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European tech leaders warn against EU digital services tax

European tech leaders warn against EU digital services tax

The digital services tax proposed by the European Union would have adverse effects on the region’s innovation and economic growth, warned Technology company chiefs

The warning was issued in a letter to finance ministers of the 28-nation European Union by leaders of 16 tech companies, including Spotify, Booking.com and Zalanda. Its stated that the proposed tax would undermine the EU’s goal of a digital single market and “harm the very businesses that are the catalysts for economic growth and employment in the European economy.”

In their letter, tech CEOs warned that the EU proposal “will have a disproportionate impact on European companies, resulting in unfair treatment.” They also stated that the tax would be incredibly difficult to implement, and could result in double taxation for some businesses and trigger retaliatory measures from other nations.

Addressing EU finance ministers ahead of a Nov. 6 meeting, the letter urged them “not to adopt a measure which would cause material harm to economic growth and to innovation, investment and employment across Europe.”

However, Johannes Bahrke, spokesman at the EU’s executive Commission, remained firm in defending the proposal on Tuesday, saying it aims to create a “level playing field” for companies whether they are based in or outside the EU.

“Our proposal remains fully grounded on the most basic principle of corporate taxation which is that profits should be taxed where the value is created,” he stated.

He did however add that the commission would prefer an international agreement to a new EU law.

The plan was unveiled by the European Commission in March, and insisted that EU member countries should be able to tax firms that make profits on their territory, whether they are physically present or not. The proposal was also seen as a way to see tech giants like Google and Facebook pay more taxes.

Brussels on his part, argued that that corporate tax rules haven’t kept up with the emergence of the borderless digital marketplace that allows some companies to make huge profits in Europe while paying very little tax.

In the EU, foreign companies like Amazon, Google and Facebook pay what tax they owe in the country where they have their regional base — usually a low tax haven like Ireland.

Britain, which is scheduled to leave the EU on March 29, announced its own tech tax this week as well.

Treasury chief Philip Hammond stated that the proposed tax would target UK-generated revenues of specific digital platform business models—although he remained opened in seeking out an international solution like the EU.

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