The EU will resurrect talks on a digital companies levy if a worldwide deal on the taxation of company giants fails, a senior European policymaker has warned.
Zbyněk Stanjura, the finance minister of the Czech Republic, which holds the rotating EU presidency, mentioned quite a lot of member states concern that the US is not going to implement the worldwide settlement agreed final yr, which might pressure the world’s 100 largest multinationals to declare earnings and pay extra tax within the international locations the place they do enterprise.
In such an eventuality, EU governments would return to shelved discussions to implement a digital companies tax, Stanjura predicted in an interview in Brussels, arguing that any such levy must be at a bloc-wide degree.
“I actually am not capable of say whether or not we’re going to await six extra months or 9 extra months, however I consider the longer these negotiations will take, the much less of an opportunity of truly reaching an settlement,” mentioned Stanjura. “If we aren’t capable of attain an settlement mid or long run, then Europe will return to talks about digital tax.”
Final yr, 136 international locations backed a two-pronged deal that goals to deal with public anger over multinationals not paying sufficient tax. The primary pillar of those reforms would pressure the biggest firms to reallocate a share of earnings to the place they do enterprise, guaranteeing they pay a fairer share of tax. The second pillar creates a minimal efficient company tax charge, at the moment envisaged at 15 per cent.
Progress on implementation has faltered regardless of OECD calculations that governments may accumulate greater than $150bn in further taxes yearly from the most important firms. Final month, Pascal Saint-Amans, the previous OECD official who masterminded the tax reforms, predicted the US would ultimately sign up, given the choice can be to see large tech firms confronted by a hodgepodge of separate digital companies taxes in numerous international locations.
However the prospect of the reform being carried out earlier than the OECD’s proposed deadline of mid-2023 has light and the chance of Republican positive factors in Tuesday’s US midterm election may additional dent hopes of progress.
Any revival by the EU of unilateral plans to tax digital giants would spark commerce tensions with the US, at a time when the 2 economies are already sparring over America’s proposed inexperienced subsidies.
Peter Barnes, a tax specialist on the Washington legislation agency Caplin & Drysdale, mentioned it was extremely unlikely that the US would implement the primary pillar by the center of subsequent yr regardless of how the midterms pan out. The measure was “contentious”, he mentioned. “Getting laws handed shortly is simply not going to occur.”
He added that if new digital companies taxes have been imposed by the EU or different international locations, the US would seemingly convey authorized motion if the brand new taxes unfairly focused American firms.
As Czech finance minister, Stanjura helps oversee the council of the EU’s financial agenda through the nation’s six-month presidency of the bloc, which ends in December. “I’m not assured we can attain an settlement” within the OECD on the primary pillar of the tax reform, he mentioned. “To talk clearly with out blurring the difficulty, I consider the issue is extra on the American aspect.”
The EU shelved a proposed digital levy within the summer of 2021 beneath US stress given the progress at the moment in the direction of an OECD deal.
EU officers burdened on the time that the digital proposal would differ from a 2018 plan that focused the world’s largest tech firms — a measure that finally foundered. Brussels was as an alternative planning to focus on tons of of firms with digital operations, quite than particularly goal at US tech giants.
The US has up to now threatened to impose sanctions on European international locations that launched digital companies taxes.
Stanjura was talking forward of talks on Tuesday amongst EU finance ministers in Brussels. The EU has additionally been unable to implement the second pillar of the OECD tax regime due to opposition from Hungary.
The Czech minister mentioned he remained assured that the EU would have the ability to strike an settlement implementing that side of the OECD programme, maybe this yr. However he added that it could be higher for the entire world if each pillars have been carried out on the similar time.
