EU tech regulator backs UK plans for digital tax, despite Trump threats

The European Union’s leading tech regulator has thrown her weight behind the British government’s plans to press ahead with a digital tax despite threats from Donald Trump.

Margrethe Vestager, the EU competition commissioner recently promoted to take charge of Europe’s digital policy as well, said she was a “strong supporter” of national digital taxes in order to advance the chances of an international agreement. She said the EU would revive plans for a digital tax within a year if international efforts to find a solution failed.

“I think it is very important that we keep up the momentum. Because of this very fundamental injustice that most people and businesses pay their taxes and they are competing with businesses who create value but do not pay taxes,” she said in an interview with the Guardian and other European newspapers.

Although not mentioning the UK by name, Vestager backs all EU member states imposing digital taxes, based on the “very, very simple thing that most businesses pay their taxes”.

The transatlantic row over taxing digital companies, such as Facebook, Google and Amazon, burst into the open at Davos this week, when the UK chancellor, Sajid Javid, vowed to press ahead with go-it-alone plans for a UK digital tax, despite threats from the US of punitive tariffs on British car exports.

Earlier in the week, the French president, Emmanuel Macron, a digital-tax champion, agreed to postpone tax plans for one year in order to find a solution through the Organisation for Economic Cooperation and Development. France was also under pressure from Trump, who threatened to slap tariffs on champagne, Roquefort cheese and handbags if the tax went ahead.

French economy minister Bruno Le Maire insisted France has not given in to US pressure and digital companies in France will have to “pay their tax dues”, either via an OECD deal or the French tax.

The head of the OECD, Ángel Gurría, said on Thursday he was hopeful of having a framework that would apply to more than 130 countries drafted by July.

Speaking before Gurría’s latest intervention, Vestager said member states implementing digital taxes would get support from the commission. Trump “decides what he will do and we decide what we will do” she said.

But she added that it would be “questionable and wrong” to give up on the prospect of an OECD agreement. Asked when the commission would act in the absence of a deal, she twice referred to a deadline set by the European commission president, Ursula von der Leyen. “It says at the end of this year or beginning of next year,” she said. “That’s the task we’ve been given.”

The EU’s desire to revive digital tax plans could be foiled: an earlier proposal for a 3% levy on internet companies was rejected by a handful of member states, including Sweden, Denmark and Ireland. EU laws on tax can only come into force with unanimous agreement.

“When it comes to taxation there are no guarantees,” Vestager said, but added she was “not completely pessimistic”, citing 14 laws agreed by the EU in five years to clamp down on tax avoidance.

The Danish Liberal party politician, who won plaudits for forcing Apple to pay unpaid taxes and fining Facebook for misleading the regulators, started a five-year term last month as one of three European commission first vice-presidents.

A former government minister, she failed in her bid to become European commission president, as Europe’s centre-right and centre-left forces preserved their dominance in divvying up the EU’s premier positions. Vestager said it took her “between 20 and 30 seconds” to digest not getting the top job, which went to Germany’s centre-right defence minister Ursula von der Leyen.

Vestager said she was successful in one of her main targets: having a woman run the EU executive for the first time. “The fact that it wasn’t me, I couldn’t help it. So would it bring me something good to grinch about it? Conclusion after 30 seconds: no.”

Another pressing task is to assess how the EU should regulate artificial intelligence. Following a widely shared leak, the commission is expected to call for a temporary ban on facial recognition in public places, while regulators assess how to treat the technology.

Vestager said regulators needed to explore how society could exploit AI, such as in reducing health inequalities and tackling pollution, without exposing people to risks.

That meant regulators deciding when AI should be considered risky. “Say my music-streaming service only gives me a playlist of jazz from the 50s and what I really want to hear is the new Eurovision soundtrack. Well I can fix that, it’s easy, no harm is done. But if it’s technology that failed to detect malign cancer, then it is a different matter. So what is the trigger for technology to be seen as risky?”

As the EU’s competition enforcer, Vestager is also expected to take a keen interest in trade talks with the UK, especially in ensuring the British government can not outcompete EU countries through unequal state subsidies. She said the EU had “a firm starting point” to ensure a level playing field between EU firms and British competitors.

The EU has said the UK can only have a zero-quota, zero-tariff trade deal by maintaining EU rules on state aid and social and environmental protection.

Brexit would leave a “void” in the EU likely to be filled, she suggested, by a varying alliance of countries seeking to be a counterweight to France and Germany. “We always talk about the French-German axis, but for an axis to be interesting it also needs some energy from the outside,” she said.

“I think the energy coming from the British side has been part of [how] that axis works. With the Brits leaving, there’s a void and a void will have to be filled, otherwise things implode. So I think there will emerge a new dynamic, where maybe not one country but changing groups of countries will step in to fill that.”