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EU To Agree On New Digital Tax Regime By Year End

European Union finance ministers will this week discuss proposals to adopt a tax on companies’ digital turnover by the end of the year.

According to the EU, the proposed fiscal measure was contained in a document prepared by the Austrian presidency.

The document indicated that the EU governments had agreed that tax rules should be changed to increase levies on digital services which, they believe, are currently under-taxed, but the governments are yet to agree on the process to achieve the fiscal objective

For instance, smaller states with lower tax rates such as Luxembourg and Ireland, which host large American multinationals, wanted the EU changes to come together with a global reform of digital taxation, which has been under discussion for years to no avail.

However,  a news report by Reuters indicated that the bigger states, such as France and Italy, which claimed to have lost millions of euros of tax revenue due to digital giants’ shift of taxable profits to lower-tax countries, desire a quick resolution of the impasse.

The larger states support the European Commission’s proposal for an EU-wide three percent tax on digital revenues of large entities that would be introduced before a global overhaul of tax rules.

The news report indicated that, Austria, which currently holds the EU’s rotating presidency, intended to move forward with the three percent tax plan.

It stated in a paper seen by Reuters that would feed into discussions on the subject at a meeting of EU finance ministers on Friday and Saturday in Vienna.

According to the Austrian document, while waiting for a global deal, EU states “face the risk of erosion of the corporate taxation bases already now and might be tempted to act unilaterally”, urging “a uniform approach” for an interim EU solution based on the Commission proposal.

Already, the document also showed that 11 of the 28 EU states were considering their own national measures, warning against the risk to the EU common market if no common plan was quickly agreed.

The document also indicated that Austria would ask ministers whether they agree on focusing work on a EU temporary solution that should be agreed upon by the end of the year.

To overcome some of the criticisms of the measure, Vienna is proposing to reduce the scope of the tax, which would no longer be applied to the sale of users’ data as in the Commission proposal.

Only revenue from online advertising services, in which Google and Facebook excel, and from virtual marketplaces, such as Amazon, would be subject to the new tax, under the Austrian plan.

In line with the Commission’s proposal, only firms with a global annual turnover of 750 million euros and EU revenue of at least 50 million euros a year would be taxable.

Some 200 companies would fall within the scope of the new tax proposed by the Commission, European officials said, estimating additional annual revenues of about 5 billion euros ($5.7 billion) at EU level.

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