OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU
OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU Supportive Opposed Neutral
Despite negotiations between Member States on an EU Digital tax levy breaking down at the March 2019 Economic and Financial Affairs Council (ECOFIN), the issue is certain to resurface when the new Commission mandate starts in October. Digital taxation is already a “hot” topic for Commission and MEP candidates in the EU elections debates so far. Candidates for the Commission Presidency from the three biggest political groups have all expressed support for higher taxation of tech giants. The favourite amongst the Spitzenkandidaten, the EPP’s Manfred Weber, pledged this month to adopt a fair digital tax to support the formation of a Digital Transition Fund, to mitigate “digital disruptions” in the labour market. Impatient with the lack of progress at EU level, several Member States including France, Italy, Spain, and the UK have either proposed or adopted national digital taxation measures. This fragmented approach will add pressure on the Commission to propose an alternative EU solution during its next mandate but it also opens the door for Member States to push on with an Enhanced Cooperation method, reminiscent of the drive to adopt the financial transaction tax (FTT). Here, we outline the state-of-play across the Union and the national measures announced so far. Meanwhile, the EU is also seeking an international level solution led by the Organisation for Economic Cooperation and Development (OECD). The OECD’s Digital Economy Task Force will prepare an interim report by June 2019 with a view to proposing recommendations by 2020.
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OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU
OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU Member States
Position on EU-level DT measures
National DT Measures •
The government confirmed that it will introduce a national DT. Consultations with the industry are currently in progress. Broadly the parameters of the measure are anticipated to be: • 3% levy on revenue from digital services; • The tax would apply to firms with global annual sales of €750 million and annual sales in Austria of €10 million.
Austria
Supportive
Belgium
Opposed
•
The Belgian government opposes a national DT.
Czech Republic
Supportive
•
In April 2019, the Prime Minister announced that the country is planning a national DT.
Denmark
Opposed
•
There is a political consensus against any national measures for introducing a levy on digital services.
•
Finland’s Minister of Finance, Petteri Orpo, announced in 2018 that national DT measures “deviate from internationally established principles”. Both the governing and opposition parties still stand firmly against introducing a national DT.
•
National DT is pending Parliament approval. Broadly the parameters of the measure are anticipated to be: • 3% levy on revenue from digital services; • Would apply to companies that sell digital products from third parties, traffic in user data or sell digital advertising, with global annual revenue above €750 million and French revenue above €25 million.
•
The German government is currently evaluating various options for introducing national measures. The German Finance Ministry announced in February 2019 that there was no agreement on how to proceed between federal finance authorities and individual states.
Finland
France
Germany
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Opposed
Supportive
Supportive
•
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OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU
OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU Member States
Position on EU-level DT measures
National DT Measures •
Greece
Ireland
Opposed
•
Opposed
• •
Ireland firmly opposes any DT measures. The Irish position is influenced by the substantial tax revenues from US tech companies based in Dublin.
•
A national DT will officially apply as of 30th April 2019. It features: • 3% levy on revenue from digital services; • Applies on digital services supplied by companies with global annual revenues equal to/above €750 million and Italian revenues equal to/above €5.5 million.
•
The Luxembourgish government has not yet announced any plans for introducing a national DT. Majority of the opposition parties are against national and/or EU-wide DT.
Italy
Supportive
Luxembourg
Supportive
• •
Netherlands
Supportive
• • •
Spain
Supportive •
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The government opposes any measures that can lead to an additional burden for tech companies operating in Greece. Reportedly, levying a digital tax is against the government’s policy of lowering corporate taxation with the purpose of attracting FDI.
The Dutch tax system is criticised by experts for the large network of tax treaties, and the low level of taxation on payments that pass through the Netherlands. The Dutch government is under pressure from the opposition to support international DT measures. It is unclear whether the government will press ahead with national measures considering the recent breakdown of EU DT negotiations. On 25 January 2019, following public consultations, the government approved a draft bill introducing a new DT as part of the country’s Budget bill for 2019: • 3% levy on revenue from digital services (incl. sales of user data); • Applies to companies with global revenues of more than €750m that bring in at least €3m in digital services revenue in Spain. However, in February 2019 the parliament rejected the Budget bill, triggering interim general elections. Whether the national DT features in the next Budget bill remains to be seen. Cicero Group | 3
OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU
OVERVIEW OF DIGITAL TAX (DT) IMPLEMENTATION IN THE EU Member States
Position on EU-level DT measures
National DT Measures •
Sweden
Opposed • •
UK
Supportive
The Swedish government has cited in 2018 “fundamental objections” to EU and/or national measures. Magdalena Andersson, the Swedish Finance Minister, added that such measures necessitate “substantial changes” to current international principles. All major political parties in the country are opposed to a national DT of any kind. After one round of public consultations, it was agreed that a national DT will be introduced as of April 2020: • The tax will be applicable to search engines, social media platforms, and online marketplaces, but not to financial and payment services, the provision of online content, sales of software/hardware and broadcasting services. • The rate of the tax will be 2% on the UK profits for companies with global revenue equal or exceeding £500m (€578m), with the first £25m (€29m) of UK revenue being exempt.
If you would like to speak to the Cicero team about this document, or how we can support your organisation and its public affairs objectives in 2019, please do contact Helena Walsh: Helena Walsh Executive Director - Brussels and Dublin BXL: +32 (0)2 612 8152 Helena.Walsh@cicero-group.com
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