A new European Union digital tax proposal likely will not dampen ecommerce in the region, David O’Sullivan, the bloc’s ambassador to the U.S., said.
“Getting the balance right is going to be very complicated, this is not a simple issue,” O’Sullivan told Bloomberg Law in a recent episode of Code & Conduit.
The EU will introduce March 21 a proposal on taxing companies based on where they generate revenue in Europe, not where their regional headquarters are located. The region is looking to raise revenues that have been lost as brick-and-mortar businesses move online and out of its tax base.
U.S. tech trade associations representing companies like Alphabet Inc.’s Google and Apple Inc. have solicited the Trump Administration to push back against Europe’s plan, stating the move could inhibit growth on all industries that rely on data flows. The changes unfairly target U.S. firms, they’ve said.
O’Sullivan said big multinational companies have for years taken advantage of minimizing taxes by moving their headquarters to low-tax countries. This might be perfectly legitimate, “but it can have a detrimental effect on the fiscal position of individual nations,” he said in the interview, conducted on the sidelines of SXSW tech conference in Austin earlier in March.
O’Sullivan also defended Europe’s new privacy regulations, known as the General Data Protection Regulation (GDPR), which will take effect in the region in May. GDPR is mostly a consolidation of existing rules across the 28-nation bloc, he said.
GDPR will require businesses to protect EU citizens’ privacy and personal data in transactions.
Some digital companies, especially startups developing artificial intelligence technologies, have expressed worries that new restrictions might curtail innovation. They’re particularly concerned about a provision on automated decision-making, which says companies should be able to explain business-and-consumer decisions made by algorithms.
“I think it will provide a level playing field and a degree of clarity for companies about how they have to comply with these privacy obligations,” O’Sullivan said. “It creates a one stop shop whereas previously we had sort of 28 sets of regulation.”
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