Business & Economy Czech Republic News Politics & International

Czech Republic approves ‘GAFA’ tax on digital giants

Prague, Czech Republic – On Monday, the Czech government officially approved a tax on digital giants such as Facebook, Google, Amazon and Apple – more commonly known as the ‘GAFA’ tax.

After months of debate and negotiations, the Czech government yesterday approved a 7% tax on large internet companies.

The new scheme would only apply to businesses with a global turnover of more than €750 million and a domestic turnover of over 100 million Kc (around €4 million) in taxable services in the Czech Republic. Digital economy and collaborative platforms with more than 200,000 users, like Airbnb and Uber, should also be subject to the tax.

According to the government’s estimates, the new tax, which could come into effect as early as next year, should bring in some 5 billion Kc (around €195 million) in state coffers per year.

If approved by Parliament and signed into law by President Milos Zeman, this digital tax, first presented by the Czech Finance Ministry in September, would be one of the most ambitious of its kind in Europe.

Czech Finance Minister Alena Schillerova (ANO) reminded that this is only a “temporary measure” to step up pressure on EU and OECD-level negotiations to move forward.

After multilateral talks on the establishment of a ‘GAFA’ tax failed, a handful of European countries have taken matters into their own hands and implemented their own domestic taxation, including the Czech Republic, whose scheme is largely based on the original proposal of the European Commission.

“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”, Schillerova declared when first putting forward the plan.

France and Austria have also introduced or plan to implement a tax on digital giants.

Headed by Kafkadesk's chief-editor Jules Eisenchteter, our Prague office gathers over half a dozen reporters, editors and contributors, as well as our social media team. It covers everything Czech and Slovak-related, and oversees operations from our other Central European desks in Krakow and Budapest.