EU considers digital tax to fund economic recovery

The idea of tax reforms for digital companies has been on the table for some time. Now, in light of the Covid-19 pandemic, these plans could be pushed forward.

In a statement earlier in the week, the European Commission says it’s considering backing a new digital services tax. This would be used to fund a €750 billion recovery fund.

The IMF recently said that at €500 billion in funding would recover from the pandemic, otherwise the Eurozone could fall into a 7.5% recession.

The recovery fund would include this €500 billion on top of the EU’s existing seven-year budget plan, plus an additional €250 billion in favourable loans.

When addressing the European Parliament, Ursula von der Leyen said, “We are investing together in Europe’s future – and will pay everything back according to a known and well-tested formula through future EU budgets. This is why the Commission will additionally propose a number of new own resources.”

The tax could include a 3% levy on companies with revenue over €750 million, which would need to include at least €50 million in revenue that’s EU taxable.

She added that the digital plans could be implemented alongside other measures, like the extension of the emissions trading scheme and a C02 border tax.

The Commission says it “ “actively supports the discussions led by the OECD and the G20 and stands ready to act if no global agreement is reached. A digital tax applied on companies with a turnover above €750 million could generate up to €1.3 billion per year for the EU budget.”

The digital tax was discussed in length last year, but wasn’t approved as it was met with opposition from a number of EU countries, including Sweden, Finland, and Ireland.

However, Spain, France, Italy, and Austria are in favour of the tax, and say they would push for it. These countries have been hardest hit by the pandemic, and many citizens feel they haven’t received enough financial support from the EU.

EU’s Economy Commissioner Paolo Gentiloni said that economic hardship could help those favouring the tax. “Maybe the crisis will help to give a little bit more boost to multilateralism and international cooperation,” he said.

He added, “What is clear from the European Union point of view is that we need a digital taxation and we are now working to have it at the global level, which should be the best way to avoid double taxation and other very complicated issues.”

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