France and Germany presented a compromise measure on Tuesday that would tax 3% of digital advertising sales, but saved other online services that had been targeted on a previous proposal.
"[The new version] it will most likely impact Google and Facebook and other companies that have a large amount of online advertising sales, "said Daniel Bunn, director of global projects at Tax Foundation.
The proposal is a more restricted version of the tax plans supported by the European Commission and supported by the French president Emmanuel Macron. The original proposal foresaw a 3% tax on a wider range of digital assets, including the sale of consumer data and transactions via online markets.
The fiscal initiative is the latest in a series of European regulatory and legal efforts to target technology companies. The EU has imposed new and strict data privacy rules and has hit Silicon Valley companies with the main antitrust fines.
Bunn said the new plan is controversial because it would tax revenue rather than profits.
"[The proposal] it is trying to tax part of the economy differently than other parts, "he said. This is discriminatory. "
A global effort
The Organization for Economic Cooperation and Development is pushing toward global standards among the richest economies in the world. But a final proposal is not expected until 2020, and even more time will be required for any changes to be implemented.
Europe does not want to wait that long and has defined the current proposal as a temporary solution. All EU Member States should sign the plan to become a new law.
French Finance Minister Bruno Le Maire said that the compromise measure is not what he hoped, but it is still a good option if previous European failures agree on tax issues.
Ireland, which hosts Apple's European headquarters, Facebook and Google, is among the skeptics. A spokesperson for the Irish Ministry of Finance said that there are concerns about the compromise measure and that he would prefer a global solution.
The Information Technology Industry Council (ITI), a lobby group for the technology industry, said the ongoing process in Europe is not "a way to tackle such an important and far-reaching problem".
"Instead of rushing into an equally relevant approach – a tax focused on digital advertising – we recommend that the European Council oppose such a discriminatory measure and instead invest the EU's energy towards creating a multilateral solution through the OECD, "he said in a statement.