SOFIA — France is running out of allies to push through its controversial revenue tax on digital giants like Google and Facebook.
Its push to create a temporary EU-wide tax on revenue generated by major tech players across the bloc is running into trouble, as former supporters of the tax plan are getting cold feet and choosing to rally around an international solution via the Organization for Economic Co-operation and Development (OECD).
“We can no longer accept to have … all our private companies paying a higher level of taxes in our nations when the digital giants are not paying the same,” French Finance Minister Bruno Le Maire told journalists after the informal meeting of EU finance ministers in Sofia, where he hoped to rally support for the measure. “If you want to explain that to the citizens, good luck,” he added.
But according to EU officials present at closed-door discussions on the issue, Le Maires European counterparts are increasingly fearful of U.S. retaliation over the plan, amid widespread wariness of a looming trade war with Washington.
The latest blow to Frances hope of reaching a deal by the end of 2018 came from an unexpected source — the United Kingdom. Although its on its way out the door, EU tax initiatives need the full support of all 28 governments before they can come into effect.
U.K. Chancellor of the Exchequer Philip Hammond used the Saturday meeting to call for a global approach to digital taxation through further dialogue at the OECD — rather than pursuing a temporary solution in the EU.
The controversial levy — presented by the European Commission last month — is supposed act as an interim solution before EU countries agree on a second proposal, which is designed to permanently change the blocs corporate tax rules.
Hammond is not alone in preferring an international solution on the issue. Ireland and Luxembourg, for example, have repeatedly warned of the potential repercussions the revenue tax could have from across the Atlantic.
“You have to understand that the Trump administration will regard the turnover tax as a hostile act,” Hammond said, according to one of the EU officials in the room.
“There is no reason why we cant [engage] bilaterally with the U.S. in parallel with OECD action,” the Brit reportedly added. “The U.K. considers the global solution the only way forward.”
European Commissioner for Taxation Pierre Moscovici has highlighted the merits of the temporary tax, which at a rate of 3 percent is expected to collect around €5 billion a year in revenues across the bloc.
But Hammond reportedly warned his EU peers that the multibillion-euro windfall would be much less impressive once its divided up between 28 tax men, several officials said.
The U.K. withdrawal leaves Frances ranks increasingly thin, with one attendee in the room noting that only four finance ministers — from Poland, Portugal, Spain and Italy — spoke in favor of the revenue tax.
The opposing team is growing in numbers. Ministers from Malta, Luxembourg, Ireland, Denmark, Lithuania, Finland, Sweden and the U.K. all pushed for Europe to seek to reach a global deal through the OECD.
The others effectively sat on the fence. Germanys new finance minister, Olaf Scholz, stayed silent during the entire debate, according to one official.
Germany has become increasingly reluctant to join the French tax offensive, mindful that exports from its huge car industry could be vulnerable to a U.S. backlash.
“The U.K. signed a letter in September in favor of the European digital taxation and I dont know what led the U.K. to change their mind,” Le Maire told reporters after the meeting.
“We are an independent Continent and we should remain an independent Continent,” he added, questioning whether “EU countries do not have the courage to take their fate in their hands.”