Spain planning on going ahead with ‘Google tax’ despite US tariff threats

Spain will press ahead with the creation of a tax on certain digital services as soon as a government is formed, according to sources from the caretaker executive. This so-called “Google tax” could, however, raise the ire of the United States, which has already threatened France with reprisals over a similar levy.

Sources from the Finance Ministry said that the ultimate decision to go ahead with the tax will lie with the next Spanish government, which is likely to be a coalition administration led by the Socialist Party (PSOE) with left-wing Unidas Podemos as partners. The measure was included in the PSOE’s manifesto ahead of the November 10 election, and the caretaker finance minister, María Jesús Montero, has often spoken in the past of the need to create a tax of this kind in order to bring the Spanish fiscal system up to date with the realities of the 21st century.

Similar legislation was sent to Congress for approval, but it was abandoned after parliament was dissolved ahead of the recent general election

The previous PSOE administration had already included such a tax in an agreement it reached in October 2018 with Podemos ahead of its failed attempt to pass the 2019 budget. The former Cabinet of then-Prime Minister Pedro Sánchez approved a royal decree that would have seen new levies on certain digital services, which became known as the “Google tax,” and which aimed to collect around €850 million for the state’s coffers. The legislation was sent to Congress for approval, but it was abandoned after parliament was dissolved ahead of the recent general election.

Sources close to the caretaker finance minister pointed out that the planned Spanish legislation does not target companies according to their country of origin, and argued that the ideal approach would be for such measures to be approved on a joint basis across either European Union (EU) or OECD countries. But there are no plans for this to happen before the end of 2020 at the earliest. That is why countries such as France have already come up with their own regulations, which has in turn prompted a response from Washington. After US President Donald Trump threatened to impose tariffs of up to 100% on French products, on Monday the EU closed ranks, announcing that it would respond “united” to a measure of this kind.

The levy designed by Spain included a tax rate of 3%, which would be applied to certain digital services from tech giants whose global revenues exceed €750 million

The levy designed by Spain included a tax rate of 3%, which would be applied to certain digital services from tech giants whose global revenues exceed €750 million and whose earnings in Spain are greater than €3 million. The decree defined three taxable factors in which the participation of end users is decisive for the creation of value: advertising aimed at the users of a digital interface (webpage, technological platform, software or social network); the supply of a platform that allows users to locate other users to trade with them (such as online retailer Amazon); and finally, the sale or transfer of data collected from the users of a website or platform.

“In the 21st century it is not acceptable for a country, state or political force to use threats or coercion to present their disagreement or opposition to a 21-st century taxation system,” said Montero in July. “Ideally, there would be a global agreement, or failing that, one on the European level, but if there is no deal in these two areas we will have to act on a national level,” said caretaker Economy Minister Nadia Calviño earlier this year. “The government is not ruling out taking action and tackling the implementation of this tax,” she added.

English version by Simon Hunter.