Digital tax - the Irish reaction in Brussels

Bad idea, even worse timing. This was the Irish perspective in Brussels to the digital tax on online revenues proposed by the European Commission, the bloc's executive arm, unveiled on Wednesday.

The question for Irish opponents of the tax plan in Brussels this week: why step ahead of the OECD when it has been undertaking effective and painstaking work under the base erosion and profit shifting project to close loopholes between national tax systems being exploited by multinational companies on global revenues?

The commission believes the tax is necessary because taxation is out of kilter with the modern global economy. Smaller member states, like Ireland and Luxembourg, see it differently: they view as another way of cutting the European cake with the bigger member states doing the cutting.

The timing is bad as the idea has been floated at a time when there is a possibility of a trade war between the EU and US over President Donald Trump’s tariffs on imported steel and aluminium, which come into force.

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The 3 per cent levy on online revenues - known as the Gafa tax because it will hit Google, Apple, Facebook and Amazon most - will incite the Trump administration seeing this as a tax grab on US corporate cash.

US commerce secretary Wilbur Ross told an Irish delegation during a visit in Washington last week that the administration views this as an attack on American corporations.

The fact that this tax was originally planned as being “temporary” before it became “targeted” and finally an “interim” tax in the final proposal has created the impression that all this has not been well thought through and that, regardless, temporary solutions ahead of more concrete longer-term proposals are never good.

Then there are suspicions about what motives might be driving Moscovici and that he might be trying to make a name for himself and currying favour with reform-hungry French president Emmanuel Macron.

There is likely to be push-back from Taoiseach Leo Varadkar when he arrives for the summit of EU leaders in Brussels on Thursday and talk from the smaller states during the two-day European Council that this might be something that the EU will live to regret.

Irish representatives attending Ibec's launch of a report cautioning Europe against a "radical change in direction," doubted the Commission's plan become.

"Sometimes they go a bit too fast because issues like this, you're better off to get everybody on board, get a consensus, flag it fairly well in advance then if people agree you can go ahead," said Fine Gael MEP Seán Kelly.

Fine Gael colleague Mairéad McGuinness believes the Irish line will hold.

“I don’t think the conversation is any harm but our line is the most effective one: these companies are not European, they are global and the issues around how they operate, taxation, is global, not European,” she said.