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Czech Republic puts forward tax on digital giants

Prague, Czech Republic – The Czech Republic is moving forward with plans to introduce one of the most ambitious digital taxes in Europe.

Last week, the Finance Ministry sent a proposal to the government to introduce a 7% tax, first put forward in April, by mid-2020 that would apply to major Internet companies such as Google, Apple, Facebook or Amazon (known as the ‘GAFA’), among others.

The tax would apply to revenues from online advertising, sale of user data and intermediation services, and will only concern large companies with a global annual turnover of more than €750 million and sales of at least 50 million CZK (around €2 million) for taxable services in the Czech Republic.

Digital platforms with more than 200,000 users, like Uber and Airbnb, could also be subject to the proposed tax, which could bring up to 5 billion CZK (around €2 billion) to the state budget every year, according to the Finance Ministry’s proposal.

The tax wouldn’t apply to domestic Czech firms, according to reports.

“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 Czech Finance Minister Alena Schillerova (ANO). “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”.

Negotiations at the EU and OECD levels for the introduction of a digital tax have stalled, prompting a handful of European countries to take matters into their own hands and introduce their own scheme at the national level until a multilateral agreement can be reached.

The Czech tax is largely based on the European Commission’s proposal that failed to gain traction among EU member states.

The Czech Republic follows the likes of Austria, which introduced a 5% digital tax to come into effect next year, and France, which implemented a 3% tax to be retroactively applied from early 2019.

The U.S. government has argued that the digital tax unfairly targets American companies and has threatened to retaliate against France, as well as other countries that decide to take a similar path.

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