A reform that was not urgent

The Council of Ministers has referred the Digital Services Tax bill (which is internationally known as GAFA tax) to the Courts because -above all- it affects companies such as Google, Apple, Facebook and Amazon.

This denomination responds to the fact that, as the tax is configured, few Spanish companies will be affected by it, since only multinational groups with a global business volume greater than 750 million euros which have income from digital services will be required to pay. in Spain of more than 3 million euros and whose business derives from the treatment of the data of Internet users or new information technologies.

In these cases, companies will be obliged to pay 3% of their total income in Spain.

The Government’s proposal is one of the most aggressive ones in the international arena. Thus, while Spain is considering the percentage of 3%, some countries have opted for a 2% tax, and compared to the 3 million income proposed by the Government, most of the countries that would be considering a similar tax raise it to 25 million, below which there would be no obligation to pay the tax. It is important to bear in mind that the correct calculation of the tax to be paid will require “locating” the devices and users, which in addition to obvious privacy problems, will determine great technical complexity. In our opinion, it is not logical that the occasional or sporadic use that a tourists can make of their telephone in Spanish territory (for example, in air traffic or on a cruise ship) justifies the obligation to pay a tax in Spain, much less the cost of establishing a technical system that allows the location of the user. However, the bill foresees high penalties for those companies that do not establish these location systems.

But if it will be difficult for digital companies to locate all users and their devices, it seems impossible to imagine that the Tax Administration will be able to contrast or verify said information. It might have been more practical to use more stable criteria, such as the user’s residence or the place where the purchased product is delivered.

The most striking element is the fact that it obliges technology companies to pay for the services provided between “sister” companies of the same group. As far as we know, no country has gone so far or even raised this possibility, in our opinion because it is contradictory with the configuration of the tax itself.

Indeed, if we think that only groups with a “consolidated” turnover of 750 million are required to pay the tax and that in this amount, transactions between the “sister” companies of the group itself are necessarily “not considered”, do we? What sense does it make when calculating the payable tax to include transactions between companies of the same group and only leave them out when the participation is 100%? Undoubtedly, this desire to collect the tax must be tempered in the parliamentary process.

We consider that the tax on digital services is clearly a defensive tax that seeks to alleviate the deficit by establishing a 3% tax on sales obtained in Spain by companies of the type mentioned above and whose origin –whether we like it or not – is fundamentally American.

It can be thought that it is perfectly legitimate for the Government to propose a tax to “defend” Spanish companies against foreign technology companies; or even that it intends to increase the collection by establishing a tax that only affects foreigners who, as it is understood, are obtaining a benefit with the data that we consciously or unconsciously give when browsing the network.

But we will understand that the country where these technology companies are from does not see with good eyes an evident discrimination of their companies or even that they considered making Spanish products and companies pay “with the same currency”, for example, by raising tariffs or limiting imports of Spanish products.

Last July, France established a tax similar to the one now raised by our Government, which with similar requirements also made sales in France of digital or technology companies taxed by 3%. The American reaction was immediate and the United States proposed a rise in tariffs on French products (cheese, champagne, wine...).

France postponed the settlement of the Digital Tax. The project that the Government has sent to the Parliament foresees that in this first year 2020 the tax will be paid in December, with the aim that an international consensus can be reached between its parliamentary approval and the payment date.

Perhaps it would have been preferable to wait for international consensus to implement the tax. It would undoubtedly have gained visibility regarding the possible damage that our exports to the US could experience and we could have taken the necessary precautions.