The Czech Republic joins a growing number of European countries that are imposing a harmful digital services tax on American tech companies. The Czech Ministry of Finance has drafted a law introducing a 7 % digital tax on revenue from online advertising, the sale of user data, and inter-mediation services, following the European Commission’s similar proposal from 2018.
The Czech government expects the levy to be introduced in mid-2020 and estimates the tax will generate CZK 2.1billion ($90 million) in additional revenue in 2020, and CZK 5 billion ($215 million) annually after that.
The tax hits companies with global turnover higher than 750 million euro annually and with sales within the Czech Republic over 1.9million euro.
Finance Minister Alena Schillerova is following the French approach saying that the tax will apply until global tax measures are agreed at the OECD level.
Make no mistake that the Czech digital tax is discriminatory. By using revenue as a proxy for nationality, the Czech Republic is looking to pillage the accounts of American tech companies in order to get their “fair share” of tax. While the OECD is working to develop a global consensus on the issue, the Czech have decided to go ahead and follow France, risking worsening the Czech-American relationship and a massive blow back on future trade.