Producers in Spain Denounce Digital Services Tax Plan

Farmers and olive oil producers fear that the tax, which will mostly affect American companies, will hinder the efforts to negotiate a resolution to existing tariffs and may lead to the imposition of more.
Spanish Prime Minister Pedro Sánchez (Photo: La Moncloa)
Dec. 2, 2020
Daniel Dawson

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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.- Jaime Malet, pres­i­dent, U.S. Chamber of Commerce in Spain

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.

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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.”





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