Digital tax kept alive by France and Germany

Europe’s efforts to tax large tech companies were kept on life-support yesterday as France and Germany proposed a final-hour compromise that scales back the broad plan initially envisioned by Paris.

Ireland, along with other countries including Sweden, opposes the tax plan and even the watered down proposals will face resistance.

The updated proposal is to tax the European advertising revenue of digital companies at 3pc. That’s watered down from an initial plan to set a levy on all digital revenues of large multinationals.

The new plan would generate about half the revenue previously planned and mainly hit Google and Facebook, which dominate the online ad market, according to an official with knowledge of the matter.

Both companies are among Ireland’s biggest employers and pay significant corporation taxes here, though the bills are a tiny fraction of the massive revenues booked here.

“Like any European compromise, some will be disappointed. They’ll say it’s not enough and I can understand them,” France’s finance minister Bruno Le Maire said.

The tax plan requires unanimous support to come into force as EU-wide legislation.

The Irish position is that any major changes to international taxation should be agreed through the Organisation for Economic Cooperation and Development (OECD) level – where the US and other big non-EU countries are also represented.

Finance Minister Paschal Donohoe is understood to have reiterated that position at yesterday’s meeting in Brussels.

“The Minister continues to have strong principled concerns about this policy direction as previously outlined. As other countries mentioned, the right and safest way to deal with this is through the OECD to find consensus on global matters. Ireland will engage constructively over the coming weeks and months,” a spokesman said.

Finance ministers from reluctant countries didn’t give their backing to the narrowed Franco-German plan at the meeting, but said they wouldn’t stand in the way of further talks. “I promise to be constructive and I’m ready to look at the proposal, but I still have serious concerns with it,” said Finnish Finance Minister Petteri Orpo.

A draft of the new proposal will be presented by the European Commission within weeks and put to a vote of member states in 2019.

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