European Tech Firms Warn Against EU Digital Services Tax

European Tech Firms Warn Against EU Digital Services TaxTech Firm chiefs have warned that an Electronic services tax Suggested by the European Union would hinder innovation and hurt economic growth.

In a letter to finance ministers of the 28-nation European Union, leaders of 16 tech companies such as Spotify, and Zalando state the proposed tax would undermine the EU’s target of a digital single market and”damage the very businesses that are the catalysts for economic growth and employment in the European market.”

Johannes Bahrke, spokesman in the EU’s executive Commission, defended the proposal Tuesday, saying it intends to make a”level playing field” for businesses whether they are based in or outside the EU.

“Our proposal stays entirely educated on the most basic principle of corporate taxation that is that gains should be taxed where the value is created,” he explained.

The European Commission introduced its plan in March, insisting that EU member nations should be able to tax companies that make profits on their territory even if they aren’t physically present.

The proposal was seen as a way of making tech giants such as Google and Facebook pay more taxes.

Brussels argues that corporate tax rules haven’t kept up with the development of this borderless digital marketplace which makes it possible for some businesses to make massive profits in Europe yet pay very little tax.

From the EU, overseas firms like Amazon, Google and Facebook cover what tax they owe from the country where they have their regional base – typically a low tax haven including Ireland.

Britain, which is scheduled to depart the EU on March 29, announced its tech taxation on Monday.

Treasury leader Philip Hammond stated the proposed tax would aim UK-generated revenues of particular digital platform business models. Hammond, such as the EU, said he’d prefer an international solution.

In their letter, technology CEOs warned the EU proposal”will have a disproportionate effect on European companies, resulting in unfair treatment”

They also said that the tax is going to be hard to implement, could lead to double taxation for a number of businesses and may trigger retaliatory measures from different countries.

Addressing EU finance ministers before a November 6 meeting, the letter urged them”not to adopt a measure which would cause material harm to economic development as well as innovation, employment and investment throughout Europe.”