Spain plans tax on jumbo tech companies despite U.S. warning

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Spain will introduce a digital services tax at the end of the year that would hit the revenue of companies such as Facebook Inc. and Alphabet Inc.’s Google in a move likely to draw the ire of the U.S. administration.

The 3 percent levy won’t be implemented until December to allow the Organization for Economic Cooperation and Development to make a final push to reach an agreement on a separate, global tech tax.

Countries including France and the U.K. have moved forward with their own versions of the digital tax, concerned current laws don’t properly account for a worldwide, data-driven economy. The European Union has also said it would consider a bloc-wide tax in the absence of a global solution. American officials have threatened to impose tariffs on any country that institutes a levy on tech revenue.

“It’s a tax that’s trying to respond to an economic reality that up until about a decade ago didn’t exist,” Spain’s Budget Minister Maria Jesus Montero said at a press conference in Madrid. The rise of the digital economy, she said, means that the international tax system has to “get up to speed” so there aren’t different levies for traditional companies and digital ones.

U.S. rebuke

The U.S. initially threatened tariffs as high as 100 percent on $2.4 billion of French goods in response to their version of the levy, before Paris said it would delay collecting the revenue until December.

When asked if she was concerned about an American response, Montero said, “Our relationship with the U.S. is fluid.”

French and Spanish officials both say a digital tax levied by multiple countries would be more effective than piecemeal policies, and Spain’s support may inject additional momentum into the OECD efforts.

Those talks are trying to address frustration among voters around the world about what’s seen as large-scale tax avoidance. Corporations are often domiciled in other countries — including low-tax jurisdictions such as Ireland or Bermuda, and shift money seamlessly across borders to minimize their obligations. Companies that sell online can easily avoid paying taxes in countries where they nevertheless make significant sales.

Facebook’s Chief Executive Officer Mark Zuckerberg said at the Munich Security Conference over the weekend that he would support OECD efforts to find a global compromise on a digital tax.

Spain’s new tax will apply to companies with at least 750 million euros in global revenue and digital sales of at least 3 million euros in Spain.

The Spanish government, led by Socialist Prime Minister Pedro Sanchez, also approved a tax on financial operations on Tuesday. Lawmakers in Madrid are expected to approve both measures in the coming months.

Jeannette Neumann
Bloomberg News