DUBLIN (Reuters) - The Czech Republic joined opposition by Ireland, Finland and Sweden to the European Union’s proposed tax on big internet companies in a joint paper warning that the measures may breach international treaty obligations.
EU finance ministers agree that tax rules should be changed to increase levies on digital services and aim to finalize a tax on large firms’ turnover by the end of the year, but are at odds on how to do so.
Smaller states with lower tax rates such as Luxembourg and Ireland, which host large American multinationals, want EU changes to come together with a global reform of digital taxation, which has been under discussion for years.
Nordic countries have also urged their partners to shelve the plan for action first at an EU level on concerns over how it may affect their own large digital companies and were joined by the Czechs in the joint paper sent to colleagues last month.
“Given the potentially far-reaching political, economic and legal consequences of introducing a tax at EU level that is not in line with tax treaties, it is our view that a discussion is needed on the compatibility of the DST (digital services tax) with international obligations,” they said in the paper, a copy of which was provided on Monday by Ireland’s Finance Ministry.
The four countries said the new tax could necessitate the renegotiation and potentially eventual termination of bilateral tax treaties with third countries and need to make sure all future treaties allow for the imposition of the digital tax.
A thorough discussion on the legal consequences of the proposal was needed, they said.
Under the European Commission’s proposal in March, EU states would charge a 3 percent levy on digital revenues of large firms like Google and Facebook that are accused of routing their profits to the bloc’s low-tax states.
Reporting by Padraic Halpin; Editing by Janet Lawrence