EU puts digital levy plans on hold under US pressure

Plans for the introduction of a tax on online tech companies across the European Union have been put on hold while international efforts to agree a global minimum corporate tax rate progress.

Over the weekend, finance ministers from the G20 countries agreed to back proposals, initiated by the United States government, for a minimum tax rate of 15 percent, which has previously been backed by G7 leaders last month, and also more than 130 countries that are members of the Organization for Economic Cooperation and Development, or OECD. G20 leaders will have a chance to discuss the proposal in October.

As a result of this international progress, European Commission spokesman Daniel Ferrie said the EU's plans for its digital levy were "on hold".

"I think we will work together to reach this global agreement," Paolo Gentiloni, European commissioner for economy, told reporters after a meeting with US Treasury Secretary Janet Yellen, who is visiting Brussels.

"In this framework I informed Secretary Yellen of our decision to put on hold the proposal of the commission of a digital levy to allow us to concentrate, working hand in hand to achieve the last mile of this historic agreement."

Yellen has called on all EU member states to back the plan, which aims to make companies, particularly in the tech sector, pay their taxes where they are based, rather than in more favorable overseas tax jurisdictions, as many do now.

"We need to put an end to corporations shifting capital income to low-tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share," she was quoted by Reuters as saying.

However, some countries such as Estonia, Hungary and Ireland, where the corporate tax rate is 12.5 percent, have benefitted from this arrangement, and oppose the new plans as they would be likely to lose business and income as a result.

"We've taken about 10 billion Euros ($11.84 billion) a year in corporation profit tax, double what the average European country does per head," Ireland's Deputy Prime Minister Leo Varadkar was quoted by the BBC as saying.

"It's one of those examples of where low taxes result in higher revenues, in a world where wealth capital, labor, corporations are very mobile."

He said the change was about "big countries trying to get a bigger share of the pie".

After a meeting with Yellen, a spokesperson for Ireland's Finance Minister Paschal Donohoe said he had told her that his country supported change to how multinational corporations are taxed, but that it stood by its opposition to the 15 percent minimum rate.

Ireland was, he added, ready to engage with the OECD as it coordinates talks about how the global tax reforms can progress.