Similar levy on tech firms in France provoked threats of retaliation from Washington

This article is more than 6 months old

This article is more than 6 months old

Spain’s government has approved a digital services tax, after a similar move by France that prompted threats of retaliation from the US.

The levy will place a 3% tax on earnings from online ads, deals brokered on digital platforms and sales of user data by tech companies with at least €750m (£623m) in global revenue such as Facebook and Google.

The budget minister, María Jesús Montero, said on Tuesday the tax would not be implemented until December, to allow the Organisation for Economic Cooperation and Development (OECD) to reach an agreement on a separate, global tech tax.

France's digital minister says tax on big tech is just the start Read more

Washington initially threatened to impose high retaliatory duties on $2.4bn (£1.8bn) of French products, including wines and leather handbags, after Paris introduced its digital tax last year.

But both sides agreed last month to pursue a global framework under the aegis of the OECD, and Paris suspended collecting the revenue until the end of 2020.

“Spain cannot afford to have a tax system rooted in the last century. We must move towards a tax system for the 21st century, which takes into account this new form of activity,” Montero said after Prime Minister Pedro Sánchez’s cabinet approved the digital tax.

The goal was to avoid unfair competition with traditional businesses, Montero said.

Officials around the world are grappling with ways to tax tech companies, which often report profits in low-tax jurisdictions such as Ireland and Luxembourg, enraging other governments. Montero said the criteria to apply the digital tax did not discriminate in terms of nationality or type of business.

Britain plans to proceed with its own digital tax despite the potential impact on its intention to forge a post-Brexit trade deal with the US.

Spain expects to raise €968m a year in extra tax revenue from the levy, in addition to €850m a year through a tax on financial transactions, which it also approved on Tuesday.

Last year Sanchez’s cabinet approved the creation of the two taxes but the bills died before they were discussed in parliament because the prime minister was forced to call snap elections after failing to pass a budget.