The road to a European solution on digital taxation (see EUROPE 11986/10) was winding and ended on Tuesday, 12 March without agreement on the Franco-German proposal to reduce the scope of online advertising (see EUROPE 12210/12). The draft European tax is set aside; work is now focusing on international negotiations within the OECD.
“Not agreeing on a European solution would be risking revealing an inability to reform, which would weaken our ability to speak out or take joint action on the international stage”, warned European Taxation Commissioner Pierre Moscovici at the beginning of the meeting. The French and German ministers have also played their last cards to defend their tax proposal, but in vain.
Ireland, Denmark, Sweden and Finland, not surprisingly, maintained their opposition in principle, while others were reserved, notably Estonia, Lithuania and Croatia, pointing out that the costs of setting up such a limited tax could be higher than the benefits derived. For Greece, the proposal is so lacking in ambition and has been so softened that it no longer makes any real sense.
Despite disappointments with the ambition of the proposal, Italy, Austria, the Czech Republic, Luxembourg, Spain, Poland, the Netherlands, the United Kingdom, Hungary, Slovakia, Portugal, Belgium and Malta were able to clearly support the compromise text.
It is better to have a “constructive defeat” than a “Pyrrhic victory”, concluded Luxembourg Minister Pierre Gramegna.
Focus on OECD negotiations
It is now time to move forward and the next challenge for Member States will be to coordinate to speak with one voice in international negotiations at the OECD (see EUROPE 12183/18).
Bruno Le Maire also launched a "call for joint work" so that at the OECD, the principles of digital taxation would be defined in 2019 and adopted and implemented in 2020.
At the end of the meeting, Pierre Moscovici told the press he was disappointed, but not surprised. He believes that the outcome of the discussions remains “positive” and that the technically sound “achievements” found after months of discussions should not be lost.
According to him, this not only provides a framework for Member States wishing to introduce such a tax at a national level, but also for the EU, which could decide to resume discussions on a European solution if there is no agreement at the OECD by 2020.
“I say this very clearly: the European Commission will not withdraw its proposal, it is on the table, it is not dead”, he also stressed to the ministers. (Original version in French by Marion Fontana with Lucas Tripoteau)