Report from the Financial Times
In Brief – The European Commission is examining a plan to impose a big annual lump-sum levy on the largest, most profitable companies operating in Europe as a way to tax the US-based tech giants without imposing a direct tax on just tech companies. The maneuver would change the Commission’s current “Corporate Resource for Europe” (CORE) proposal, which would imposes a lump sum annual tax of €100,000 to €750,000 on companies with annual revenue above €100 million, meaning mid-size and large companies, and make it apply only to the largest companies and impose a big annual payment. Because the levy would apply to all sectors, rather than just tech, some hope it would not draw retaliation from the Trump Administration, but the plan would likely bring some domestic opposition from the largest EU companies and could lead to US retaliation anyhow if it disproportionately impacts American enterprises.
Context – For years, Europe has been a hotbed of efforts to increase corporate taxes in the largest digital companies based on arguments that they unfairly avoid national corporate taxes. France led the effort and enacted a 3% Digital Services Tax (DST) in 2019. President Trump aggressively opposed DSTs and used tariff threats to keep them at bay. In subsequent years, several countries in Europe and elsewhere enacted DST taxes. Although an EU-wide DST was regularly discussed, one was never enacted. Multinational talks at the OECD attempted to agree on changes to corporate taxes globally, and the Biden Administration engineered as global agreement in 2021 that paired dropping national DSTs with a global corporate minimum tax, but deal was never fully implemented. Trump objected to that OECD tax agreement and immediately exited it when he returned to office. He also revived tariff threats against countries with DSTs. However, his wave of tariffs in 2025 were applied without regard to national DST policies and none of the bilateral trade deals ended a DST. It’s a good bet that the national DSTs aren’t going away any time soon while a broad-based corporate tax increase in the EU faces big hurdles.