EU states set to scrap digital tax plan, to work for global reform

European Union finance ministers are set to ditch a plan to introduce an EU-wide digital tax next week but agree to work on a global reform of the taxation of internet companies, an EU document shows.

The move is likely to be welcomed by digital giants like Alphabet Inc’s Google and Facebook who would have fallen under the scope of the envisaged 3 percent levy.

“A number of delegations continue to have fundamental objections,” the Romanian presidency of the EU wrote in a document prepared ahead of the EU finance ministers meeting on March 12.

The meeting had been seen as the last opportunity to reach a deal on the plan.

The document showed that EU ministers week are expected to agree instead to keep working on a global tax reform prepared by the Organisation for Economic Co-operation and Development (OECD), a club of mostly wealthy nations.

Global reform of tax rules has been debated for years but has never been agreed as national interests differ widely.

Under the plan originally rolled out by the EU Commission last year, large companies would have been required to pay a levy on data sales, online marketplaces and targeted advertising. But several EU states blocked it, fearing a loss of revenues and retaliation from the United States and other countries affected.

Tax reforms on the EU level must be backed by all 28 member states to be approved, but Ireland and Scandinavian countries have staunchly opposed the overhaul. Other countries have also been skeptical.

In a bid to salvage the plan, France - the keenest supporter of the tax - agreed in December with Germany, the largest economy in the bloc, to limit its scope only to digital advertising. But even the watered-down plan met with scepticism in some capitals.

As the plan floundered, France, Italy and Spain have moved to introduce digital taxes on the national level.