The Senate of Spain has passed a Digital Services Tax (DST) bill, under which companies offering certain digital services and with a global turnover above €750m will be taxed 3% on their income.
The bill, also known as the ‘GAFA Tax’ (an acronym for Google, Apple, Facebook and Amazon) or ‘Google Tax’, will come into force on 16 January 2021 after being published in the Spanish Official State Gazette (BOE) earlier this month.
Through the introduction of the DST, the Spanish government wants to prevent technology heavyweights from avoiding taxes in countries where they offer digital services through intricate financial schemes, including registering their profits in low-tax EU states such as Luxembourg or Ireland.
Digital services that fall under the DST include online advertisement, sales of user data, and online intermediation services providers (OISPs). OISPs includes marketplaces such as those offered by Amazon, Google, Apple and Facebook, which are thought to be the main targets of the bill.
The Spanish government argues the tax won’t affect middle or working-class citizens but only multinationals with a business model not properly reflected in the tax system.
However, some opponents of the bill say it will also hit smaller enterprises at a time when digitisation is most needed as a result of the pandemic.
“The DST won’t only affect a handful of huge multinationals but it will also have a direct impact on start-ups and small and medium-sized enterprises (SMEs),” José Luis Zimmermann, general manager at Adigital, a business association representing the digital economy in Spain, told Tech Monitor.
“Unlike what it seems, the tax will bring negative effects to the overall Spanish economy, pushing it to be less productive, less innovative less entrepreneurial and, in consequence, less competitive at a global level.”
When the bill was originally proposed by Pedro Sánchez’s coalition government, it was estimated that it would bring in €968m a year in extra tax revenue. However, the Independent Authority of Fiscal Responsibility puts the figure between €546m and €968m.
Spain joins the governments of France and Italy, who have also introduced a 3% tax on digital services income by tech giants. The UK, Austria and Germany have a similar levy and there are ongoing efforts to introduce EU-wide measures, despite President Trump’s warnings that he will retaliate against what he perceives a threat to American interests.