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Czech Lawmakers Moves Forward With Digital Tax

The Czech Finance Ministry submitted plans to start taxing global internet giants from the middle of 2020, proposing a 7% rate on targeted advertising, multilateral digital interface use and user data sales, it said on Thursday.

The tax will apply to revenues from online advertising, the sale of user data, and intermediation services, and will only target companies with a global turnover of 750 million euros or more with sales in the Czech Republic of at last 50 million crowns (1.9 million euros) per year.

The tax could raise state revenue of 2.1 billion crowns for the 2020 budget and 5 billion crowns annually after that.

“Internet giants do not pay taxes in our country to an extent that would match their profits, which is unfair to other companies in the Czech Republic that pay taxes,” said Finance Minister Alena Schillerová. “We have long supported the search for a common international solution, but unfortunately negotiations at EU and OECD levels will take some time. And because we can no longer wait and see the unequal competition of global giants with other entrepreneurs, we come up with our own temporary digital tax adjustment until an international compromise will be found.”

The Czech Republic is following the example of Austria, which introduced a five per cent digital tax to come into force by 2020, and France, whose national assembly has approved a three per cent digital tax.

The OECD is conducting multilateral discussions over how to tax international technology companies. The US said it would continue those discussions while conducting its own examination.

The European Commission estimates that on average traditional businesses face a 23% tax rate on their profits within the EU, while internet companies typically pay 8% or 9%.

Imposed all across the EU a similar tax would collect around €5 billion per year.

Brussels’ efforts stalled since an EU-wide levy has to be approved by all members, but Ireland, the Czech Republic, Sweden and Finland raised objections.

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