04/11/20

INTERNATIONAL TAX: European Union digital tax proposal may be delayed.

As published on irishtimes.com, Wednesday 4 November, 2020.

European Union proposals for a digital tax may be delayed to allow for more time to reach a worldwide agreement on the issue, German finance minister Olaf Scholz has indicated.

It comes after the Organisation for Economic Co-operation and Development (OECD) and United Nations outlined plans for a global pact on digital taxation, a high-stakes issue for Ireland because of the large tech multinationals such as Apple and Facebook that are based in the State.

Speaking after a video conference of finance ministers, Mr Scholz said it was clear there would not be a global agreement on digital taxation by the end of the year, but that it was important to give the process enough time.

“By mid-2021, we want to reach an international consensus . . . this is clearly the path we are following, we’ve never achieved this much before,” Mr Scholz said. “The European Union supports this process and will continue to advocate a global solution.”

But he added: “It’s clear that we won’t be able to get consensus by the end of the year.”

EU countries had previously agreed to lay out their own plan for digital taxation at the start of 2021, a timetable that now looks to be delayed if more time is to be given for the international negotiations.

The bloc believes an international agreement is preferable, as if only part of the world implements a digital tax, companies could simply relocate to avoid it. But the European Commission has said it will push ahead with plans for an EU-only tax if global talks do not make progress.

Progress in the OECD negotiations on a digital tax stalled in June when the United States pulled out, a move that prompted France to push ahead with a national digital tax, angering the US.

The outcome of the US presidential election is seen as crucial for prospects of an international agreement on digital taxation. The Democratic Party’s Joe Biden is seen as more friendly towards international co-operation.

The finance ministers also agreed to support proposals to reform the legal framework and surveillance structure in Europe to combat money laundering.

This could involve bringing rules into line across the bloc, while setting up an EU supervisory body with surveillance powers over parts of the financial sector.

Ministers will also speed up implementing measures to reduce non-performing loans in the banking sector. This relates to loans on which repayments are 90 days or more late or that are unlikely to be repaid in full without foreclosure. These are expected to rise due to the economic impact of the Coronavirus pandemic.

There have been proposals to set up an EU-wide “bad bank” to take on bad loans but, due to different national law enforcement practices on loans, this “requires more discussion”, Mr Scholz said.