Spain delays ‘Google tax’ until December due to US pressure

The Spanish government is planning to approve one of its signature projects at the weekly Cabinet meeting today: the digital services tax, known popularly as the “Google tax.”

This will place Spain one step ahead of an initiative by the Organisation for Economic Cooperation and Development (OECD) to address the taxation challenges posed by the digitalization of the global economy.

The international organization is in talks with 137 countries to tax multinationals where their users are based and to disincentivize profit-shifting to low-tax jurisdictions. Tech giants such as Google, Facebook, Apple and Amazon, as well as other large companies, are known to engage in these practices to lower their tax bills.

We are working in the international and European arenas, but without giving up on progress at the national level

Nadia Calviño, Deputy PM and Economy Minister

But faced with pressure from the United States, which is threatening to impose retaliatory tariffs on countries that tax American companies, Spain will not be immediately collecting the tax on a quarterly basis. Instead it will wait until the end of 2020, when the OECD is expected to have finalized its own proposal.

“This is not a suspension of the tax, just an end-of-the-year collection,” said Spain’s Deputy Prime Minister and Economy Minister Nadia Calviño, speaking in Brussels.

The French way could be a model for Spain, according to Foreign Minister Arancha González Laya

The decision to postpone collection of the digital service tax illustrates the difficulties that many countries are experiencing due to threats of new tariffs by the US, where most of the world’s big tech companies are headquartered.

In March 2018 the European Commission proposed creating new rules for a fair taxation of the digital economy because “there is a disconnect, or ‘mismatch,’ between where value is created and where taxes are paid.” But Washington says it could slap new tariffs on automobile imports if a digital tax is introduced.

The French case

In the case of France, which unilaterally introduced its own digital tax in July 2019 and even started collecting it, the threats have worked: payments have been placed on hold after US President Donald Trump said he would add tariffs of up to 100% on French goods, including wine.

Spain is now following in France’s footsteps by approving a national tax but waiting to collect it until a global fee is – hopefully – agreed on at the OECD. Spain’s Foreign Minister, Arancha González Laya, has admitted that the French way “could be a model for Spain.”

Spain would like the OECD or the EU to lead the way on a digital tax, but has said that it will forge ahead with a national tax in the event that global negotiations fail. “We are working in the international and European arenas, but without giving up on progress at the national level,” said Calviño on Monday.

The Spanish government is also set to approve the so-called Tobin tax, or financial transactions tax. Sources at the Finance Ministry said the projects slated for approval on Tuesday are nearly identical to the ones that were presented to Congress last year, but which were put on hold due to early elections.

English version by Susana Urra.