EU states spar over digital tax

German Finance Minister Olaf Scholz (left) and French Economy Minister Bruno Le Maire address reporters at a meeting of European finance ministers in Vienna on Saturday. (EPA-EFE Photo)

VIENNA: Germany has called for more time to agree on a European Union tax overhaul to raise levies on large digital firms, although its finance minister says a solution is needed soon.

Under a proposal made by the European Commission in March, EU states would charge a 3% levy on digital revenues of large companies like Google and Facebook that are accused of diverting their profits to low-tax states in the bloc. Apple, for example, books most of its iTunes revenue inLuxembourg.

The plan is opposed by smaller states such as Ireland, and by Nordic governments who fear it could stifle innovation and trigger retaliation from the United States, which is home to most of the firms that could be hit by the proposed tax.

“It is necessary to take some time for debate, but we are absolutely willing to find a solution very soon,” German Finance Minister Olaf Scholz Scholz said at a meeting of EU finance ministers in Vienna on Saturday.

Berlin originally supported the tax but has taken a more cautious approach since Scholz took office in March. Governments that oppose the new tax might interpret his latest remarks as a sign that Germany is losing enthusiasm for the idea.

EU officials said Germany wants to make sure the tax does not damage its carmakers, who could face retaliatory measures from international partners, or fall within the scope of the new taxation if their digital revenues increased.

French Economy Minister Bruno Le Maire, one of the main supporters of the levy, has tried to strike a compromise by offering to add a sunset clause to the EU tax.

Under his proposal, the new tax would end once a deal is reached at a global level on the taxation of digital companies.

“We should be able to take a decision at the European level on internet taxation by the end of this year,” he said.

An overhaul of digital taxation has been under discussion at the global level for a long time, but no deal is in sight as large differences remain among rich nations.

The EU plan already foresees that the 3% levy would be only a temporary solution until a global deal is reached.

EU tax reforms require the backing of all its 28 member states to be adopted. Austria, which holds the EU’s rotating presidency, is working to find a compromise by the end of this year.

Eleven EU states are already planning national web taxes, which are likely to be adopted if no EU solution is agreed.

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