France, Germany move to save European Union digital tax proposal

France, Germany move to save European Union digital tax proposal

France, Germany move to save European Union digital tax proposal

Facebook logo picture illustration made in Zenica, Bosnia and Herzegovina.

The EU finance ministers have not reached agreement on the proposed digital tax on online services.

The idea, revealed to AFP by a European source, was formally proposed by Paris and Berlin to EU Finance Ministers meeting in Brussels to discuss the issue later yesterday.

Meanwhile, countries like Ireland, with its low taxes, have benefited from transnational digital giants funnelling their profits from other European Union states through them. France has held up the digital tax as an opportunity to show voters ahead of European Union elections in May that establishment parties are capable of action to make global corporations contribute a fair share to public coffers.

The tax has been championed by French president Emmanuel Macron as a way to show that governments are capable of taking action to rein in large tech companies, which are seen as paying minimal tax in Europe due to their use of accounting loopholes, ahead of Europe-wide elections in May of next year.

According to European Union sources, the two countries are declaring in a joint statement their "determination to introduce a fair and effective tax on large digital companies".

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The measure was aimed at big IT firms such as Google and Facebook.

US lawmaker Kevin Brady, chairman of the tax-writing Ways and Means Committee in the House of Representatives, welcomed the failure of the proposal, calling the tax a "revenue grab" aimed at an industry dominated by American firms.

"What matters for France is that there is a legally binding instrument that can be adopted as soon as possible", French Finance Minister Bruno Le Maire said as he arrived for talks with his euro zone counterparts on Monday. France and Germany said that the watered-down proposal doesn't prevent countries wishing to impose the levy on a broader revenue base to do so.

"Rather than pursuing measures like this that would result in double taxation", he said, "countries should continue working together through the OECD framework on the important global dialogue regarding the digital economy".

German Finance Minister Olaf Scholz said tax receipts generate by the proposed Franco-German tax would be small, noting a similar tax planned by Britain was expected to raise around 500 million pounds ($641 million).

The latest proposal is meant to come into force in January 2021, but only if the Organisation for Economic Co-Operation and Development (OECD) fails to reach a consensus on a global approach by then.

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