France and Germany have come up with a compromise for a European Union (EU)-wide digital tax, abandoning a wide-ranging 3 percent tax on revenues generated by ad sales in the digital economy. According to the Financial Times (FT), the new version would target tech giants like Facebook and Google through their sales of advertising. However, officials noted that other retailers like Amazon, Airbnb and Spotify would most likely be excluded.
This tax is a replacement for the original plan that would have targeted around 180 of the largest technology groups by capturing activities such as data sales, raising an estimated €5 billion ($5.69 billion USD) a year. The shift to focus solely on advertising comes after German concerns that the country’s car companies could be hit by the tax, as well as opposition from Nordic economies that have been pulling for broader international rules.
Since tax matters need unanimous agreement from all EU governments, the Franco-German compromise is urging finance ministers to approve the draft “without delay and, in any case, before March 2019.” It has been designed to come into effect in 2021 if a global solution at the OECD is not agreed upon by then.
Earlier this month, French Minister of the Economy and Finance Bruno Le Maire called for the digital tax plan to be approved by the end of the year, going as far to say that waiting any longer would be seen as “political failure.”
“We want the adoption of the directive on digital taxation by the end of this year. This is a clear red line for the French government,” Le Maire told reporters in Brussels. “We are aware there are some technical issues … but these are technical concerns, not political problems, so we still have three or four weeks before the next Ecofin (a regular meeting between EU finance ministers) to fix those technical issues.”