The move comes in response to the European Union’s failure to agree on a unified digital tax, leaving individual member states to make their own decisions on the matter. While there is general agreement in the Czech Republic on levelling a tax on Internet giants, there are divisions over how high that tax should be. The proposed 7 percent tax is the result of a compromise between the ruling parties and should apply to internet companies with a global turnover of over EUR 750 million (CZK 19.1 billion) and annual turnover in the Czech Republic of over CZK 100 million. Finance Minister Alena Schillerová presented the proposal at a press briefing in Prague on Tuesday.
“The tax will apply to users of multilateral digital interfaces, primarily targeted site advertising, social service charges, or the sale of user data but also digital economy platforms such as Airbnb and Uber that allow users to provide services and goods to each other for a transaction fee.”
While Austria and France introduced a 5 and 3 percent digital tax respectively, the Czech government has set its sights higher with a proposed 7 percent tax. Jan Hamáček, head of the junior coalition party of Social Democrats, welcomed the agreement reached.
“I am very glad that we opted for a more ambitious 7 percent tax. Although other European countries have a lower tax, I think that 7 percent is adequate to the profit these giants make in the Czech Republic. Part of the profit should definitely stay in this country.”
The 7% tax would be applied to the revenue of the internet giants, for services provided in this country. The tax would be estimated annually, then the companies would need to pay deposit amounts monthly, with a final annual tax return completing the billing cycle.
The tax would not apply to companies which have digital services as a side income, and the deciding threshold would be 10% of total revenues.
The bill may still meet some opposition in Parliament since opposition MPs would have preferred to see a lower tax imposed, but in view of the government’s majority in the lower chamber, which can override a veto from the Senate, it should have a smooth passage through Parliament. The new tax should come into force next year. The giants whom it concerns have so far refused to comment on the development.