Media: EU signals de-escalation on digital tax against US Big Tech

The European Union appears to be de-escalating its immediate threat of a bloc-wide digital services tax, a measure once considered a direct counter to US tariffs.

While EU Commission President Ursula von der Leyen had previously suggested an "Amazon tax," sources now indicate a strategic shift, with the bloc reportedly prioritizing retaliation on goods, at least for the present, Caliber.Az reports, citing foreign media.

The proposed "Amazon Tax," envisioned by von der Leyen in April, aimed to levy a digital service tax on the gross revenue of large digital companies operating within the EU. This initiative has garnered robust support from trade unions and progressive MEPs, viewing it as a vital bargaining tool given the EU's significant trade deficit in services with the United States. Though broadly applicable, it was widely understood as primarily targeting dominant US Big Tech firms.

However, internal and external opposition persists. Former German Finance Minister Jörg Kukies warned, "we simply have to be cautious with digital corporations because we have no real alternatives to the offering by the American digital industry." Ireland, a consistent opponent, saw its Taoiseach, Micheál Martin, reiterate his objection, citing potential harm to a sector crucial for Ireland's economy, where a significant portion of corporate tax revenue originates from a handful of US companies.

Conversely, Oliver Roethig of UNI Europa argued for the tax's broader significance, saying, "Apart from the digital service tax targeting the only area where the EU has a trade deficit, it’s a highly symbolic move in defence of Europe’s economic model, built on social dialogue and collective bargaining." He also highlighted US Big Tech's perceived hostility towards collective bargaining.

The concept of an EU-wide digital tax dates back to 2018, intended as a temporary measure pending new global tax rules under the OECD. These global negotiations faltered when the Trump administration withdrew support, citing discriminatory proposals against US businesses.

In the interim, several EU member states, including Spain, France, and Italy, have implemented national digital taxes. These national Digital Service Taxes (DSTs) are generally slated for repeal if the OECD's global agreement materializes. The Trump administration has consistently opposed these taxes, with US Treasury Secretary Scott Bessent criticizing "unfair digital service tax" implemented by some European countries.

Despite strong arguments for a digital tax and von der Leyen's earlier remarks about potential implementation if US talks fail, the EU has not made explicit moves towards a bloc-wide levy. A Commission spokesperson said that a "negotiated solution remains the commission’s preferred outcome," though "all options remain on the table." Regarding existing national DSTs, the spokesperson affirmed their alignment with OECD discussions and pledged "appropriate measures... to defend EU interests" should trade action be taken against member states with DSTs.

Roethig concluded, "The real problem is the model: we shouldn’t be subsidising union-busting, tax-avoiding, anti-democratic companies," underscoring a deeper ideological divide.

By Vafa Guliyeva