Luxembourg wins digital tax victory at EU summit

Luxembourg scored a major political victory on Thursday night after it pushed back against efforts to raise taxes on digital companies, like Amazon and Google, in Europe.

Prime minister Xavier Bettel argued at a European Union summit in Brussels for an international approach that would create a global "level playing field".

Bettel said at the beginning of the summit that he would "insist" that work on internet taxation should be made within the framework of the Organisation for Economic Co-operation and Development (OECD).

"There should be no discrepancy between the EU and the rest of the world," he said.

Luxembourg was joined by other small EU countries in opposing an EU-only solution. Ireland's Premier, Leo Varadkar, said: "If we introduce a digital tax, we should do so on an international basis."

The Grand-Duchy, along with the other sceptics, succeeded in securing a reference to the OECD in the written conclusions adopted at the summit.

"It is important to ensure that all companies pay their fair share of taxes and to ensure a global level-playing field in line with the work currently underway at the OECD," the conclusions stated.

The reference represents a defeat for French President Emmanuel Macron, who had been driving for a European solution.

France had been leading an effort, which had gained the support of other large European nations including Germany, Italy and Spain, to increase taxes on digital multinational companies via an "equalisation tax" on revenues, instead of profits.

"A Europe that protects is a Europe of ambition, [with] the ability to have our own regulation of taxation," said Macron at the beginning of yesterday's summit.

However, the French president did win a commitment that the Commission would bring forward its proposals "by early 2018".

The Commission's preferred option is to change the way digital companies are taxed through its broader Common Consolidated Corporate Tax Base (CCCTB) proposal, which would use the firm's assets, labour and sales to calculate where its value is created, and tax the firm accordingly.

However, the changes won by Luxembourg could also be short-lived if there is a change to the voting procedure on tax issues. 

Tax changes currently require unanimous consent from member states, but even Commission President and former Luxembourg Prime Minister Jean-Claude Juncker has argued for a switch to majority vote.

(By Diego Velazquez and Hannah Brenton, hannah.brenton@wort.lu, +352 4993 728)