Booking, Spotify CEOs plead with EU not to impose tech tax

Chief executive officers from some of Europe’s largest tech companies, including Booking.com, Spotify Technology SA, and Zalando SE, have urged European governments not to adopt a tax on digital revenues.

The proposed levy would “create a harmful legal precedent of taxing revenues over profits, even when the taxpayer is not yet profitable,” according to a copy of the letter to the European Union’s finance ministers obtained by Bloomberg. The letter was also signed by the CEOs of Allegro.pl, Supercell Oy and Takeaway.com NV.

The bloc has been unable to reach agreement on a proposed 3 percent levy on the European sales of tech companies, amid persistent resistance from countries including Sweden, Ireland and the Netherlands. Even a watered down version of the tax, targeting only advertising, has struggled to garner support, as governments mull how to strike a balance between luring business and addressing popular discontent about companies not paying their fair share.

Austria, one of the leading advocates, has gone ahead with its own domestic proposal, and other proponents of the levy, including Italy and France, vowed to do the same. Traditional tax systems have so far failed to capture revenue from companies with global reach but limited physical presence, fueling anger from voters disgruntled after years of austerity and meager wage growth.

The planned levy would “impose a financial burden on burgeoning European companies and weaken their ability to compete globally,” and “result in double taxation, particularly when charged on EU resident companies’ revenues, which are already subject to corporate income tax and VAT in Europe,” according to the letter.

Critics of the levy have argued that the tax risks triggering the ire of President Donald Trump in the midst of a transatlantic trade spat, as most of the affected companies would be U.S-based. The signatories of Monday’s letter complain that any tax would “risk retaliatory or copycat action from third countries, including adverse and arbitrary taxes on European businesses’ turnover in those jurisdictions.”

Spotify CEO Daniel Ek
Daniel Ek, chief executive officer and co-founder of Spotify AB, stands for a photograph after a news conference in Tokyo, Japan, on Thursday, Sept. 29, 2016. Spotify Ltd. is bringing its popular online music service to Japan, a large and lucrative market where fans have demonstrated a continuing fondness for CDs and even vinyl records. Photographer: Akio Kon/Bloomberg