As Spanish Prime Minister Pedro Sánchez prepares to implement a digital services tax in January, table olive and olive oil producer associations have called on his government to reconsider.
The so-called Google tax will require all companies that earn more than €3 million of income in Spain and at least €750 million globally to pay a three-percent tax. American companies, including Amazon, Facebook and Google, would be hit the hardest.
The income that can be obtained from this tax is not offset by the damage that can occur in bilateral relations at a time when trade and tariff policies weigh heavily in the way of enforcing some policies against others.
Agricultural producers in Spain fear that the move will inflame trade tensions with the United States and make negotiations about existing tariffs on European agricultural and industrial imports more difficult to resolve.
“The introduction of the Google tax is not good news because everything that makes negotiations less tenable is not a trivial matter and it will have some impact, although I hope it will not be much,” Rafael Pico Lapuente, the executive director of the Spanish Association of Olive Oil Exporting, Industry and Commerce (Asoliva), told El Economista.See Also: Trade News
Black table olive exports from Spain to the U.S. already face a 35-percent tariff as the result of anti-subsidy and anti-dumping charges levied by the administration of President Donald J. Trump.
Meanwhile, green table olive and individually-packaged olive oil exports face a separate 25-percent tariff, which came as the result of a dispute over illegal subsidies provided by the European Union to the aircraft manufacturer, Airbus
In addition to these punitive measures, the Trump administration previously threatened to impose $2.4 billion worth of tariffs on France when it announced its own, similar plans to tax the largest – mostly American – multinational tech companies.
Even though President-elect Joseph Biden R. Biden Jr. will have assumed office by the time Spain’s new digital tax comes into force, agricultural associations fear he will also seek to protect the interests of American tech companies.
“They have a government, be it Republican or Democratic, that defends their interests,” Antonio de Mora, the secretary general of the Spanish Association of Exporters and Industrialists of Table Olives (Asemesa), told El Economista.
Spanish table olive producers have been hit particularly hard by both sets of tariffs. According to data published by Asemesa at the beginning of the harvest, exports to the U.S. fell by 30 percent in the first half of 2020.
Biden has yet to publicly comment on the E.U.’s own proposal for a digital services tax, but officials in Brussels have said that they expect him to take a more multilateral and cooperative approach to resolve the issue than his predecessor.
While Biden has not yet made any public decisions about how he will pursue international trade once he takes office, the former vice president spoke on the campaign trail of giving priority to domestic investments ahead of new trade deals.
In the view of the Sánchez government, the Google tax will do just that for Spain. The government estimates that the new digital services duty will bring in €2 billion in the first year and up to €968 million each year afterwards.
However, for Jaime Malet, the president of the U.S. Chamber of Commerce in Spain, the opportunity cost of the Google tax will weigh down the economy more than the short-term gains will boost it.
“The income that can be obtained from this tax is not offset by the damage that can occur in bilateral relations at a time when trade and tariff policies weigh heavily in the way of enforcing some policies against others,” he told the news agency EFE.
“Being the first in the class in this is not going to give us agility of any kind,” he added, referring to the Spanish government’s decision to unilaterally implement the tax without waiting for broader consensus from the rest of the E.U.
De Mora also worries about the government’s decision to go ahead with the Google tax without the E.U., which said it will wait until March – two months after the Biden administration has come into power – before implementing its own, very similar digital services tax.
“What is very surprising is that when we asked the Ministry to negotiate and pressure the United States about the tariffs imposed by the aeronautical conflict, it said that it was necessary to align with the E.U. and wait for the resolution of the World Trade Organization on the legality of the Boeing subsidies,” he said.
“It seems that we are in the E.U. for some things, but not for others,” De Mora added. “That creates a legal uncertainty for companies that is incomprehensible.”