EU leaders want proposals on taxing online giants early next year

By Julia Fioretti

BRUSSELS (Reuters) - European Union leaders said on Thursday they looked forward to seeing proposals on taxing online giants by early 2018 but in a nod to concerns from countries like Ireland said EU efforts had to be in line with work under way at a global level.

European countries are split over whether online companies such as Google , Facebook and Amazon should pay more tax, with smaller EU members such as Ireland and Luxembourg - which host many online businesses - worried that taxes would hurt their competitiveness without a global solution.

Countries like Italy and France on the other hand are frustrated by the low tax rates online giants pay by re-routing profits through low-rate countries and insist the EU should go it alone if the Organisation for Economic Co-operation and Development (OECD), which includes the United States and Japan, is unable to reach an agreement on a global solution.

 

Meeting for an EU summit, the leaders said in their conclusions that they looked forward to "appropriate (European) Commission proposals by early 2018."

However they referred to the need to ensure a "global level-playing field in line with the work currently under way at the OECD", a change from earlier draft summit conclusions which did not mention "global" or link the OECD work to EU efforts.

An EU diplomat said French President Emmanuel Macron - who has led the charge for more taxation of digital giants - was told to wait for OECD proposals in April 2018.

Last month the European Commission outlined three options for taxing internet companies: taxing the turnover rather than the profits of digital firms, putting a levy on online ads and imposing a withholding tax on payments to internet firms.

In the longer term the EU wants to change existing taxation rights to make sure digital firms with large operations but no physical presence in a given country pay taxes there instead of being allowed to re-route their profits to low-tax jurisdictions.

The EU wants member states to reach a compromise by December, will then base its proposals on what they agree to, and will also send those proposals to the OECD.

However, the EU faces the prospect of countries opposed to the measures blocking the move as states have a veto on tax matters.

The Commission has raised the possibility of stripping members of their veto rights on tax issues, a move Ireland has said it will resist.

(Additional reporting by Alastair Macdonald; Editing by Phil Berlowitz)