Digital tax issue won’t go away

Ireland was one of the countries which blocked the proposed introduction at EU level of an interim digital sales tax – a proposed 3 per cent levy on the sales of some of the big digital players.

The issue was parked after a recent EU meeting of finance ministers, with Sweden, Finland and Denmark joining Ireland in opposing the tax, causing significant frustration to France and the EU Commission. The EU is to await the outcome of a process at OECD level that is looking in detail at the taxation of digital activity.

However the threat to Ireland has not gone away. The UK, Spain and Italy have all proposed their own digital taxes at national level and now the French parliament is discussing its own plan. This has got strong support from the European finance commissioner, Pierre Moscovici, who told French radio that countries representing maybe 5 to 8 per cent of the EU's population were blocking progress .

Powerful voice

Another powerful voice entered the fray on Monday, with European commissioner for competition Margrethe Vestager saying that "Europe must step forward" in the area of digital tax, and "France is showing the way".

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Vestager, a possible candidate for the next presidency of the European Commission, may well be seeking France's support for her bid. However, her intervention shows the way the wind is blowing.

French finance minister Bruno Le Maire says he is seeking "tax justice". And there is no doubt that many of the big digital players have paid very low levels of tax on earnings outside the US for many years. However, part of what is going on now is also about where tax is paid by the big multinationals – as well as how much is paid.

Fighting to maintain our share of tax revenues, while also realising that change is inevitably on the way is a complex challenge now for Ireland. Having for years fought off EU moves by pointing to our adherence to the OECD tax process, we can’t now turn around and refuse the fundamental measures which look likely to emerge from the OECD’s latest work.