A global pandemic and parliamentary closures haven’t stopped efforts by European countries to impose digital services taxes on large tech companies such as Facebook Inc. and Google.
After a month-long hiatus, U.K. lawmakers on Monday moved the country’s digital services tax one step closer to becoming law, with all the major parties in Parliament approving the measure’s passage.
Similar efforts are underway in the Czech Republic, Spain, Poland, and several other European countries. The effort is driven by concerns that multinationals, especially tech giants, aren’t paying taxes in the countries where they have customers and users.
The unilateral measures could threaten the multilateral consensus the Organization for Economic Cooperation and Development is trying to reach among nearly 140 countries on an international digital tax solution. They have already caused trade frictions between France and the U.S., which argues that such measures unfairly target American companies.
The U.K. finance bill, which includes the digital tax measure, has now moved moved to the committee stage which must be completed before June 25.
The U.K. proposal would impose a 2% levy on the revenue of digital businesses, such as Amazon.com Inc. and Facebook.
“The digital services tax will improve the fairness and sustainability of our tax system by ensuring that digital businesses that access the U.K. market make a fair contribution to the Exchequer,” the Economic Secretary to the Treasury John Glen said Monday. “It is anticipated to collect 2 billion pounds ($2.5 billion) in revenue,”
The measure received broad support from all parties who argued for the the need to pass the tax.
“The current crisis means that, once we emerge from Covid and all its related difficulties for our economy, it will not simply be a case of playing populist politics,” said Shabana Mahmood, a member of the Public Accounts Committee, which scrutinizes public spending.
“I simply do not think the public will accept a situation in which such huge multinational enterprises do not pay a fair share of tax in countries such as ours where they create a huge amount of their value,” she said.
The coronavirus response has delayed, but not put an end to, the Czech Republic’s plans for a digital services tax, a spokesperson at the Czech Ministry of Finance wrote in an April 27 email to Bloomberg Tax.
“The Ministry of Finance still prefers to adopt an international solution,” she wrote. A unilateral solution is “a bridging measure” before agreement on a global solution is reached, and meant to put pressure on the OECD negotiations, she said.
The Czech measure proposes a 7% rate, but Minister of Finance Alena Schillerova has repeatedly said she will support a rate of 5%. The proposal is with the budgetary committee of the lower house of the Czech Parliament, which may propose amending it.
According to Petr Jelinek, general secretary of the committee, the earliest the committee can take up the proposal is at its May 13 meeting.
But that could change if the country’s epidemic state of emergency continues. “I don’t know if the deputies will be willing to discuss the digital tax at a time of emergency,” he told Bloomberg Tax in an April 27 telephone interview.
The Spanish government is proposing a 3% tax on the revenue large tech companies earn from providing digital services—such as targeted advertising—that is connected to Spain.
The measure has been approved by the government, and must now pass Parliament, the Finance Ministry told Bloomberg Tax in an April 23 email.
An amended version of the bill was submitted to the Spanish Parliament’s lower house on Feb. 28.
The Polish government on Tuesday proposed a 1.5% revenue tax on online streaming services to help pay for the cost of coronavirus-related spending packages.
The tax would bring in around 15 million Polish zloty ($3.58 million) this year and at least 20 million Polish zloty in subsequent years, according to an impact analysis published Tuesday.
The analysis lists Netflix as the biggest anticipated payer of the proposed tax, followed by IPLA, Poland’s biggest Internet TV service. Amazon and Apple TV+ rank fourth and sixth on the list of biggest anticipated payers.
The proposal must be approved by Parliament and signed by the president before becoming law.
— With assistance from Isabel Gottlieb