January 29, 2019 / 2:38 PM / 4 months ago

EU raises doubts over Spain revenues from tech tax

BRUSSELS, Jan 29 (Reuters) - The European Commission warned that Spain’s planned digital tax may not raise as much revenue as Madrid estimates, casting new doubts over the country’s ability to meet its deficit targets this year.

The Spanish government this month approved a draft law that would tax large companies 3 percent of their digital turnover, bringing an estimated 1.2 billion euros ($1.3 billion) to state coffers each year.

The tax is one of the measures Madrid wants to deploy this year to raise revenues and bring down its deficit to 1.3 percent of gross domestic product from 2.7 percent last year.

But the European Commission, which is responsible for keeping the budgets of EU countries in check, said the tax may not be as lucrative as predicted.

Commission Vice President Valdis Dombrovskis and Economics Commissioner Pierre Moscovici wrote in a letter to the Spanish government that they had “doubts about the estimated revenue-raising capacity,” of the planned digital tax.

In the letter, dated Jan. 28, the commissioners repeated that there were risks Spain would not meet its deficit target and may not be compliant with EU fiscal rules.

Spain’s central bank on Monday predicted the budget deficit could be as high as 2 percent of GDP this year, much higher than the government’s target..

The Spanish economy ministry and budget ministry declined to comment on Tuesday.

Spain brought in the tax after the failure of talks on an EU-wide levy on large digital firms like Google and Facebook which are accused of paying too little by routing their profits to low-tax states in the bloc.

Talks on the matter are expected to resume in coming weeks at EU level, but on a tax with a smaller scope.

Other EU states, including Italy and France who championed the EU levy for months, have introduced national taxes which would kick in if no deal is reached in Brussels before summer. ($1 = 0.8757 euros) (Reporting by Francesco Guarascio Editing by Keith Weir)

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