The European Union (EU) has been discussing the possibility of imposing a “traffic tax” on tech firms to fund telecoms infrastructure and ramp up 5G across the bloc. The idea is that all market actors benefiting from the digital transformation should assume their social responsibilities and make a fair and proportionate contribution to the costs of public goods, services, and infrastructure. However, the digital policy program does not create a tax, nor does it specify what is considered a fair contribution. In this article, we will explore how EU member states voted on the EU “traffic tax” on tech firms.
Background
The EU has been trying to reform corporate tax rules so that profits are registered and taxed where businesses have significant interaction with users. In March 2018, the European Commission proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The proposal aimed to lay down rules relating to the corporate taxation of a significant digital presence. The EU is trying to rein in tech giants and prevent the emergence of anti-competitive dominant companies.
The “Traffic Tax” Proposal
The “traffic tax” proposal is part of a major policy program to make Europe a technology leader by 2030. The Council, which represents the 27 EU governments, adopted its position on the policy program on May 11, 2022. The proposal hints at a future tax for online platforms’ use of telecoms infrastructure. EU member countries want tech companies like Google and Netflix to chip in cash for telecoms infrastructure to ramp up 5G across the bloc. The proposal aims to make foreign online platforms bear some of the burdens of costly infrastructure.
How EU Member States Voted
According to a Reuters report, most member states oppose the EU’s imposition of a “traffic tax” on tech companies such as Google and Meta. They believe that this will lead to a gap in the funding and investment. Even if the EU approves this levy, these tech brands will simply pass the cost on its users. The EU launched a 12-week consultation meeting in February this year, requiring tech firms such as Apple, Netflix and Google that occupy more broadband resources to pay an “Internet tax” to help build 5G network infrastructure.
The draft document, part of consultations with industry, suggests firms could contribute to a fund to offset the cost of building 5G mobile networks and fiber optic infrastructure. It also proposes that the funds will help to create a mandatory system to induce tech giants to pay telecom operators. However, not all the member states in the EU support this idea
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The member states that oppose the imposition of “traffic tax” are as follows:
- Austria
- Belgium
- Czech republic
- Denmark
- Finland
- Germany
- Ireland
- Lithuania
- Malta
- Netherlands
The neutral member states are as follows:
- Poland
- Portugal
- Romania
Member States that support the levy are as follows:
- Cyprus
- France
- Greece
- Hungary
- Italy
The EU has proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The proposal also aims to lay down rules relating to the corporate taxation of a significant digital presence. In addition, the new rules try to prevent the emergence of anti-competitive dominant companies.
EU member states warn
Seven EU countries sent a letter to the European Commission warning against any possible hasty decisions on a “fair share” tax on tech firms. The countries include Ireland, Luxembourg, Malta, Cyprus, Hungary, Latvia, and Lithuania. The letter warned that the EU should not take any action that could undermine the international tax reform process. The countries also called for a global solution to the issue of taxing digital companies.
In 2018, the EU proposed a 3% turnover tax on big U.S. tech firms. The tax would only apply to large firms with annual worldwide revenues above 750 million euros ($924 million). The threshold for EU revenues has been raised from 10 million euros initially foreseen to exempt smaller companies and emerging start-ups from the tax. Large U.S. firms such as Uber, Airbnb, and Amazon could also be hit by the new levy, which would apply across the 28 EU countries. The tax is presented in the draft as a temporary measure that would only be implemented if no deal is found on a more comprehensive, and possibly global, solution to tax the digital profits of companies in the countries where they are generated.
Final Words
The EU member states have been discussing the possibility of imposing a “traffic tax” on tech firms to fund telecoms infrastructure and ramp up 5G across the bloc. However, the proposal seems not to be getting the approval of a majority of member states. The EU has proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The proposal also aims to lay down rules relating to the corporate taxation of a significant digital presence.
The region is also trying to rein in tech giants and prevent the emergence of anti-competitive dominant companies. Seven EU countries have warned the European Commission against any possible hasty decisions on a “fair share” tax on tech firms. The votes show that more EU nations oppose the proposal. Some countries have called for a global solution to the issue of taxing digital companies. In 2018, the EU proposed a 3% turnover tax on big U.S. tech firms. The tax would only apply to large firms with annual worldwide revenues above 750 million euros ($924 million).
