Plans for a European Union (EU)-wide digital tax on big technology companies like Google, Amazon and Facebook fell apart this month when several European countries objected to the proposal.
The push to adopt an EU-wide digital tax was led largely by the UK, France and Germany who want to tax tech companies earning profits in their countries. These companies, largely based in the U.S., pay an effective tax rate of 9.5% in the EU, whereas traditional businesses pay an effective rate of 23.2%.
Under the EU proposal, all EU states would charge a 3 percent tax on large firms’ digital revenues. But at a meeting in Brussels this week, Ireland and several other European countries effectively blocked the plan’s adoption.
With no EU agreement in sight, Spain and Britain have both announced their own national plans to tax digital companies starting in 2020. The U.K. tax will only be aimed at large tech firms that generate global revenue of at least 500 million pounds per year.
Congressional Republicans have already threatened retaliation to ensure U.S. companies aren’t operating at a disadvantage in global markets.
“Singling out a key global industry dominated by American companies for taxation that is inconsistent with international norms is a blatant revenue grab,” said House Ways and Means Committee Chairman Kevin Brady (R-TX). “If the United Kingdom or other countries proceed, that will prompt a review of our U.S. tax and regulatory approach to determine what actions are appropriate to ensure a level playing field in global markets.”