Sunday, 23 January, 2022

EXCLUSIVE. For Pierre Moscovici, the risk of failure of the GAFA tax is clear

It’s (almost) done. In Brussels and Paris, we have already mourned the great digital tax project, on the menu of the summit of the “last chance”, the Ecofin of 4
December, bringing together the Union’s finance ministers. In June, Angela Merkel and Emmanuel Macron had promised “progress on the taxation of
digital ”before the launch of the European Women campaign. “It may be a little short to conclude before the end of the year”, admits Pierre Moscovici, the Tax Commissioner. Less than nine months to agree to 27 on such a structuring tax subject, it is a challenge “. Launched with great fanfare in September 2017 by Bruno Le Maire, the Minister of the Economy, this tax targets the tech giants, accused of massively transferring their profits to tax havens. If Europe demonstrates, as is likely, its inability to implement it, there is no doubt that the populist parties will take full advantage of it. Exclusive maintenance

Challenges: The Ecofin of the last chance will discuss, on December 4, your directive aiming to tax the digital giants. Do you still have a hope of success?

Pierre Moscovici, European Commissioner for Taxation: The game is not over and I am not giving up. But I am also lucid: it may be a bit short to conclude before the end of the year. The deadlines were very tight. This directive to tax the turnover of digital companies was proposed in March. Less than nine months to come to an agreement at 27 on such a structuring tax subject, it is a challenge and it has never happened in Europe, on any text. However, in the discussion, the awareness of the need for fair taxation of digital technology has progressed a lot. We left with an extremely weak base of support. Today, this support is largely in the majority within Ecofin. The problem is, you need unanimity.

Why is the probability of an agreement so low?

Support for our directive is conditional on an agreement between France and Germany, which has not yet clearly materialized. The German position is difficult to read, between a stated desire to get there while launching a call to wait for the end of the discussions on digital taxation at the OECD, which will be much longer. Germany has never been really enthusiastic. If there is no Franco-German agreement, the risk of failure is clear.

What explains the hesitation of Germany on this tax on GAFA?

It is linked in particular to the trade war launched by Donald Trump. Germany, especially the automotive sector, fears retaliatory measures because the digital giants are largely American. But precisely, we should not call our directive “GAFA tax”. It is awkwardness and inaccuracy. This tax would affect all companies with more than 750 million euros in turnover, including 50 million in the European Union, or 180 companies. It is often presented as an anti-American tax. It’s wrong. Half of the companies concerned are said to be American but 30% European.

Angela Merkel has recently shown her will to succeed. Is an agreement with France still possible?

Yes, this is still a possible scenario. But it would take a real agreement on the directive and not a declaration of intent. I want a clear commitment to implement this 3% turnover tax. If the Germans and the French finally get along, it will not be won. It will still be necessary to convince the recalcitrant countries: Sweden, and Denmark, which fear that this tax will slow down the dynamism of the digital sector and Ireland, whose economy is partly built on the attractiveness towards multinationals. Anyway, it will be very complicated before the Ecofin on December 4th.

Many criticize this 3% tax on turnover, considering that it is more consistent to tax profits …

Initially, this was not the Commission’s position because I consider that the best taxation is that of profits. It was France which launched this option and I joined it. Because we must quickly have an impact, showing that there is a real desire to tax digital companies. Then to move towards a more intelligent and structuring reform, discussed within the framework of the OECD.

Some negotiators criticize the method of Bruno Le Maire, who jostled his colleagues with very offensive speeches …

The energy deployed by Bruno Le Maire is very useful. The French minister made a lot of progress on the subject, by popularizing it. We worked well together. But advances in the Union are made step by step, through discussion and persuasion. And the questions should not only be dealt with in the bilateral Franco-German framework. This is no longer enough. It is also necessary to convince the other member States. Look at the negative reaction of the Dutch or the Swedes to Meseberg’s Franco-German agreement in June on euro zone reforms. I’ve never seen that. Lessons will have to be learned for the future.

If this fails, can we imagine that some of the countries apply this tax?

Yes. If we managed, for example, to have 25 countries in favor of this project, it would already be a big success. This means that this tax could be applied in 25 states out of 27. If we do not do this, we would then see national digital taxes being created in a haphazard fashion. Or quite the opposite of what we are trying to do in Europe, by establishing harmonized taxation. But we are not there yet: there is a week left to convince and I will do everything to the end.

Interview by Thierry Fabre

Tax Paradise