22/04/21

INTERNATIONAL TAX: EU vows to press ahead with digital tax despite global reform.

As published on independent.ie, Wednesday 21 April, 2021.

THE EU will press ahead with a “soft touch” plan to tax tech firms this summer, regardless of a global deal, a Brussels official has said.

The move has “nothing to do” with global plans to overhaul corporate taxation, said Benjamin Angel, a tax director at the European Commission.

EU leaders have tasked the Commission with designing a bloc-wide “digital levy” by June, with the revenues coming back to the bloc’s budget.

Mr Angel said the plan is for a “modest” tax rate that would avoid “trade tensions” and not hamper foreign direct investment.

The US is against any targeting of tech companies, and Treasury Secretary Janet Yellen ruled it out in her recent proposals to the Organisation for Economic Cooperation and Development, which is leading global talks.

“It will be a soft touch,” Mr Angel told a Department of Finance seminar on Wednesday. “We do not want to create obstacles for the digitalisation of our economy, which we believe is a top priority. And [it will be] also an instrument that could be constructed in a non-discriminatory way so as to avoid any – even remote – risk of trade tensions.”

The OECD’s tax director, Pascal Saint-Amans, said that a “significant part” of the deal should be wound up by July, and that it was necessary for “tax peace”.

The likelihood of accord has been bolstered by the removal of a key US roadblock and new proposals from the Biden administration – including a 21pc global minimum tax rate – which Mr Saint-Amans said were “interesting and powerful”.

“We now have a new impetus, a momentum. We cannot fail. It’s too big to fail,” he said.

But Finance Minister Paschal Donohoe said a global deal should “accommodate” Ireland’s 12.5pc corporation tax rate, which he said was a “fair rate and within the ambit of healthy tax competition”.

The OECD plans could eat away at around €2bn – or a fifth – of Ireland’s annual corporate tax take, the government estimates. However, that estimate was made before the US plans were tabled.

Mr Donohoe said that while he would “work constructively” to reach an agreement at OECD level, he said the narrative in recent weeks has confirmed his “reservations” about a global minimum tax rate.