why the crisis might mean higher taxes on Silicon Valley

Tech giants could be forced to pay higher taxes in Europe as governments search for new revenue to deal with the ongoing coronavirus crisis, three experts told CNBC.

Taxing tech firms such as Google, Facebook or Amazon has been a thorny subject in Europe. Countries failed to come up with a joint digital tax in 2019 and deferred the negotiations to the OECD (the Organization for Economic Cooperation and Development). In addition, some nations, such as France, decided to implement their own digital taxes regardless, but their actions sparked a trade spat with the United States.

Different governments are now dealing with the greatest economic crisis since the Great Depression and they will need fresh cash to support their economies. They might look at tech firms for that extra revenue. 

“We see digital goods/services tax conversations advancing most rapidly in Europe, where the scale of ambition to use the EU budget to finance economic recovery from coronavirus may see Brussels taking an increased interest in the attractive potential tax base of e-commerce and digital services,” David Livingston, an analyst at the research firm Eurasia Group, told CNBC Wednesday.

The European Commission, the executive arm of the EU, is due to unveil new spending plans this week. The institution is likely to look at additional taxes, such as a carbon duty, as new sources of revenue.

Speaking to CNBC Wednesday, Dexter Thillien, a senior industry analyst at Fitch Solutions, said there are two reasons why tech giants could be asked to pay more.

“The first is that they will be the companies making the most money during and after the pandemic, and the second is because there have been many moves towards digital taxation,” he said via email.

The OECD delayed a target to reach a digital tax plan to October from July. It also said earlier this month that the plan might be done in a staged process that lasts until 2021.

The European Commission has said that it will revive talks at the European level if there is no agreement at the OECD this year.

The same institution has previously said digital companies pay on average an effective tax rate of 9.5% in the EU — compared to 23.2% for traditional businesses. Tech giants have argued that they pay as much tax as they are legally obliged to. 

The European Commission has taken a leading role in regulating the tech industry. For instance, in 2016, the institution ordered Ireland to recover 13 billion euros in unpaid taxes from Apple. The company and the Irish government contested that decision.

After an online discussion with Facebook’s CEO Mark Zuckerberg last week, European Commissioner Thierry Breton brought up the issue of taxation. He said on Twitter: “Being smart is good. But being too smart with taxes is never a right idea.” The European…