UPDATE: European Union Finance Ministers Push For 'Web Tax'

--Updates With EC, MEP Reaction and Quotes

By Silvia Marchetti and Tara Oakes

     ROME/BRUSSELS (MNI) - Finance ministers from Italy, Germany, France and

Spain have officially endorsed the adoption of a European level web tax to

crackdown on internet giants operating across the EU, with a tax to be discussed

at an informal meeting in Tallinn, Estonia, later this week under the Estonian

presidency. 

     In a letter jointly signed by Italy's Pier Carlo Padoan, Germany's Wolfgang

Schauble, Spain's Luis De Guindos and France's Bruno Le Maire, forwarded to the

European commission over the weekend, the finance ministers of the EU's four

leading members call for an urgent "equalisation tax on the turnover generated

in Europe by the digital companies".

     The statement is the first official endorsement of a web tax, long under

discussion and now backed by the Estonian EU presidency which wants a shared

document by December. 

     The move by major EU peers makes this all the more likely and "concrete"

that the EU could now take effective steps.

     "Being able to appropriately tax the companies operating in the digital

economy is a major challenge for the European Union," state the four ministers

in the letter. 

     Italian Treasury sources told MNI that the joint initiative was spearheaded

by Rome's government to speed-up implementation of a framework web tax. Italy

has been cracking down lately on web giants, sanctioning, among others, Apple

and Google. 

     "We should no longer accept that these companies do business in Europe

while paying minimal amounts of tax to our treasuries. Economic efficiency is at

stake, as well as tax fairness and sovereignty," argue the finance ministers. 

     The ministers called on the Commission "to explore EU law compatible

options and propose any effective solutions based on the concept of establishing

a so-called "equalisation tax" on the turnover generated in Europe by the

digital companies. The amounts raised would aim to reflect some of what these

companies should be paying in terms of corporate tax."

     "This proposal is practical. It will demonstrate our commitment to

appropriately tax the companies of the digital economy in a way that reflects

their genuine activity in the EU," adds the letter. 

EC REACTION

     EC tax spokesperson Vanessa Mock told journalists at the regular midday

briefing that the Commission broadly welcomed the interest now being shown in

the issue.

     "We're actually very glad to see political interest in this issue. We trust

and we hope that this interest can be harnessed to drive forward our work to

find a solution to the taxation of the digital economy," she said.

     "As for any business, digital giants should really pay their fair share of

tax in the countries where their profits are aimed," she added.

     The EC are not the only ones struggling to find a solution with digital

taxation in a fast-changing and varied marketplace: the OECD have also tried to

address the issue as part of their work on Base Erosion and Profit Shifting

(BEPS), saying in 2015 that 'key features of the digital economy may exacerbate

BEPS risks'.

     One of the many issues to be dealt with is the wide range of business

models used by online 'giants': Apple, for example, also have physical

bricks-and-mortar stores subject to tax arrangements in member states as well as

their vast online presence, whereas other platforms have purely online revenue

streams based on advertising models.

     Despite increased visibility of the issue and international pressure

whipped up by the letter, for some in the EU bubble the pace is still not fast

enough. MEP Sven Giegold, financial and economic policy spokesman of the

Greens/EFA group, said in a statement any initiative was "overdue".

     "Instead of parking their billions in profits in tax havens, internet

giants must also make their contribution to the financing of the community in

Europe. The unfair competition between internet giants and the local economy

undermines the European internal market," Giegold said, calling for EU tax

decisions to be decided by majority rather than the currently-required

unanimity.

     The Tallinn summit discussion paper, obtained by MNI, states that

international rules on taxation are 'outdated' and 'cannot cope with the

challenges of the digitalisation of the economy'.

     The fact that business can only be taxed where they have a 'physical

presence' is creating massive distortions, it adds.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,MC$$$$,MI$$$$]