Austria to ‘Campaign’ for EU Digital Tax Support

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By Jabeen Bhatti

EU presidency holder Austria’s goal of pushing a digital tax solution through the bloc this year will be a big lift.

“I don’t think we will see results in the short term,” Erich von Tüllenburg, a tax partner at Rödl & Partner in Vienna, told Bloomberg Tax July 23. “A lot of countries are not convinced.”

European Union member nations remain divided over the details of a proposed 3 percent levy aimed at large digital companies like Alphabet Inc.'s Google and Facebook Inc. On July 18, Austria failed to get countries to agree to sticking points such as the rate, the scope—how it is to deal with targeted advertising—and the administration of the levy.

“The goal will be to campaign for further support and to take a step forward. Obstacles are to be overcome,” a spokeswoman for the Austria Ministry of Finance said July 20. “Our task is to emphasize the advantages in our presidency and to achieve a bit more solidarity and tax fairness in Europe with a European implementation.”

Finding agreement on the tax is the linchpin to EU taxation of digital companies. And a lack of consensus on the tax, meant to be temporary, slows down the bloc’s negotiations over a permanent solution.

‘Good Weapon’

Creating a new model to tax digital companies is a “big step” and would involve creating completely new procedures as the “new digital companies don’t fit well to the current procedures,” von Tüllenburg said.

He added that it might be advantageous for the bloc to wait on such a tax, as a trade war builds between the EU and the U.S. On July 20 U.S. President Donald Trump accused the EU of manipulating its currency to boost exports.

“It’s a good weapon in the current problems with the US,” he said. “The digital tax would largely hit the US.”

Permanent Solution

The tax is meant to be a step toward a permanent solution to digital taxation. Austria hopes to craft a solution that will eventually transition the digital companies to being regular corporate taxpayers, the spokeswoman said.

“The digital equalization tax (as a temporary solution) is an effective means of taxing the privileged digital megacorporations for the first time,” the spokeswoman said. “In the future, they shall pay taxes just like any other company in Austria.”

“This should be made possible by first taxing the turnover generated by the international megacorporations in Europe from the use of data, before beginning with profit taxation,” she added.

To contact the reporter on this story: Jabeen Bhatti in Berlin at correspondents@bloomberglaw.com

To contact the editor on this story: Penny Sukhraj at psukhraj@bloombergtax.com

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