The European Union (EU) has ‘put on hold’ plans for a digital tax on technology giants like Amazon, Facebook and Google. The decision reportedly follows pressure from the United States, which believes the EU's levy has been made redundant by a separate agreement to reform the global tax system. The EU-wide tax plan is part of a bid to boost financial resources and pay for the post-COVID-19 recovery.
First agreed to by the G7, the international agreement includes plans to redistribute taxing rights and set a global minimum tax rate of 15 per cent for corporations. It was given a further push recently when G20 finance ministers and central bank governors gave their nod.The European Union (EU) has 'put on hold' plans for a digital tax on global technology giants. The decision reportedly follows pressure from the US, which believes the EU levy is now redundant due to a separate agreement to reform the global tax system. The EU-wide tax plan is part of a bid to boost financial resources and pay for the post-COVID-19 recovery.#
"Successfully concluding this process will require a final effort, a final push by all parties, and the Commission is committed to focusing on that effort," a spokesperson for the European Commission said. "For this reason, we have decided to put on hold our work on a proposal for a digital levy."
The spokesperson, however, refused to say whether US lobbying played a part in its decision to pause its digital tax plans.
The EU executive plans to ‘reassess’ its proposal in October, which is when the G20 want the technical details finalised.
EU countries like France, Spain and Austria argue that big tech corporations are not paying their fair deal of taxes because taxing rights are still determined by the place where the company's headquarters is based—usually in countries that offer low tax rates, like Ireland—instead of by the place where the goods and services are being purchased by customers, which, in their view, marks the moment the real revenue actually originates.
Worried about growing fragmentation inside the single market, the European Commission began working on an EU-wide digital tax with the aim of making it operational by 2023. The executive had previously said the levy would be modest and non-discriminatory and would work in parallel to the international agreement being pushed by the Organisation for Economic Cooperation and Development (OECD).
However, the United States disagrees, arguing that such a digital levy would be discriminatory as the primary target would be US corporate giants, which dominate the online services market globally.
Ever since the G7 reached the landmark tax deal, Washington has requested the EU to wait for at least the technical details of the OECD agreement are finalised.
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