EU ministers fail to reach agreement on imposing taxes on revenues of tech giants

European Union finance ministers were unable to reach an agreement on digital services tax reforms that would target the revenues raised by tech giants like Google and Facebook after various member states opposed the proposed directive.

The European Commission had submitted a proposal to impose a 3 per cent digital services tax on any registered profits for tech businesses with annual worldwide revenues that exceed 750 million euros ($855 million) or annual revenues within the EU that surpass 50 million euros, Efe news reported.

"The new rules will also change how profits are allocated to member states in a way which better reflects how companies can create value online: For example, depending on where the user is based at the time of consumption," the EC explained on its website.

"Ultimately, the new system secures a real link between where digital profits are made and where they are taxed."

However, after it became evident the directive would not get the necessary unanimous backing, with Sweden and Ireland flatly rejecting it, France and Germany adjusted the proposal late Monday to reduce the scope of the new levy in a bid to get the directive passed.

The significantly altered proposal would only apply a 3 per cent tax to sales of digital advertising space and excludes revenues raised through trading of user data and profits of any other sales.

Franco-German lawmakers urged an implementation of the diluted directive "without delay and in any case before March 2019", which in practice would come into effect by January 2021 if the Organization for Economic Co-operation and Development does not implement a global solution for the failures and loopholes the fiscal system presents when it comes to the taxation of digital services.

Civic action group Avaaz decried the outcome of Tuesday's EC meeting.

"Today, Europe had a golden opportunity to end the injustice of tech billionaires avoiding their taxes while everyone else pays. But despite massive public pressure, ministers simply kicked the can down the road. They now have one last chance to get it done before EU elections," it tweeted.

(With inputs from agencies.)