Irish scrap on EU digital tax heats up

Nikos Chrysoloras and Eamon Quinn

Scrap between the EU countries, with Ireland at the center of the fight, around a proposed tax on tech giants, is expected to resume later today when ministers Finance will try to strike a balance between attracting business and tackling the popular discontent caused by companies not paying their fair share.

Finance ministers meeting in Brussels will try to push ahead with a legislative proposal for a 3% tax on European sales for companies with annual global sales of $ 750 million or more, such as Facebook, Google and Amazon. The technology industry is opposed to the tax, saying it would hold back investment.

Under the impetus of France, the project has met the resistance of Dublin and Stockholm, which calls into question the wisdom of the EU to act alone in the face of the global nature of digital services. To complicate things further, the tax risks are causing American President Donald Trump's anger in the middle of a transatlantic business niche, as most of the affected companies would be based in the United States.

According to the Commission's plan, companies generating significant digital revenues in Europe will pay a 3% tax on their turnover in the EU, which will bring them around 5 billion euros. Many Irish badysts support Finance Minister Paschal Donohoe's opposition to EU tax, saying it could mark the beginning of the dismantling of the country's corporate tax regime.

The government relies on the corporate tax paid by multinationals to fuel its public spending plans.

Union leader Brendan Howlin said at his party's conference this weekend that he was in favor of a digital service tax allowing Internet companies to pay their fair share. The UK, often seen as a friendly technology center, announced last month its intention to introduce its own tax on the biggest internet companies, with the goal of raising £ 400m. (455 million euros) per year. This decision was considered an obstacle to Dublin's retreat from the European tax.

Countries from South Korea to Australia are also closing loopholes that allow companies to redirect their profits to less taxed jurisdictions. Traditional tax rules have failed to seize the activities of these companies, fueling the anger of disaffected voters after years of austerity and low wage growth.

The idea behind the tax proposed by the EU is to focus on the place of installation of technology users, rather than on the location of the company's headquarters. . This is widely perceived as an infringement of Ireland's competitive tax system. Some countries do not agree on whether the "sale of user data" should also be taxed, according to an internal memo circulated to national governments. The Austrian EU Council Presidency is campaigning for an agreement by the end of the year.

Governments also disagree whether the tax should have a fixed expiration date or a review clause related to overall developments, according to one of the documents. All national delegations agree that the tax would be repealed if the Organization for Economic Co-operation and Development or the Group of 20 countries agreed to find a coordinated solution for tax technology, according to the document.

Prior to today's meeting, some countries had expressed doubts as to whether the initiative would violate existing treaties to avoid double taxation. As unanimity is required, the plan could end up being put aside.

Bloomberg and the staff of the Irish Examiner