France’s unprecedented move to slap a “tech tax” on the industry’s biggest internet names is already proving influential, with Austria set to go ahead and implement its own version of the tax system, deemed to be much fairer, on a national level ahead of any EU-wide legislation. The dawdling and divided manner in which the European Union is handling the controversial taxation situation will likely prompt other nations to follow in France and Austria’s footsteps – potentially curtailing EU-US relations.
Its controversy comes as some EU nations fear a copycat move across the Atlantic in a potentially damaging move for European technology companies, with tax haven flagbearer Ireland joined by Estonia and Sweden in opposing the heightened levy imposed on GAFA (Google, Amazon, Facebook, Apple). On the flipside, supporters of a new digital sales tax system claim these same companies have been funneling off profits made in major European economies into countries with lower tax rates – reportedly utilizing perfectly legal loopholes.
The French government hopes to bring in $572 million a year from the tax scheme which was implemented on January 1, as France’s Economy and Finance Minister Bruno Le Maire said, “A small or medium-sized company in an EU country such as France, Germany or Italy was paying 14 percentage points more in tax than Google, Amazon, Facebook and Apple.” The EU, meanwhile, plans to introduce a 3% tax on companies making annual revenues in excess of $857 million, although the division among the 28-member bloc has bogged down progress.
It echoes what we saw back in October when the UK announced a 2% digital sales tax on internet firms, primarily search engines and social media platforms, which sparked a hostile response from some US officials – implying it could hurt trade relations in the wake of Brexit.
Austrian Chancellor Sebastian Kurz said, “In addition to an EU-wide move, we’ll also act on a national level. We will introduce a digital tax in Austria. The aim is clear – to tax companies that generate huge profits online, but pay hardly any tax on them, such as Facebook or Amazon.”
Le Maire added, “If we are incapable of re-establishing a fair tax system, of taxing the digital giants, we will pay for it at the ballot box.”
Last year was one riddled with data breach scandals and was without doubt the most significant in the legal history of the digital behemoths – now 2019 looks set to be the year economies begin to fight back. Spain and Italy are reportedly discussing their own digital taxes on a national level in Europe, while Singapore and India are too planning to take a stand.