Potential EU Digital Tax Has Trump Administration, Tech Companies on Edge

The European Union is considering levying a 3% tax on digital sales and services that would affect edge providers and anyone else doing digital business in the EU and it has the Trump Administration and tech companies both raising red flags.

According to the Tax Foundation the EU is trying to come up with a uniform definition of a "digital permanent establishment" for companies doing digital business in an EU member state, which would "be at least $8.1 million (€7 million) in annual EU revenues, more than 100,000 users and more than 3,000 contracts for digital services with businesses in the EU."

That would be a long-term solution, while in the short term the EU would levy a digital services tax, or DST, on companies with annual worldwide revenues of at least $868 million (€750 million) and EU revenues of at least $58 million (€50 million).

It would be a tax on digital revenues from ad space, online sales, sales of user data and more.

In a statement Thursday, Treasury Secretary Steve Mnuchin said the Administration has "strong concern with countries’ consideration of a unilateral and unfair gross sales tax that targets our technology and internet companies. A tax should be based on income, not sales, and should not single out a specific industry for taxation under a different standard."

He warned the EU against unilateral action.

Tech association ITI, whose members include Amazon, Apple, Google and Microsoft, agreed.

“The imposition of a digital tax poses a real and significant threat to companies in all sectors of the economy," said ITI CEO Dean Garfield, "While the notion of a digital tax isn’t new, the likelihood of its implementation is gaining momentum and its possible passage should be taken seriously by all major economies. We welcome the administration’s attention to this issue and share its concerns."

He called the tax a "dangerous precedent" that could violate existing treaties. "We join the administration in urging the European Union to take a multilateral approach to address these complex and far-reaching tax policies and to finish the...process with the United States and other nations.”

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.