Following the negotiations in the Economic and Financial Affairs Council (ECOFIN) on 3rd December 2018, which ended with a slimmed down version of the digital tax, the reports on the “significant digital presence” of a company and on the digital tax were put to the vote in the European Parliament. In doing so, an important first step has been taken towards taxing digital giants such as Google, Facebook and Amazon.
The 21st century is as connected as never before. Exchanges and consumption are increasingly taking place on the Internet. In spite of this, giant companies such as Google, Facebook, Amazon and Co. are still taxed as if it was the 20th century. During its meeting on the issue of digital tax on 3rd December 2018, the ECOFIN Council only agreed on a very weak regulation. Berlin and Paris want a tax, which is only levied on advertising revenues generated by digital companies and not on their total revenue, as intended in the proposal of the Commission. Hence France, who is interested in closing tax loopholes, and Germany, who during the last six months has been very ambivalent towards the digital tax and almost rejected it, want to make an agreement palatable to the countries, who oppose such a tax. These include in particular Ireland, the Netherlands and Denmark. In spite of her forthcoming withdrawal, Great Britain has announced her resistance against the watered down version. The Austrian Finance Minister Hartwig Löger was clearly frustrated by the compromise, which is to be adopted in March 2019. In case the Directive will be blocked, his idea is a separate way of taxing digital companies in Austria.
The rapporteur for the Directive on the “common system of a digital services tax on revenues resulting from the provision of certain digital service”, Paul Tang (S&D), as well as S&D President, Udo Bullmann, told the Council that a clear commitment to a digital tax was required and that the tax competition between Member States had to be stopped. EU Trade Commissioner Günther Oettinger warned the Council too not to talk the digital tax to death in endless debates, as had happened to the Financial Transaction Tax in 2011.
European Parliament with large majority in favour of a digital tax
On 12th December 2018, a debate on the “digital tax” and the “significant digital presence” took place in the European Parliament, where the rapporteurs once again outlined their position. Afterwards, Juliane Bogner-Strauß on behalf of the Austrian Presidency, in spite of contradicting statements from Vienna, repeatedly warned against fragmenting the European Single Market by going it alone in regards to the taxation of digital services. An Austrian compromise had been discussed by the Council; however, it had not been possible to reach an agreement. Currently the Franco-German attempt was being discussed by all Member States and should be a priority for the Rumanian Presidency. Even though EU Commissioner Günther Oettinger regarded the proposal of France and Germany “as lacking in ambition”, he saw in it the only current option to achieve a result before the end of the legislative term.
The voting on 13th December 2018 began quite turbulent. Phillipe Lamberts (Greens) informed the plenary about packages, which Facebook had allegedly sent to MEPs as advertising material. In spite of this, plenary voted with 451 votes in favour of the Digital Tax Directive. Only 69 MEPs voted against, whilst 64 abstained. However, the motion tabled by Social Democrats, the Left and the Greens to increase the digital tax from 3 % to 5 % was rejected. The proposal on the “significant digital presence” was adopted with a majority of 439 votes. It remains to be seen whether the Council can agree to a common approach to make it possible for trilogue negotiations to begin.