Digital tax proposal to rock Lux firms

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"The tariffs on steel and aluminum imports from the following countries are suspended until May 1, 2018", the White House said in a statement, listing European Union members states, Argentina, Australia, Brazil, Canada, Mexico and South Korea.

The fact that this tax was originally planned as being "temporary" before it became "targeted" and finally an "interim" tax in the final proposal has created the impression that all this has not been well thought through and that, regardless, temporary solutions ahead of more concrete longer-term proposals are never good. The commission, seeking to close loopholes created by uncoordinated European regulation, says digital firms have an average effective tax rate of 9.5 per cent, nearly half of that of traditional businesses.

The second part of the proposal comes in response to calls from several member states for an "interim tax" covering the main digital activities that escape tax altogether in the European Union at present. It would only apply to large companies, however, with revenues that exceed 750 million euros worldwide and 50 million euros inside the EU.

Valdis Dombrovskis, the Commission's Vice-President for the Euro and Social Dialogue, said the EC "would prefer rules agreed at the global level, including at the OECD".

The European Commission has attempted to address the matter in a number of state-aid cases against companies including Amazon and Apple, alleging the groups exploited differences in national tax law across the EU to avoid tax.

These numbers are, however, disputed by the tech giants, which have criticised the tax as a "populist and flawed proposal".

"The proposed turnover tax aimed at online platforms is discriminatory and ignores the global consensus that the so-called "digital economy" should not be singled out", said Christian Borggreen, vice president of tech trade association CCIA Europe.

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A second proposal outlines an interim 3% tax on revenues made from three main types of services where the main value is created through user participation.

Smaller European digital start-ups and companies, such as Netflix, which depend on subscriptions will be spared from paying the EU's digital tax.

The proposals aim at taxing digital media companies on the basis of where they generate their revenues, and not where they have their regional headquarters in Europe.

EU leaders meeting in Brussels for the European Council summit on Thursday postponed issuing a formal statement on trade until Friday because they were still waiting for Trump's official statement on the exemption. Although the EC said the tax is not specifically aimed at USA companies, the biggest digital companies are American.

The EU's Mr Moscovici sought to reassure that "these proposals are neither a response to a French request nor a response against the United States".

Trump shocked the world with his sudden announcement earlier this month of a 10-percent levy on aluminum and 25-percent tariff on steel, angering Washington's closest allies, which swiftly demanded that they be exempt.

EU Commissioner for trade Cecilia Malmstrom met yesterday with Lighthizer and U.S. commerce Wilbur Ross in Washington to try and secure an exemption.