After bouncing on comments from Mario Draghi that "there's no currency wars," EURUSD is sliding back to the day's lows after Reuters reports that The European Commission is planning on slapping major tech firms' with an unprecedented tax.
According a draft document prepared by the European Commission and seen by Reuters, Europe wants to tax large digital companies' revenues based on where their users are located rather than where their headquarters are, at a rate between 1 and 5%, a draft Commission document showed.
The proposal aims increasing the tax bill of firms like Amazon, Google and Facebook that are accused by large EU states of paying too little in tax by re-routing their EU profits to low-tax countries such as Luxembourg and Ireland. The proposal says that the tax should be applied to companies with revenues above 750 million euros ($922 million) worldwide and with EU digital revenues of at least 10 million euros a year.
In other words, while not directly cracking down on (alleged) internet monopolists, Europe hopes to pocket some of the "upside" generated by the world's tech giants, which incidentally happen to be mostly US-based.
There is still the possibility the proposal falls apart:
the document is subject to changes before its publication which is expected in the second half of March. The tax would be a temporary measure until a more comprehensive solution to fair digital taxation is approved, the Commission said.
Meanwhile, as Europe's taxman plays the bad cop, Europe's "big brother" is set to play good cop: in a separate report, Reuters reported that German prosecutors said on Monday they would not open a formal investigation of Facebook managers including Mark Zuckerberg in connection with a complaint alleging the company broke national laws against hate speech and sedition.
German attorney Chan-jo Jun had filed a complaint with prosecutors in Munich in 2016 and demanded that Facebook executives be compelled to comply with anti-hate speech laws by deleting racist or violent postings from its site. The Munich prosecutors' office said in a statement on Monday that while the posting of certain content on Facebook may breach German law, the failure to later delete those posts was not a crime.
And so, as the US is slashing corporate taxes, Europe keeps ratcheting them higher.
The reaction to this new law 'strawman' leak was EUR weakness...
This followed EUR gains after European Central Bank President Mario Draghi says in comments to lawmakers at the European Parliament in Brussels on Monday.
“There isn’t any currency war I would talk about.”
The Governing Council is worried about increasing volatility, which “might cause an unwanted tightening” of financing conditions in the euro area.