On May 29, the Minister of State for Culture, Wolfram Weimer, proposed a 10% advertising levy based on the Austrian model. We welcome this proposal. After all, digital companies continue to pay significantly lower taxes than other companies (9.5% instead of 23.3% according to a recent CEPS report). Taxation helps to curb economic power by returning part of the revenue to the community. There are various aspects to consider when designing such a tax, which are summarised here.
Who should pay a digital tax? In Austria, the digital tax is limited to advertising markets; in other EU countries such as Italy, France and Spain, the taxes there also include other markets such as digital platforms or data transmission services. With the increasing importance of cloud services, for example, it is advisable to choose the broadest possible basis for tax assessment. What the existing tax bases have in common is that they are due from an annual global turnover threshold of €750 million and are therefore only levied on very large companies. The CEPS report contains an overview of the various digital taxes within the EU as well as revenue estimates for the taxation of different markets.
Who should levy digital taxes, individual countries or the EU? Effective action against the tax avoidance strategies of global corporations requires a global approach. Nevertheless, it also makes sense to levy taxes at regional and national level. Discussions on a digital tax are underway at EU level; however, there is little reason not to act more quickly at national level, as the examples of Austria, Italy, France and Spain since 2020 show.
Who should benefit from a digital tax? There are suggestions that the revenue from a tax should go directly to journalism. There are good reasons against this: Strengthening journalism makes sense and should, however, be independent of the introduction of a tax. After all, the social value of journalism should not be linked (even more) to how much income Google and Meta generate on advertising markets. Sensible measures such as the unbundling of Google’s advertising platforms or a ban on personalized advertising would then suddenly lead to less money being available for journalism.
What are the alternatives to a digital tax? A desirable alternative could be a consistent excess profits tax, as recommended by the Tax Justice Network, as it addresses the problem of economic power on a more fundamental level or independently of the sector. What Weimer could mean, for example, would be a cultural fund financed by Google and Meta to promote journalism. The voluntary commitments he mentions should be rejected, as it should not be up to companies to decide whether and to what extent they pay taxes.
Is taxation more important than breaking up or regulating digital corporations? All three aspects are needed to address the variety of negative effects of digital corporations. Breaking them up deprives them of the opportunity to shape entire markets according to their will and link them together. Taxation obliges them to return part of their economic power to the countries in which they operate. Abuse control (for companies with market power) and regulation oblige them to refrain from individual forms of damage.
Aline Blankertz also spoke about this with Deutschlandfunk Kultur.
