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EU ministers fail to break digital tax deadlock

Reuters  |  BRUSSELS 

By Thomas

BRUSSELS (Reuters) - failed to agree a tax on digital revenues on Tuesday, despite a last minute plan to salvage the proposal by narrowing its focus to companies like and .

The European Union's arm proposed a 3 percent tax on big digital firms' in March, alleging the companies funnelled profit through states with the lowest tax rates.

The tax requires the support of all 28 EU states, including small, low-tax countries like which have benefited by allowing multinationals to book profits there on digital sales to customers elsewhere in the

The setback is a blow to French Emmanuel Macron, as his government had invested considerable political capital in the tax. It is also seen in as a useful example of action before EU next year.

In the original proposal, the tax was intended to be a temporary "quick fix" until a could be found among members.

But this was opposed by and some Nordic countries, leading French and German to focus solely on instead.

While this met with misgivings and outright opposition from at least four other ministers at a meeting in Brussels, they agreed to keep talking, said Austrian Hartwig Loeger, whose country holds the rotating EU presidency.

"PRINCIPLED CONCERNS"

A broader turnover tax on firms with significant digital revenues in would have hit companies such as and harder, but the proposal would not cover data sales and

"I continue to have strong principled concerns about this policy direction," Irish told his EU counterparts in a debate on the tax.

U.S. lawmaker Kevin Brady, of the tax-writing in the House of Representatives, welcomed the failure of the proposal, calling the tax a "revenue grab" aimed at an industry dominated by American firms.

"Rather than pursuing measures like this that would result in double taxation," he said, "countries should continue working together through the framework on the important global dialogue regarding the digital economy."

Companies with big like and would be most affected by the proposal as they make up the majority of the market in

Under this proposal, the tax would not come into force until January 2021, and only if no international solution has been found. and proposed that it expire by 2025 in a move aimed at appeasing concerns that it may become permanent.

The Austrian presidency has been trying to reach a deal on the tax by the end of the year, while the Franco-German proposal calls for a deal by March.

"Don't expect us to solve the challenge of a generation in a couple weeks or months," French said, adding the Franco-German proposal could still yield a deal.

German Finance Minister said tax receipts generate by the proposed Franco-German tax would be small, noting a similar tax planned by Britain was expected to raise around 500 million pounds ($641 million).

($1 = 0.7806 pounds)

(Reporting by Thomas, editing by Ed Osmond, Alexander Smith and Leslie Adler)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, December 05 2018. 04:30 IST
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