New EU tax on tech giants could be agreed by Christmas

A new Europe-wide tax on tech giants could be agreed by Christmas and net an extra £4.5bn a year for EU countries.

Pierre Moscovici, head of tax for the European Commission, who earlier this year announced plans for a 3% levy on the revenues of large internet companies with global revenues above €750m (£660m) a year, said good progress was being made on unblocking an issue that has caused controversy around the world.

The likes of Facebook, Apple and Google have faced growing criticism that they do not pay their fair share of tax.

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Earlier this week Facebook faced fresh public uproar after it revealed it was to pay just £15.8m in tax in the UK despite sales totaling £1.3bn. Once a hefty tax credit is deducted the bill will drop to £7.4m.

Citing Brexit, the European Parliament elections and the appointment of a new set of commissioners, Moscovici has warned that unless a deal is finalised this year, it could be the end of 2019 or even later before it is reconsidered.

He needs agreement from all EU members, including the UK at this stage, and while the tax has the support of the bloc’s biggest countries, France and Germany, it faces stiff opposition from some smaller EU members.

Earlier this week, it emerged that Ireland has teamed up with the Czech Republic, Finland and Sweden to oppose the digital tax proposals, warning that they breach international treaty obligations.

The Irish Times says “it is the latest possible hurdle for the EU’s digital tax plans which have been fiercely pushed by France’s Emmanuel Macron - with the support of Spain and Austria - but has divided other member states”.

One solution to break the deadlock could be the introduction of a “sunset clause”. This would mean that any EU tech tax would be temporary until international bodies such as the Organisation for Economic Co-operation and Development (OECD) agreed a similar type of system applicable to all countries.

“Such a move could ease concerns from member states that a new tax could damage the wider economy and make investing in the EU less attractive,” says the BBC.

The broadcaster also says that the “push by the EU will also increase pressure on Philip Hammond, the chancellor, who has laid out his own proposals for a new technology tax”.