Brussels must consult Washington prior to taxing digital behemoths like Google, Luxembourg finance minister told CNBC on Thursday.
In March, the European Commission proposed a 9,5% effective tax rate in each EU member states where digital behemoths operate, which is less than half of the 23,2% paid by most other companies. The projected revenue is €15bn a year.
That would include revenue from companies such as Facebook, Google and Amazon, all of whom are US-based. The plan only concerns behemoths, that is, companies with a turnover of more than €750 million a year and profits in the EU in excess of €50 million.
The finance minister of the Dutchy, Pierre Gramegna, is concerned that the tax could sour the relationship between Washington and the United States, which he fears would be “counterproductive,” calling the idea of a turnover tax a “quick fix” for which there is no consensus.
The Commission’s proposal on March was meant as a compromise between member states whose growth model is founded on tax “competition” and members states that want to ensure revenue incurred in their markets is taxed.
States with a “competitive” approach to corporate taxation include Ireland, the Netherlands, Belgium, and Luxembourg.
Some member states, including the Dutchy, argue against “unilateral” approaches to taxation, which France has threatened, advocating a global approach negotiated within the Organisation of Economic Cooperation and Development. That could prove a political non-starter, as the US and Europe are not likely to reach a consensus.