France and Germany agreed to a compromise proposal on how to tax large tech companies that scales back the broad plan initially envisioned by Paris, they said in a joint statement issued early yesterday.
The proposal would only tax the European advertising revenue of digital companies at 3 percent, rather than a wider base encompassing data sales, the statement said.
The duty would generate about half the revenue previously planned and mainly hit Alphabet Inc’s Google and Facebook Inc, which dominate the online ad market, an official with knowledge of the matter said.
Photo: Reuters
While the deal marks a compromise after months of wrangling, it does not guarantee that the tax will become law; several countries, including Sweden and Ireland, have indicated they are unlikely to support the measure, which requires unanimous support to come into force as EU-wide legislation.
A draft of the proposal is to presented by the European Commission in the coming weeks and the EU would vote on the measure before the end of February, an EU diplomat said.
France and Germany said that the proposal does not prevent countries wishing to impose the levy on a broader revenue base to do so.
The compromise is a blow to French President Emmanuel Macron’s broader plans to reform the euro area.
France has held up the tax as an opportunity to show voters ahead of EU elections in May that establishment parties are capable of action to make global corporations contribute a fair share to public coffers.
In a bid to get a deal, France has repeatedly made concessions to try and get Germany on board with the plans.
At a meeting a month ago, French Minister of the Economy and Finance Bruno Le Maire agreed to be more flexible on the implementation date of the European tax by having it as a fallback option if international efforts did not get results.
The statement says the levy would enter into force in January 2021, unless rich nations at the Organisation for Economic Co-operation and Development reach a consensus on a global approach by then. The levy would expire in 2025.
The narrower base France agreed to on Monday responds to German concerns that other industrial companies could get caught in the net. Paris sees it as a first step toward a broader push to regulate and tax tech companies.
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