Europe and the U.S. have long disagreed over new tax arrangements for digital giants, but a deal on the issue is still possible in 2020, the Irish finance minister told CNBC Friday.
Countries disagree on how to tax tech firms such as Amazon and Apple. While some in Europe believe these companies need to pay more in tax within the region, the United States has said the proposed plans discriminate against American firms.
Chances of a deal took a fresh blow in June when the U.S. decided to pull out of talks at the Organization for Economic Cooperation and Development, while threatening to impose trade tariffs on nations that decided to apply individual digital taxes on the tech companies. However, Paschal Donoghoe, Ireland’s finance chief, said he believes that an imminent breakthrough is still a possibility.
When asked if an agreement was still possible this year, he said: “I think it is possible. I think the rumours of the demise of the OECD process were somewhat overstated.”
His comments echo those made to CNBC in July, when he said: “I think we need to view what is happening inside the OECD at the moment as a pause.”
Ireland was one of the few European countries that voted against an EU-wide digital tax back in 2018, pushing instead for a broader agreement with other nations beyond the European level. Ireland is home to a number of large tech firms, which have headquarters in the country.
Even without a deal at the OECD level this year, tensions will remain. France, the first major economy to legislate its own digital tax, is due to collect the first payments in early 2021. The U.K. and Italy have also introduced taxes aimed at tech giants, which they say they will only change if there is a wider international agreement.
Despite his optimism, Donoghoe added that a conclusion of the negotiations might not happen until the start of next year.
“I expect to see that process reactivated later on in the year and while I think some kind of an agreement is possible in 2020, my own view is that it will be more likely that you’d see some of this work conclude in the early parts of next year,” he told CNBC’s Street Signs Friday.
The debate over digital taxation has grown in the aftermath of Covid-19, as many governments are struggling for cash as they attempt to support their economies amid the pandemic.