EU Seeks Compromise on Tech Taxes as Macron Rails Against Google

(Bloomberg) -- The European Commission set itself the challenge of finding a formula that will satisfy leaders both like France’s Emmanuel Macron, who’s demanding giant tech companies pay more taxes, as well as those concerned about driving their business away.

Commission President Jean-Claude Juncker said his officials will propose a new set of rules for taxing tech companies next year after a day of discussions at a European Union summit in Tallinn, Estonia.

Macron is leading a group of 10 countries also including Germany, Italy and Spain that want to find a way to stop companies like Google, Facebook and Apple shifting their profits to low tax jurisdictions such as Ireland or the Netherlands. Officials in Dublin, engaged in a legal fight with the commission to avoid receiving a 6 billion-euro ($7.1 billion) tax windfall from Apple, are trying to block the initiative.

“Internet giants are not contributing to funding the common good,” Macron said at a press conference after the summit on Friday. “Some Internet giants are not playing a fair. They are using their dominant position to block other players, and we’re calling for an ambitious reform on that.”

Irish-led resistance has hampered early efforts to create a new levy for companies also including Amazon.com Inc., a move requiring unanimity of EU members. Traditional practices have failed to capture revenue from an industry where value creation tends to be virtual rather than material and digital companies have sought to take advantage of loopholes created by uncoordinated European regulation.

Romanian President Klaus Iohannis was among those advocating a more cautious approach to levies on Internet-based services.

“There’s a need to find an adequate method, a fair method, to tax these services because we’re facing a danger here in Europe,” Iohannis told reporters as he met fellow EU leaders in Tallinn. “If we overdo this tax, I don’t think it will solve the problem. We’re in fierce competition with the U.S., with Asia, so if the taxation level is too high, then companies would move elsewhere and we wouldn’t gain a thing.”

While France has proposed a temporary levy on revenue because taxing profits is complicated under international rules, countries such as Austria and Estonia suggest applying current discussions to an interim solution before passing that outline on to the Organization for Economic Cooperation and Development for a more comprehensive fix.

One French official said that countries are making progress toward a unified response. Like with the international approach to changing banking-secrecy rules, the French believe a new tax system for tech companies that use the disparate rules in EU states to pay less could result from a rapid change in the global consensus.

--With assistance from Arne Delfs and Ian Wishart

To contact the reporters on this story: Andra Timu in Tallinn at atimu@bloomberg.net, Ott Ummelas in Tallinn at oummelas@bloomberg.net, Helene Fouquet in Tallinn at hfouquet1@bloomberg.net.

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Ben Sills, Michael Winfrey