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France lashes out after digital tax battle but nervous times remain for Ireland

Saturday insight


Minister Bruno Le Maire

Minister Bruno Le Maire

Minister Bruno Le Maire

French finance minister Bruno Le Maire took aim at Germany as his bid for an EU tax on technology giants floundered yesterday.

As probably the keenest supporter of the proposed EU digital tax, he'll have been disappointed by the level of opposition the measure faced at a meeting of European finance ministers earlier this week.

The French are hoping the law will be backed at a meeting next month - and are willing to have its implementation then suspended until as late as the end of 2020.

It would only come in at that stage if the issue hadn't been tackled by the Organisation for Economic Co-operation and Development (OECD).

Delaying the implementation is a serious concession by France - but it wants agreement quickly to stop other member states from going off and imposing similar digital taxes on their own, like Britain now plans to do.

The measure needs unanimity to pass and while the opposition of Ireland won't have been a surprise, it appears Mr Le Maire is now getting nervous about Germany's backing.

The ministers' meeting broke up with the proposal looking like a dead duck.

Ireland, Sweden and Denmark were opposed - and some countries said they would press ahead on their own.

Austria said divisions now appeared to be so deep that chances for a deal had narrowed considerably, while Danish finance minister Kristian Jensen said: "It is very difficult to see an agreement on the digital tax because so many technical issues are not solved yet."

One such issue sprung from Germany. It sought a revision to the terms of the tax which would protect car-makers like Volkswagen from coming under the tax's scope.

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Mr Le Maire tried to put a positive spin on things, saying the debate was moving in the right direction. He made a joke about Finance Minister Paschal Donohoe, saying: "It just remains for me to offer Paschal a beer in a Dublin pub, and then I think we'll be able to move toward a decision."

But on Friday his rhetoric was not so jocular. "Germany's failure to back a proposed EU tax on big internet companies would damage trust between France and Germany.

"We can't imagine for a second that Germany does not stick to its commitments and decides not to adopt the directive in December," Mr Le Maire said in an interview with 'Les Echos'.

"That would be a breakdown of trust between France and Germany". Whether that has the desired effect in Berlin may well be moot.

Paschal Donohoe declined to specify whether he would use a veto against the tax, but made it very clear that as far as he was concerned the OECD is the place to sort this all out.

The opposition posed by other countries should help mitigate against any attempt to link the tax with support on Brexit, as has been hinted at by anonymous officials in media reports.

Such reports no doubt served to focus Minister Donohoe's mind, but maintaining his opposition in any case looks now to have been the right call. It looks like France may have lost this particular battle - but there will be many others.

Mr Le Maire's strident comments against Germany are perhaps a reflection of that country's waning influence - and a concomitant growth in French power in Brussels.

German chancellor Angela Merkel and Britain are on the way out, Italy is not quite a basket case but looks like it could become one, and so the French look poised to take the ascendancy among the EU nations.

That might spark a bit of nervousness for Ireland, which is losing its biggest ally and has just helped thwart the French on one of their flagship initiatives.

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