Emmanuel Macron’s plans for a turnover tax encountered some resistance at the EU summit © Bloomberg
French president Emmanuel Macron was checked on Thursday in his ambition to secure rapid EU agreement on a new revenue tax for US tech giants, after Ireland and Luxembourg warned that Europe should not disrupt discussions under way at global level.
France has sought to galvanise EU work on taxation of the digital sector by drawing up plans for a turnover tax that it argues would make it impossible for the likes of Apple and Google to slash their tax bills by moving profits between countries.
While it won early support in September from powerful allies such as Germany, Italy and Spain for the turnover tax plan, which would target companies’ revenues instead of profits, some other EU countries have emerged in recent weeks as staunch opponents. Paris needed unanimity to push through any new tax plan.
The tech tax plan is part of a flurry of initiatives from Mr Macron to reinvigorate EU integration and trade protections. The French leader has been pushing for Brussels to adopt a tougher trade stance, tighten non-EU foreign investments and set up a common eurozone budget.
The opposition to the turnover tax proposal crystallised at an EU summit meeting in Brussels on Thursday, where Irish prime minister Leo Varadkar and Luxembourg’s leader Xavier Bettel, argued that the EU should not go it alone in introducing new measures.
Mr Varadkar, in his way into Thursday’s talks, warned that any moves by Europe to introduce a system in isolation from other major economies “just might hand an advantage to America, to Japan and to the United Kingdom, which is leaving [the EU]”.
French officials said that, even though the turnover tax plan has run into difficulties, Mr Macron and his administration have succeeded in reviving work to address a problem that they say costs Europe’s exchequers billions of euros per year, after previous EU initiatives stalled.
An adviser to the French president said on Thursday that Paris was pleased with “progress in relations to taxation of tech groups so that we take into account the place where revenues are generated”.
At Thursday’s meeting, Mr Macron secured a commitment that the European Commission will come forward “by early 2018” with “appropriate” proposals to address the problem of tech companies paying very little tax in EU countries where they do a lot of business.
Ireland and Luxembourg, however, said any steps should be taken at global level through the Organisation for Economic Cooperation and Development.
The push led to changes to a set of conclusions adopted by EU leaders to emphasise that any European initiatives should be “in line with” OECD work.
The exchange is an early indication of the difficulties that Mr Macron is set to face in pushing his ambitious agenda of European reform, given that very different economic philosophies and priorities at play in different EU countries.
The problem is likely to be especially acute in the area of taxation, where unanimous support of national governments is needed to adopt new initiatives.
The commission last month put four options on the table for increasing the tax contributions of tech companies. The first, and its clear preference, is a comprehensive reform plan to establish a common corporate tax base.
Three interim solutions are also being considered: the French proposal for a turnover tax, a withholding tax on digital purchases from non-resident sellers and a tax on digital advertising revenues.
Far-reaching reform to create a single EU system for calculating corporate tax has long been an ambition for the commission. The latest, scaled-back, proposal was tabled in 2016.
Brussels argues that such a broad overhaul of rules is the best way to impose heavier taxes on large tech companies.