Brussels puts digital sales tax plan on ice after US pressure

The European Union has paused plans for an online sales tax that would have affected US tech giants such as Amazon.

Brussels is putting the plans on ice following pressure from Washington – and after the G20 club of the world’s largest economies endorsed a separate overhaul of corporation tax.

Plans for the digital tax had been expected to be published later this month.

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But they are being paused after G20 members at the weekend backed a deal which would introduce a global minimum corporation tax.

That deal will also mean the likes of Amazon and Google paying their taxes partly based on where they sell their products and services rather than shifting them to headquarters in low-tax jurisdictions.

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It is hoped that Europe’s climbdown on a digital sales tax will help ease the passage of the global reform in the US congress – one of more than 130 countries that would need to ratify it.

The announcement coincides with pressure from US treasury secretary Janet Yellen who has been visiting Europe.

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EU economics commissioner Paolo Gentiloni hinted at the concession over the weekend, telling reporters that postponing the bloc’s digital tax plan would make it easier to concentrate on achieving “the last mile” of the global deal.

Daniel Ferrie, a spokesman for the commission, said on Monday: “We have decided to put on hold our work on our new digital levy.”

Image: US Treasury secretary Janet Yellen has been visiting Europe

He added that the the bloc would reassess the situation in autumn.

The corporate tax plan still faces opposition from some countries including three in the EU – Ireland, Hungary and Estonia.

Ireland, whose corporation tax rate of 12.5% has helped persuade several multinationals to make the country their EU headquarters, has said it cannot support the proposed global minimum rate of 15%.

Ms Yellen on Monday urged all 27 EU countries to join the deal.

“We need to put an end to corporations shifting capital income to low tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share,” she said in a statement.