Abstract:
Brussels is considering taxing large U.S. technology companies through a broad tax on large businesses as a way to increase revenue for the European Union while avoiding retaliation from the Trump administration. Six officials familiar with the discussions revealed that after the United States threatened to take retaliatory measures against countries that implement digital services taxes, the European Commission is studying new options to obtain more tax revenue from technology groups such as Apple, Meta, and Google without targeting the above-mentioned companies alone.
EU member states are negotiating on the EU common budget. Domestic fiscal expenditures of each country are under pressure, so they require the establishment of new EU central-level taxes. Negotiations on the taxation of global multinational corporate profits have stalled, and relevant discussions are advancing against this background.
Brussels is considering amending existing proposals to require all companies operating in the EU with annual revenue of more than 100 million euros to pay a fixed annual tax, officials said.
The current version of the proposal, called the "European Corporate Tax Source," would require digital services companies with subsidiaries in the EU to pay a fixed tax, but would only capture a relatively small portion of multinational companies' profits, officials said.
Officials said that adjusting the threshold and collection amount of the European corporate tax proposal to only cover very large companies will not only increase the amount of taxes collected from technology companies, but also resolve criticism within Europe that the tax will affect a large number of local medium-sized European companies.
Officials said the new tax will apply to all types of businesses, not just digital service companies, and specific details are still being negotiated.
An EU official said: "Some EU member states are opposed to a pure digital tax and do not want to anger the United States; more countries are opposed to the European corporate tax source plan itself. The solution is to expand the scope of taxation to cover almost all large enterprises."
European corporate source tax is one of five new taxes. The entire package is expected to raise around €60 billion per year for the EU's common budget from 2028 onwards.
However, most EU countries strongly oppose the plan, believing that it will put many local medium-sized European companies at a disadvantage compared to overseas competitors.
Officials said that if the threshold is adjusted and medium-sized enterprises are excluded, more countries may be able to support this tax. However, officials cautioned that the adjustment would require unanimous consent from the 27 EU countries. The European Commission declined to comment.
Global tax negotiations for large digital services companies have reached an impasse in recent years. An OECD-brokered deal in 2021 to require large multinationals to pay more taxes in countries where they generate sales has stalled after U.S. President Donald Trump was re-elected in 2024. An EU official said the deal was effectively dead.
Brussels has previously shelved EU-wide digital services tax legislation to leave room for the implementation of a global tax agreement, but it is currently cautious about any tax system design specifically targeting digital companies.
Officials say it will be difficult for such taxes specifically on digital companies to gain the necessary support from EU member states due to concerns about U.S. retaliation.
Since Trump was re-elected, the EU has been walking a tightrope: on the one hand, it continues to implement its iconic digital regulations, while on the other hand, it avoids escalating the situation with the United States.
France, Italy, Spain, and Austria have established their own digital services taxes and have been subject to Section 301 investigations by the United States, which may trigger retaliatory trade tariffs.
The Computer and Communications Industry Association, which represents several U.S. technology giants, declined to comment.
A spokesman for the European Commission said that the Commission will support the European Council and the European Parliament to "reach an agreement on a new own-financing package" this year, calling this package "crucial to provide adequate financing for our common priorities over the next decade."
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