The European Union can't keep up with the pace of innovation, growth, and success of American technology companies. This was true in the past but became undoubtedly apparent during the COVID-19 pandemic.
Discriminatory Digital Services Taxes imposed on American companies could not stop their success; neither could massive subsidies for European companies. Now the EU is resorting to regulatory and antitrust tactics to undermine U.S. innovation and make American companies pay for their never shrinking budgets.
In December, the European Commission will propose seismic policy changes to overhaul digital sector regulation: The Digital Services Act (DSA) and the Digital Markets Act (DMA).
European Competition Commissioner Margrethe Vestager says that regulatory action is needed to protect "fair" competition and consumers. The truth is it is just another maneuver of the overall EU tactic to attack successful American companies, extort as much money from them as possible - through fines and taxes - and restrict their ability to compete in the European marketplace.
It's not a coincidence that the European Parliament and the German Council of the EU presidency just reached a backdoor deal to stick their €1.074 trillion budget agreement reached in July by boosting specific programs with an additional €15 billion. This also includes a €1.8 trillion COVID-19 recovery package.
Who is going to pay for this, you might ask? Well, if EU bureaucrats get away with their plan, American companies will foot the bill. The vast majority of the $15 billion budget hole is supposed to be filled with fees and fines resulting from Margrethe Vestager's antitrust investigations. Is it another coincidence that on the same day of the backdoor deal, Vestager launched two new investigations into Amazon's alleged anticompetitive practices?
With this move, the EU not only declared American companies to be already guilty, facing extremely high fines, but showed what all of this is truly about: A money grab.
It is not the first time the European Union used American companies to fund their ever-expanding budgets. In 2016 the European Commission ordered Apple to pay €13 billion - the largest corporate tax fine in history. After years of challenging this order in courts, a European Union appeals court overturned this massive judgment against the technology company in July 2020 and said that EU regulators erred.
The EU fined Google €2.4 billion in 2017, another record-breaking €4.3 billion in 2018, followed by another antitrust fine of €1.5 billion in 2019, totaling €9.3 billion in penalties over three years.
In 2018 the Digital Services Tax was born, designed to exclusively target American companies. European nations and many other countries around the world have unilaterally departed from over 100 years of accepted tax principles and imposed discriminatory digital taxes on U.S. companies based on global revenue.
Longstanding international taxation standards like the physical presence standard or the concept of value creation were sacrificed on the altar of false “fairness.” The EU proposal lacked unanimity and failed due to opposition from Nordic EU member states and other historically low tax countries like Ireland. Though many studies could prove that American digital companies are often paying more in taxes (and fines) than traditional non-digital European companies, France and other countries strongly pushed for unilateral digital taxes to collect what they think is rightfully theirs.
Margrethe Vestager's proposals have to be voted on by the 27 EU country parliaments and the European Parliament, but it will likely pass. The Digital Services Act and the Digital Markets Act are just another part of the tactic that American companies are quite familiar with.
The Trump Administration was always prepared to take all appropriate action to defend American businesses, workers, and interests against these attacks. The Biden-Harris Administration has to step up and make it unmistakably clear that he will continue on that path.