EU says planned digital taxes won’t trigger a trade war with the US 

The EU insists its plan to tax big technology companies won’t start a trade war with the US or interfere with global corporate tax talks.

The European Commission confirmed yesterday that it intends to come forward with a proposal for a digital levy this summer to help fund its post-pandemic budget.

“The digital levy should not fuel trade tensions in any way,” said Paolo Gentiloni, the EU’s economy and tax chief.

“We will be ready to table this proposal in mid-2021, as agreed, with the aim of making it operational from 2023 onwards. Finding a global solution remains a key priority for the Commission. This is why we will work to develop a design that does not interfere with the OECD process.”

Global talks on reforming corporate taxation – including how to allocate profits by country and setting a minimum rate for large multinationals - are being led by the Paris-based Organisation for Economic Cooperation and Development (OECD).

Finance Minister Paschal Donohoe has repeatedly called on the EU not to go it alone on digital taxes, while the US has consistently opposed singling out the tech sector and has threatened to retaliate against national digital taxes in France, Italy and other EU states.

Earlier this month, the Biden administration proposed taxing the world’s largest multinationals at a 21pc minimum rate, with the taxes calculated country by country, a plan that France and Germany have publicly supported.

Mr Gentiloni said the US position was a “game changer” and brought a “new dynamic” to the OECD talks. However, he said work is still needed to “bridge differences” among the 139 countries in the talks.

Previous tax proposals from the Commission – including a 2018 digital levy – have foundered in the backwash, as tax laws require the unanimous approval of EU governments.

In a non-binding report, MEPs called on the Commission to consider removing national vetoes in favour of majority voting on tax matters.

Fianna Fáil MEP Billy Kelleher said the report “goes well beyond what it should be about” and expressed his concern at what he called an EU “trend” to undermine tax sovereignty.

“It veers into the areas of treaty change, undermining the sovereignty of member states in terms of their competency around taxation.”

Ireland says its corporation tax rate allows it to compete for investment, while critics say it funnels revenues away from other states.