Following Fiscal Phil’s announcement in the Budget that a new digital services tax on big technology companies like Facebook and Google would soon apply, the EU member states are struggling to make a global agreement of the same nature.
The EU are said to be fearful of a potential US retaliation, which is what is stopping them from reaching a consensus. To pass the plan, approval is needed from all 28 EU member states, and currently there have been many objections. Proposals are for a three percent tax on the revenues of large technology companies, which mostly have origins in the US. The implementation of a worldwide tech tax is therefore not likely to be implemented for some time.
Chancellor Philip Hammond last week announced the UK would launch its own digital services tax on the UK revenues of these companies.
Britain followed other countries such as Spain and Italy in launching its own version of this tax. Hammond made the announcement last week in his 2018 Budget speech, where he promised the tax would only to apply to profitable companies with sales of more than £500m globally.
He said: “We will ensure we get it right so UK remains best place to start and scale a tech business.”
The EU disagreement comes just a day after Hammond publicly defended his new digital tech tax.
He pointed out that while the tax will be a topic to debate between the UK and the US, the US itself has a tax reform act which is arguably discriminatory towards any non-US companies.
He said “everyone recognises it’s a problem” that the EU is failing to come to an agreement.
France and Austria both wanted a global bill to be agreed by the end of 2018, but came to a compromise which would pressurise the OECD to deliver a plan.
France today announced it would only hold of on implementing its own digital services tax in place of a global one until the end of 2018.
The nation claims that bringing in the tax would be the perfect way to win votes in the next European Parliament elections.
France’s Bruno Le Maire said the EU draft bill was “due to be adopted in December 2018… but we are open to postponing the entry into force to allow time for the OECD to make a more comprehensive proposal”.