial discussions on the proposal to create a 3% tax on the gross earnings of the activities of digital platforms ('digital services tax' or DST), on Tuesday 6 November, France made a further concession to try to save the legislative edition, whilst Germany has taken a step towards the sceptics' camp.
The Austrian Presidency of the Council of the EU structured the discussion around two questions. Firstly, should data sales be excluded or not (see EUROPE 12128)? A very large majority – all except Germany – took position in favour of keeping it in the scope of application of the directive.
Secondly, there also appears to be consensus on the French proposal for a 'sunset clause' (see EUROPE 12092) stipulating that an international solution at the level of the OECD will eventually replace the future European solution.
Taking the floor last, France tabled “one last concession for the common good”: a 'reverse sunset clause'.
This provision aims formally to adopt the directive in December 2018, but with an implementation date set for the end of 2020 instead of 1 January 2019, to give the OECD enough time to make a fuller alternative proposal that will include the EU's international partners. The directive will automatically enter into force on that date unless an agreement has been reached within the OECD level in the meantime.
The ball is in Germany's court
The French finance minister, Bruno Le Maire, made this proposal in response to the U-turn in the German position.
As the German minister, Olaf Scholz, explained during the meeting, his country is prepared to implement a revised version of the Commission's proposal only if, by summer 2020, no international consensus at OECD level has been reached.
During the meeting, however, the Minister did not react to the French proposal, which is reported already to have been put before him in a bilateral Franco-German meeting.
“For the time being, Germany is saying 'no'”, a French source confirmed. The source admitted that there is a major rift between the two partners: France is determined that the directive should be adopted in December, whilst Germany would favour an informal commitment instead. However, France has no intention of giving in over this point and the ball is now in Germany's court.
France laments Germany's “inability to make its mind up” due to internal issues. The German tax services themselves are reportedly opposed to the directive, as is the CDU-CSU coalition.
Although there was to be no political declaration at the end of the day, France will not hesitate to say that Germany has not kept the commitments it twice signed off in the Franco-German declaration of Meseberg, the same source said (see EUROPE 12044). The source went on to express hopes that an agreement would be reached “at the last second of the last minute of the last hour”.
Staunch opposition from Ireland, Denmark and Sweden
“The technical work is drawing to a close (…). What is missing is a frank and decisive political discussion (…). Today's decision is undoubtedly one of our last opportunities and I urge you to take it”, the Commissioner for Taxation, Pierre Moscovici, told the public debate.
The discussions did at least have the merit of establishing a clear panorama of positions. Ireland, Denmark and Sweden now seem to be the last remaining detractors of the tax.
Bruno Le Maire, who was expecting more virulent positions, expressed satisfaction at the discussions, even going as far as to joke that he “just had to buy Pascal (Donohoe) a beer in a Dublin pub and then I think we can move towards a decision”.
When approached for comment at the end of the meeting, Donohoe had an entirely different take. Reiterating his opposition to the directive, he said that several countries that are in favour of the DST have raised “substantial questions”.
The Danish minister, Kristian Jensen, said that it would be “very difficult” to reach an agreement in December. “We have asked a lot of questions (…) and we haven't had any clear answers yet”, he explained.
France has reportedly interpreted Sweden and Denmark's opposition as a wholly political stance. However, France is not taking anything for granted and intends to get the two countries onside with technical clarifications, particularly on the data included in the scope of the directive, the absence of dual taxation and compliance with the principle of taxation at the place of production.
The creation of a specific working group between the Commission and member states opting in to resolve all of these matters was proposed.
The December deadline will therefore be critical for the future of the tax, which many observers already believe is dead in the water. (Original version in French by Marion Fontana)