International

Meeting of EU Finance Ministers: France puts digital tax policy under pressure

French Finance Minister Bruno Le Maire made a clear announcement during the meeting with his European counterparts in Berlin. If there is no global agreement on the introduction of a digital tax at Organization for Economic Co-operation and Development (OECD) level by the end of the year, the EU for its part must find a solution in the first quarter of 2021, said the treasurer of France in Berlin on Friday.

The protracted debate about taxing the profits of internet companies like Google, Apple, Facebook and Amazon has gained new momentum as the EU seeks new sources of funding for the multi-billion dollar Corona aid package.

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At a marathon summit in July, EU heads of state or government agreed to set up a reconstruction fund worth € 750 billion. The fund aims to support countries affected by the Corona crisis, such as Italy or Spain, to get back on their feet economically.

Government contributions increase if there are no EU taxes

The billions in aid must be released by taking the EU into debt. However, the subsequent repayment of these debts poses a problem for EU countries: if the community does not develop its own sources of funding, Member States’ contributions to the EU budget will inevitably increase shortly. Finance Minister Olaf Scholz (SPD) said at the informal meeting on Friday that the repayment would “require the European Union’s own income”.

Only the introduction of an EU tax on plastic is certain

So far, after the agreement of the heads of state or government in July, it is only certain that the EU will impose a plastic tax from the beginning of 2021. Each member state is then asked to pay 80 cents for every kilogram of non-recycled plastic from Brussels. In addition, other new taxes are being discussed in the EU – including a CO2 border tax for imports from non-European countries with lower climate protection requirements and a digital tax. France has already introduced such a tax on its own for technology companies, but is in a clinch with the US over payments from digital companies.

At EU level, countries such as Ireland and Luxembourg, where many digital companies are located in the European Union, have so far blocked the plan for a joint tax. Luxembourg Finance Minister Pierre Gramegna said on Friday that his country would continue to prefer the introduction of a digital tax at OECD level. If Europeans were to be left alone to introduce such a tax, “it would be detrimental to the EU’s competitiveness,” he said.

Irish Treasury Secretary Donohoe sees the need to change digital taxes

Irish Finance Minister Paschal Donohoe was also skeptical of an EU solution. While accepting that something needs to change in the tech giants’ taxation, he said. But it must be “fair and effective” for all states, he noted. Despite such objections, however, French Finance Minister Le Maire is now out of patience. “The only winners of the economic crisis are the digital giants,” he said. This is another reason to continue to seek agreement at OECD level.

Irish Finance Minister Paschal Donohoe and ECB President Christine Lagarde on Friday in Berlin Photo: REUTERS

Meanwhile, the head of the European Central Bank (ECB), Christine Lagarde, made it clear that the EU and in particular the eurozone will likely have to struggle even longer with the economic consequences of the Corona crisis. After a ‘catastrophic’ second quarter, there is currently a recovery in the eurozone, although this varies greatly from country to country. According to the assessment of the European Commission, most Member States will also not have reached the economic level before the crisis by the end of 2021. There is a risk of economic fragmentation in the Community, warned EU Economic Commissioner Paolo Gentiloni, who is from Italy.

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