France’s President Emmanuel Macron (2nd L) and Germany’s Chancellor Angela Merkel (R) look at US President Donald Trump (front L) and Turkey’s President Recep Tayyip Erdogan (front R) walking past them during a family photo as part of the NATO summit at the Grove hotel in Watford, northeast of London on December 4, 2019.
Christian Hartman | AFP | Getty Images
Taxing tech giants has long divided policymakers, but disagreements with U.S. President Donald Trump could drive Europe to step up levies on companies like Google and Facebook, a lawmaker told CNBC.
France, Austria and Italy are among the European countries that have implemented taxes on the tech companies at a national level, but there’s been a failure at the European Union level to agree on a joint levy.
The political and economic union of 27 countries failed to reach a consensus in March 2019, when four member states vetoed a common tax. At the time, Ireland, Sweden, Denmark and Finland said there should be a broader debate outside of Europe over a digital tax, before the EU implemented its own.
However, criticism from the U.S. could push European countries to design an EU-wide digital tax, Paul Tang, a Dutch lawmaker at the European Parliament, told CNBC’s Beyond the Valley podcast.
“Trump will most likely unite Europe on this,” Tang said. “We are already in a situation where the transatlantic relation is shaky.”
The EU and the United States have clashed over trade, defense, foreign policy and much more since Trump’s arrival in the Oval Office.
“Taxation won’t make this situation easier to put it mildly,” Tang, from the Socialist group in the European Parliament, added, suggesting that the EU doesn’t have much to lose from pursuing a digital tax, even if Trump opposes it, given the state of their relationship.
The White House was not immediately available for comment when contacted by CNBC Wednesday.
In the past, Trump has attacked European governments keen to make tech giants pay higher duties. He said in 2019 that France’s digital tax was foolish and the “great American technology companies” should be taxed in their home country.
Trump also started a trade spat with France and vowed to do the same with other European countries if they taxed U.S. tech firms more. The trade row has been put on hold while an international debate over digital tax takes place at the OECD (Organization for Economic Cooperation and Development).
“There is also a growing awareness in Europe that we need to act on our own, and Trump is forcing Europe to act on its own,” Tang said. “This is not just in the area of trade and taxation, this is much broader.”
If there is no OECD agreement by the end of the year, tech giants will have to pay higher duties in some European nations, including in France, the U.K. and Italy. Meanwhile, the European Commission — the EU’s executive arm — has also said that it will look to create a common EU digital tax if no OECD deal is forged.
Jeremy Ghez, affiliate professor at H.E.C. Business School in Paris, told CNBC’s Beyond the Valley podcast that a digital tax is a good way to make the market place fairer between tech giants and more traditional, smaller businesses.
“Digital taxation is a way to fix this, because if you don’t fix this, you are likely to end up with a two-speed economy and you are likely to empower tech giants further,” he said.
Despite Trump’s fierce opposition, Ghez added that the U.S. might change its approach to digital taxation in the future.
“Down the line, many people inside the United States will understand this argument, I think, which is basically that you need to do that rebalancing act to help traditional sectors better adapt and to not empower too much one industry over the others,” he said.