US tech giants still reeling from the news of Britain’s new ‘digital tax’ received bad news this week – both France and Germany are pushing for the European Union to introduce its own levy.
Last month UK chancellor Philip Hammond confirmed plans for the tax which will see some of the biggest digital brands pay a 2% tax on revenues earned within the UK.
The move follows growing concern at the ability of large tech firms to minimise their tax liabilities by processing sales and profits through low tax jurisdictions, actions which have raised the ire of both competitors and many consumers.
Speaking last month as he presented his budget, Hammond said “it’s clearly not sustainable, or fair, that digital platform businesses can generate substantial value in the UK without paying tax here in respect of that business.”
He added that efforts “to deliver international corporate tax reform for the digital age” had so far been unsuccessful, “so we will now introduce a UK Digital Services Tax” which will be “narrowly-targeted tax on the UK-generated revenues of specific digital platform business models.”
The chancellor also stresses that the new tax would be “carefully designed” to ensure tech start-ups didn’t fall into its criteria and would not “an online-sales tax on goods ordered over the internet” which would then be passed on to consumers, but instead would be paid by the companies.
Spain has already introduced a levy and the EU now looks set to follow suit.
The bloc published initial proposals for a levy earlier this year and could have its own tax in place before the end of the year after French Finance Minister Bruno Le Maire told France Inter radio that member states “are close to having a deal in our hands”.
However, despite the growing interest in such levies, introducing them could cause tensions with the US where some local politicians see such initiatives as an attack on their globally successful firms.
With trade disputes already a hallmark of President Donald Trump’s time in the White House, it’s possible that any move to increase taxes on US firms could provoke a retaliation.