Germany is delaying the adoption of the “Google tax”, and that’s a good thing

While France and Spain are heavily lobbying for the adoption of a “GAFA” tax (Google, Amazon, Facebook and Apple), also known as “Google tax”, Germany has chosen a more careful approach. Rightfully so.

French finance minister Bruno Le Maire began his move towards what was then known as a “digital tax” (now also called “tax on digital presence”, for mere accuracy) in autumn last year. Le Maire had run a centre-right primary campaign for France’s Republican party as a fiscal conservative, but seems to have found the social democrat within him since he joined Macron’s government.

Describing it as a matter of “fairness”, France’s finance minister Bruno Le Maire has called for European unity on this issue. During the Estonian presidency of the European Union, Le Maire gathered finance ministers to gain support for the proposal.

However, ministers from Denmark, Sweden, Malta, Ireland, or Luxembourg quickly showed opposition, suggesting that such an idea should be taken up at the OECD level. Critics claim that the move could be seen as a further punishment on U.S firms, as most companies affected would be American.

Back in September 2017, Danish finance minister Kristian Jensen said: “I’m always sceptical about new taxes and I think that Europe is taxed heavily enough.” Malta’s finance minister Edward Scicluna expressed his hopes that “this is not another financial transaction tax”, knowingly that he publicly and vehemently opposed the latter as a member of the European Parliament.

Luxembourg’s Pierre Gramegna showed more initial opposition, which has since drowned out: a move that could be related to Luxembourg Prime Minister Xavier Bettel’s ambition to an EU top job after the Grand-Duchy’s election next month.

In administrative court rulings in July 2017, the tech success story Google had escaped a €1 bn bill by the French taxman. The court had ruled that the U.S company could not be taxed on the activities of its service AdWords, since it has no “permanent establishment” in France. This is what sparked the original reaction in Paris, which is now, given the proximity of the European elections in May, even more pressing for the government.

In an attempt to vouch for the tax which seemed rather desperate, French minister Bruno Le Maire brought up Emmanuel Macron’s win against the far-right in France, as a reason to accept the reform.

In any way, this bargaining tactic could drive up one bill, and that is the one of the European Consumer. Very often, increases in company expenditure in indirect taxes, which this would inevitably imply, would raise prices for consumers around the continent. VAT has long been recognised as the tax which hits poor people the hardest, yet many EU countries now prefer to introduce higher levels of indirect taxation.

Just at a time when especially low-income earners can have simpler access to many products because of the internet, it seems cruel to restrict their purchasing power.If people such as Bruno Le Maire want to talk about fairness, then they should first address the unfair situation of those people who cannot support indirect tax increases. If we care about those with low wages, we need a more competitive marketplace in which companies are in a price race, not a race to optimise astronomical tax burdens.

Meanwhile, German finance minister Olaf Scholz is now known to be deliberately delaying the progress of the tax. A confidential document from the German Federal Ministry of Finance, which is quoted by the German newspaper BILD, condemns the “demonisation of the large internet companies”. This has supporters of the tax up in arms, because of course, opposing an idea that they just came up with a year ago must mean that a person is owned by big digital.

Scholz is not even delaying it to avoid because he disagrees with it on principle, as his social democrat party affiliation would probably suggest, but more by pragmatic considerations. German carmakers could suffer from retaliatory tariffs from the U.S, if president Trump were to see the tax as an attempt to increase the level of European protectionism. After all, EU leaders are constantly using the fact that there is no European Google, Apple, or Facebook, continuously in their statements.

It is unlikely at this point that any agreement can be reached until the European elections in May, and that is also thanks to the delays be minister Scholz. The future of Europe’s market economy undeniably lies in the digital sector. The idea of attempting to massively tax online businesses is not a promising objective, neither for the states nor their consumers. It belongs in the dustbin of creative political EU integration.


This article was first published by Vocal Europe.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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