The head of tax for the European Commission has said in an interview on 10 October 2018 that details of a new tax on large technology companies could be agreed by the end of the year.

Currently corporate income tax systems in the EU are based on physical presence and this results in digital companies paying considerably less corporate income tax than many other types of company. The European Commission therefore considers that there is not a level playing field between these digital companies and other business operating in the EU.

In March 2018 the European Commission proposed rules to tax certain revenues of large digital companies with global revenues above EUR 750 million a year. Under the proposal large companies with significant digital revenues in the EU would pay a 3% tax on their turnover on various online services in the EU, raising tax revenue of around EUR 5 billion.

According to the Commissioner Germany and France have made it clear that they want to reach an agreement on the tax by the end of 2018. Concerns have however been raised by other EU countries which are worried that the tax would make it less attractive to invest in the EU and that there would be damage to the wider economy.

One possibility to meet these concerns would be to introduce a sunset clause into the package to clarify that the EU digital tax would be a temporary measure until international bodies such as the OECD reached agreement on a similar system applicable globally. Such an international agreement may however require a long time owing to potential opposition from the US where many of the large digital companies are based.