The EU’s usurious digital tax on international tech companies that they had proposed has met with sufficient resistance from low-tax member nations—Ireland and several northern European nations—that France and Germany, the drivers of the proposal, have offered a modified version. This new effort would
- limit the tax to a 3% levy on online advertising revenues rather than all online revenues
- effectively exempt Amazon, AirBnB, and Spotify—a sop to non-EU administrations, especially Trump
- run until 2025
The beef underlying this drive to tax techs centers on tech firms paying less tax than putatively traditional firms on their EU earnings.
The European Commission estimates traditional companies pay 23% tax on profits—compared to just 8 to 9% for internet firms, with some paying effectively none.
Given that low tax rate nations like Ireland and Luxembourg are attractive to businesses, including tech firms, the foolishness of this new proposal is exposed. It tries to get a common, high, tax imposed on tech firms at least.
Maybe not foolishness, so much as cynicism. It remains inconceivable to the EU to lower its overall taxes to competitive levels rather than trying to suck those low-tax members into raising theirs to uncompetitive levels.