Hoping to avoid a trade war, EU may allow delay for digital tax ruling

14 Jul 2020

Image: © AB Visual Arts/Stock.adobe.com

The EU is open to delay talks over a proposed digital tax in order to give nations more time to agree a deal.

While several European nations have announced their own forms of digital tax on tech companies with a large international presence, the EU is continuing to hold discussions over legislating for a tax that would apply to all member states.

Last year, the EU agreed to postpone plans for a digital tax until the end of 2020 pending the results of talks hosted by the OECD, which have yet to reach an agreement. Now, Bloomberg reports that EU officials are willing to give countries more time to continue discussions with the aim of preventing a transatlantic trade war.

This is in part due to disruptions caused by the coronavirus pandemic, but also strong objections from the US and many of the major tech companies based there. At a European Parliament meeting, the European Commission’s director general for tax, Benjamin Angel, said that an agreement before the US presidential elections in November is unlikely.

“The difficult question that we must face collectively is when is the right moment to move with plan B,” Angel said. “We will have to accept that the OECD process is not moving as quickly as we hoped while doing our best to support it.”

Early retaliation

Early signs of US retaliation were seen last week after it announced it would introduce a 25pc tariff on a number of French goods worth approximately $1.3bn, in response to the European nation’s own digital tax law.

However, the US government said this would be postponed for 180 days after France announced it would not collect taxes until the end of this year. Last month, the US announced it was to withdraw from OECD talks on the implementation of a global digital tax.

The recent appointment of the Minister for Finance, Public Expenditure and Reform, Paschal Donohoe, TD as the new president of the Eurogroup finance ministers is set to give Ireland a key role in ongoing discussions.

Speaking last week, Donohoe said that the way tech companies are taxed does need to be changed.

“My concern all along is that we need to find a way of doing it that doesn’t cause further difficulties to global and world trade that would have a huge impact on the Irish economy,” he said.

“I believe we can get agreement on this matter.”

Colm Gorey was a senior journalist with Silicon Republic