In a recent interview with “Le Journal du Dimanche,” the French Finance Minister Bruno Le Maire said he expects the European Union to agree on a Digital Services Tax by the end of March. 

An EU-wide Digital Services Tax poses unprecedented dangers to tax competition, tech-fostered innovation, European and worldwide economic growth. The new tax would represent a dramatic and irreversible shift for the international tax system.  It would mean damage to the transatlantic relationship and could lead to a spiral of retaliation.

Le Maire’s comments come as a surprise.  The EU member states have failed to reach a unanimous consensus on the European Commission’s digital service tax plans for over a year.
The process concluded in December thanks to many EU member states including  Luxembourg, Sweden, Denmark, Finland, Malta and Ireland actively opposing the plans to impose this tax.

Those countries host not only many foreign tech companies but also fear a worsening relationship between the EU and the United States and a dramatic shift in the system of international taxation. 

The EU is under pressure as more and more countries like Spain, UK and France either already have a digital services tax in place or announced like Austria’s chancellor Sebastian Kurz that they will follow through with their own levy shortly.

The European Commission’s interest is not to increase competition between the member states but to “harmonize” taxation within the EU and is therefore strongly pushing to put an end to the veto power member states have over EU tax matters. This approach is poison for the very different economies, differences between different locations comprise many factors, and it is obviously not the same to operate a business in Luxembourg or one in rural Ireland. 

Nevertheless, Bruno Le Maire shows his determination in the interview saying that there are still some “hesitant countries,” but he is convinced there will be agreement by the end of March and “with the European elections just a few months away, our citizens would find it incomprehensible if we gave up on this.” 

The European Commission’s original proposal was to force mainly American tech companies like Google, Facebook and Amazon to pay a 3% tax on their revenues in each country, rather than where the business is headquartered for purposes of taxation.

Now it is of the utmost importance for EU member states opposing a Digital Services Tax on the EU level to make their voices heard louder than ever, and in the U.S., the Trump administration must further step up its opposition.