EU digital tax discriminates against US companies – senators

Brussels has come under renewed pressure to drop controversial proposals to tax digital company revenue in a letter from key US senators to the presidents of the European Commission and European Council. The digital services tax, a proposal for an interim 3 per cent tax on the turnover of major digital companies, also faces strong opposition from Ireland and a number of other member states.

It is being championed in particular by France and the European Commission pending digital tax measures expected next year from the OECD.

Senators Orrin Hatch and Ron Wyden, chairman and senior ranking member of the US Senate Finance Committee, warn in a letter dated October 13th of "significant and growing concerns" in the US business community about a tax they say is "designed to discriminate against US companies" and would "create a significant new transatlantic trade barrier".

That, they say, at a time when the EU and US are urgently discussing reducing such barriers. Ireland has argued that EU measures will damage European competitiveness and may exacerbate trade tensions with the US at a difficult time.

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Taxable revenues

The tax would apply only to companies with total annual worldwide revenues of €750 million or more and that have annual EU taxable revenues of€50 million.

It would be applied on revenue made from user-targeted advertising on the company’s interface, data transmissions from data collected and social networking that could lead to the supply of goods or services.

Economic Affairs Commissioner Pierre Moscovici has repeatedly insisted that "this is neither a Gafa [Google, Apple, Facebook and Amazon] tax nor an anti-US tax proposal that will target any company or any country." But there is little doubt the US digital giants would be the main targets.

The letter says the tax would violate the “long-held principle that taxes against multinationals should be profit-based not revenue-based” and notes, as the Irish have done, that it could almost certainly give rise to double-taxation issues. It would also be discriminatory, the letter says, because Chinese businesses would be able to avoid its scope.

The senators urge the EU to await the common approach that the OECD promises next year.

France and the commission are still hoping they will be able to build the unanimous backing the proposals require in time for their approval by the European Council in December.