Closing Loopholes

EU Ministers to Discuss Sales Tax for Digital Firms

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For online firms in the EU, it's just a hop and a skip. Source: Shutterstock

At an informal meeting in Tallinn, European Union finance ministers will discuss plans on Saturday for a new sales tax on big digital companies within the 28-nation trading bloc, according to meeting notes made available by Estonia, the current EU council president.

Currently, these companies only pay taxes on profits in the EU country in which they are based. In practice, this tends to mean these multinationals register their EU headquarters in a low-tax member such as Ireland, although their sales might derive from throughout the 28-nation trading bloc.

We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries.

The latest initiative was spearheaded by finance ministers of France, Germany, Italy and Spain in the run-up to this weekend’s gathering in the Estonian capital. “We should no longer accept that these companies do business in Europe while paying minimal amounts of tax to our treasuries,” the four countries said in a joint statement issued before the meeting. Wolfgang Schäuble, Germany’s finance minister, has long advocated tightening rules on corporate taxation within the EU and his home country in particular.

“The most promising way forward would be to amend the current international corporate tax rules to fill in the gap that enable the profits earned from businesses in the digitalised economy to escape fair taxation,” the meeting notes said. It was “urgent” to close this tax loophole and ensure a fair taxation of these companies, the document continued.

The notes did not discuss a time frame for introducing a tax but cited possibilities for a “quick fix” outside current tax rules. One issue was the non-taxation of internet advertisements, which might be corrected with an online ad tax, the notes said.

 

Jeremy Gray is an editor at Handelsblatt Global. To contact the author: j.gray@vhb.de

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