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Europe should go it alone and impose taxes on tech giants such as Google, Apple and Microsoft because a deal to change taxation rules globally is being blocked by countries including the US, Saudi Arabia and India, the French economic minister has said. But Bruno Le Maire's plan for governments across the continent to join forces in a bid to make Big Tech pay its fair share is unlikely to have the desired effect unless other major economies come on board too, one expert told Tech Monitor. There are attempts by the OECD to align global tax policy on large technology companies. (Photo: Poetra.RH/Shutterstock) While there have been major moves recently to align taxation on multinational companies, including an OECD-led deal that will see almost all countries impose a minimum 15% tax on these giants, moves to tighten up rules around profit reporting have hit strong opposition. Proponents of a globally aligned tax policy argue it is required to prevent large companies from declaring profits in only a few jurisdictions. But such measures are opposed by countries where these large technology companies were founded, particularly the US, as well as countries such as India and the UK hoping to attract tech investment by creating favourable regimes for investment. Speaking on Monday, Le Maire said that despite agreement on the 15% global minimum tax on the 100 largest companies having been agreed in 2021, it is unlikely a deal is possible on the wider issues of taxation, and said it is time for a “European solution” which could see greater alignment of corporate tax policies between member states. France already imposes a levy on revenues generated by global tech companies in the country, which generates about $748m a year for the French economy. "We'll call for the situation on Pillar One to be unblocked, but the chances of success are slim," Le Maire told reporters. "This calls for a digital tax to be extended to a European level as soon as possible." Two pillars of global Big Tech tax Pillar One is part of the OECD deal on global taxation policy and proposes that multinationals should be taxed where they operate, removing their ability to shift revenue around so they only pay in the lowest tax jurisdiction. This is the most controversial part of the plan. It is hoped that Pillar One, if implemented globally, will make tax from profits more fairly distributed – shifting tax rights from those countries where the enterprise is physically present or based, to countries where they generate profits. This will have a major impact on countries such as the US where a lot of the Big Tech companies have their global headquarters. Pillar Two, which is likely to be implemented in the coming years after further negotiations and changes to national tax policies, proposes a 15% minimum corporation tax rate. The deal was designed to overcome disagreements between the US and countries including France over national levies on revenue from digital companies. Such taxes have been called discriminatory by the US government, which has suggested it could counter any levies with trade tariffs on goods from countries imposing such levies. There was agreement to hold off on any new digital levies until the deal has been finalised but Le Maire says the US may struggle to get Pillar One through Congress and said if G20 countries can't agree on a fast implementation of digital tax "we'd call for Europe to put it in place" adding that "I think we've got to that point". Speaking anonymously to Bloomberg, insiders from Saudi Arabia said reservations to Pillar One surround exemption rules and India is worried about a lack of support for developing nations. EU approach 'unlikely to have an impact' Any meaningful international agreement on the proposals is likely to be “politically extremely difficult” according to Professor Marc Moore, chair in corporate and financial law at University College London. He points out that India is “extremely keen to establish itself as a global hub for tech companies and entrepreneurs to rival the United States, and anything that risks discouraging inward investment to the sector is like to attract strong opposition.” Moore adds: “The United States Big Tech sector, meanwhile, is facing increasing foreign competition, especially from China, therefore any tax policies perceived as uncompetitive for the sector will be similarly resisted. This is a very challenging backdrop for the OECD as an initiative to be working against here.” The UK government does already have a levy on tech companies in the form of its Digital Services Tax, charged at 2% on revenues of search engines, social media services and online marketplaces which derive value from UK users. However, this will be repealed by 31 December 2023, or earlier if Pillar One is introduced before that date. But, Moore says the UK is likely to be cautious when it comes to Pillar One. “In other policy areas like financial regulation, the UK has been throwing the kitchen sink at trying to enhance the country’s reputation as a friendly environment for global big tech, especially in the light of Brexit," he says. "Any tax policies that cut against the grain of this are, in my view, unlikely to see the light of day in any real, meaningful way.” While Europe is likely to attempt its own solution it “is certainly questionable what difference this will make without other global tech powerhouses such as the US, UK and India also being on board,” Moore adds. Read more: This is how GPT-4 will be regulated

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