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Europe Will Intensify Technology Tax Talks

The plan is opposed by smaller states like Ireland, who fear losing revenues, and by Nordic governments who think the tax could stifle innovation and trigger retaliation from the United States
Brussels has estimated the tax proposal would affect about 150 of the biggest tech companies. Brussels has estimated the tax proposal would affect about 150 of the biggest tech companies.

European Union finance ministers say they would try to seek consensus on a digital tax proposal, but with a clear understanding that the measure is temporary and would be superseded by an international deal.

The announcement, which followed a morning of talks on Saturday among ministers in Vienna, came a month after businesses expressed concerns that the EU’s foreseen temporary tax might never end, news outlets reported.

Ministers agreed to intensify negotiations on an EU-wide tax targeting the revenues of Google, Apple and other technology giants even as several member states said that they remained opposed to the plans.

Austria, the country holding the EU’s presidency, said after discussions among ministers, that governments had agreed to “work intensively at a technical level over the coming weeks and months” on the proposals, which have been championed by a group of nations including France, as a way to ensure large tech companies paid their fair share of tax.

Hartwig Loger, Austria’s finance minister, said after the talks in Vienna that his objective was to secure a deal by the end of the year.

But diplomats said Saturday’s talks had also underlined how controversial the proposals remained for several countries including Ireland and Sweden, whose ministers warned during the meeting that the plans risked pulling the EU out of sync with international practices, damaging transatlantic relations and making it harder to reach a global consensus on taxing the tech industry.

  Temporary 3% Tax

The Vienna talks focused on proposals from the European Commission for a temporary 3% tax on digital companies’ revenues from online advertising, selling users’ data and providing intermediation services that connect online buyers and sellers.

The tax would apply to businesses with annual global revenues of €750 million ($868 million) and EU revenues of €50 million. Brussels has estimated the proposal would affect about 150 of the biggest tech companies and could raise as much as €5 billion per year. Under EU rules, the tax would require unanimous support from governments to come into effect.

The plans have been strongly backed by French President Emmanuel Macron, who has argued that digital giants are able to make huge profits in Europe that are barely taxed—the result of sophisticated tax planning techniques and the fact that national tax codes struggle to capture online activities.

  France Signals Progress

French Finance Minister Bruno Le Maire signaled that support is growing for a European Union plan to tax the revenue of large technology companies, giving momentum to an effort to strike a deal on the proposal by year-end, Bloomberg reported.

Le Maire suggested adding a “sunset’’ clause that would allow the European Commission’s planned revenue tax to be automatically phased out once a global scheme is ready. The proposal aims to assuage concerns by countries including Ireland over the wisdom of the bloc going it alone given the global nature of digital services.

“Lots of countries have changed their position,” Le Maire said, highlighting what he called “constructive” statements from Britain, the Netherlands and Luxembourg. “Compared to our previous meeting, when things were very difficult, we are making progress.”

  Concerns Rise

France is pushing for a rapid introduction of an EU tax on revenues of large tech firms such as Amazon.com Inc. and Facebook Inc. until the world’s wealthiest nations can agree on a global system for better taxing such firms.

“The message that emerged from this discussion was a frankly positive message and one of optimism,” Spanish Economy Minister Nadia Calvino said after the meeting. “A message of optimism and determination to reach concrete decisions by the end of the year.’’

Any tax proposal will need the unanimous approval of all EU members before becoming law, meaning a single country could block it.

A European Union tax overhaul to raise levies on large digital firms needs a thorough debate although an agreement could still be found by the end of the year, Germany’s Finance Minister Olaf Scholz said.

The plan is opposed by smaller states like Ireland, who fear losing revenues, and by Nordic governments who think the tax could stifle innovation and trigger retaliation from the United States, which is home to most of the firms who could be hit by the proposed tax.

  Crypto Market

Crypto traders reeling from a week of losses are getting a soothing message from the European Union.

Finance ministers gathering in Vienna agreed that they won’t rush with steps to further regulate the market, and that they’ll wait for the outcome of a thorough analysis by European authorities before deciding on any steps, according to officials involved in the talks.

Regulators around the globe are taking steps to rein in one of the biggest investment manias in recent memory, ranging from a massive crackdown in China to an exchange-licensing regime in Japan.

EU policy makers have moved to increase transparency in the market, yet have stopped short of introducing rules to protect investors or shield traditional financial firms from the risks posed by the crypto market.

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