James Geoghegan (Dublin Bay South, Fine Gael)
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296. To ask the Minister for Finance if he will outline any engagements he has had with the European Commission and the Trump administration about the introduction of an EU-wide digital levy; and if he will make a statement on the matter. [27445/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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I have not had any recent engagements with the European Commission nor the Trump administration about the introduction of an EU-wide digital levy, however, I have recently engaged with both parties on current EU-US trade and related issues.

The terms digital levy and digital services tax (DST) can be used interchangeably but I will use the latter for ease in answering this question. DSTs typically refer to a tax that is applied to the revenues that result from the provision of digital services. The European Commission proposed a Digital Services Tax in 2018 that sought to apply a 3% tax on certain digital services revenues alongside a Significant Digital Presence (SDP) proposal that sought to reallocate digital taxing rights amongst EU Member States depending on where the users of digital services are based. However, no agreement was reached on either of these proposals. The European Commission later announced in 2020 that it would bring forward a proposal for a Digital Levy both as a policy measure and as a potential own resource for the EU budget, that is to say resources that are not contributions from member states but rather revenue streams that are directly assigned to the EU. However, in July 2021, the European Commission announced that work on its Digital Levy proposal would be put on hold to support the finalisation of the OECD agreement on international tax reform.

It is important to point out that DSTs or similar measures can often have different aims. The European Commission’s 2018 DST and SDP proposals were proposed as policy measures to ensure the fair taxation of the digital economy, while its proposal for a Digital Levy that was never published was proposed as both a policy measure to ensure the fair taxation of the digital economy and as a potential own resource for the EU budget. Amid rising global trade tensions, some commentators have recently also spoken about the potential use of a DST or levy as a potential retaliatory trade measure. It is important to note that the European Commission has not proposed any new digital levy, DST or other similar measure, either as a policy measure, trade measure or as an own resources measure at this point.

Ireland has not supported the use of DSTs at EU level and that remains the Government’s view. Taxation of the digital economy is a global issue, not just an EU one. I consider a global approach such as that envisaged through the OECD's Pillar One as preferable to any proliferation of uncoordinated measures such as DSTs globally.

I also consider that a DST would have a harmful effect on the EU economy as a whole, and critically, would not position us to de-escalate trade tensions that are causing long-term harm to multilateral tax cooperation. Rather, I believe the introduction of an EU-wide DST would only escalate tensions and further damage the transatlantic relationship.