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Margrethe Vestager warns that EU could act alone on digital tax

The European Commission has given the OECD fifteen months to reach a global agreement on how to tax tech companies.

Commission vice-president Margrethe Vestager warned on Friday (27 September) that the EU will press ahead with its own tax plans if the intergovernmental body fails to agree a deal before January 2021.

In May this year, the OECD announced a road map for “resolving the tax challenges arising from the digitalisation of the economy”, and committed to creating a “unified long-term solution” by the end of next year.

But several European governments, frustrated by slow progress at the OECD, have threatened to go it alone and institute their own policies to ensure tech companies pay more tax on domestic revenues.

The British government published a finance bill earlier this year confirming plans to introduce a new two per cent tax on tech companies’ revenues by April 2020. France and Germany have published similar proposals.

But the plans have stoked the ire of the tech giants, which back an international response, and also the US government, which has threatened to withdraw support for a UK trade deal and sue France.

The Trump administration only backed down after Emmanuel Macron, the French president, promised to shelve the tax once the OECD had reached an agreement. Under the terms of the deal with the US, France will also backdate any refunds owed to tech companies that have been overcharged, due to discrepancies between the French and OECD regimes.

Vestager, who has ordered Ireland to reclaim $14bn of back taxes from Apple, appears unfazed by the prospect of US retaliation. “If no effective agreement can be reached by the end of 2020, the EU should be willing to act alone,” she said in response to questions from EU politicians this week.

Recent research by Tax Watch has claimed that Facebook, Google, Apple, Microsoft and Cisco avoided paying £5bn in UK taxes in the last five years.