When it comes to taxation in the European Union, it is a rare day when Nordic countries such as Denmark, Sweden and Finland are outspoken opponents. After all the three nations are annually ranked at the top of the overall tables in the EU when it comes to overall tax burden.

So, when Sweden, Denmark and Finland took the unusual step on June 1 to publicly reject the pending short-term EU digital transaction tax, it was indeed not only a bold gesture, but it also will quite likely mark the day the levy died.

In no uncertain terms the three countries make it clear that the short-term digital tax defies “internationally established principles”.“Traditionally exporting firms should not pay taxes in their export destination simply because they have consumers there,” the three countries said in a joint statement posted on the Swedish Ministry of Finance’s website. “The proposal for a digital services tax means that basically all value creation is deemed to take place at the location of the consumer.”

This approach, the statement added, “deviates from fundamental principles of income taxation by applying the tax on gross income, i.e.. without regard to whether the taxpayer is making a profit or not.” Just as they are leaders in the tax tables, the Nordic countries are also committed internationalists with long-standing allegiance to international institutions and rules. So, it was no surprise that they also insisted that any change to internationally tax principles must be agreed at multilateral institutions such as the OECD.

“If we in the EU unilaterally apply a digital services tax on gross income, including to non-EU firms, the tax will be difficult to enforce and there is substantial risk that it will complicate international cooperation in the tax area,” the three Nordic countries said in their joint statement.

 The European Commission proposed the short-term digital tax after intensive support by 10 EU countries led by France and Germany. But in recent months Germanyhas begun to scale back in supporting the temporary digital levy. The reason for that backtrackis simple. With an economy powered by exports, it suddenly woke up to the old adage that “what goes around comes around.” In other words, German exports could face the same kind of tax that the EU wants to impose on big tech companies, especially those from the United States.

In the case of the Nordic countries, which never signed the letter sent in September of 2017 that propelled the temporary digital levy into legislative motion, the tit-for-tat consequences were obvious from the beginning. And the reiterated that message in the June 1 statement.

“It seems unlikely that third countries [i.e., non-EU countries] would quietly accept isolated EU actions in this area without introducing corresponding measures for tax companies of EU member states,” the three Nordic nations said. “In the end we would risk moving to the general destination-based allocation of taxing rights, which is not in the interest of the EU.”

Besides being a mortal blow to the current pending EU short-term digital tax, which would require the unanimous consent of all EU member states, the Nordic nation statement also challenged the status quo when it comes to the U.S. Tax reform approved at the end of 2017. Unlike assertions by the European Commission about U.S. Tax code changes, the Nordic nations went as far as to say that measures such as the Global Intangible Low-Tax Income (GILTI) would actually resolve the issue of big tech companies and tax avoidance. 

“We note that the recent U.S. Tax reform with its GILTI provision should precisely address the issues of tax avoidance by U.S. digital companies by ensuring a minimum taxation of 13 percent on profits from foreign sales, which previously could often go untaxed for a long time,” the Nordic nations said. “This is an important contribution to securing a level playing field between U.S. And European companies.”

That is a far cry from European Commission claims that the U.S. tax reform contains protectionist measures in the form of export subsidies and is therefore being examined for a possible challenge in the World Trade Organization. It is also a surprising assertion in light of the EU referral in March of the U.S. Tax reform to the OECD Forum for Harmful Taxation to determine if it violates EU tax haven blacklist corporate taxation criteria. The OECD conclusions are due by the end of 2018 and most experts agree that the chances of guilty decision are unlikely.

 Based on the Nordic nation opposition as well as flagging support from other countries including Luxembourg, Cyprus, Malta and the United Kingdom and the end of the 2018 will also likely mark the end of the short-term EU digital tax plan. At least for the 28 EU countries. There is also a chance to pursue the legislative procedure known as enhanced cooperation that allows at least nine like-minded countries to adopt legislation that normally requires unanimous consent.

Of course, the success rate for enhanced cooperation when it comes to tax legislation is not good. For more than five years, 10 EU countries have used the procedure in an unsuccessful attempt to reach a deal on a Financial Transaction Tax (FTT). The three Nordic countries are not among the FTT 10. They seem to know a tax loser when they see one. After all, no country has more experience with taxation than they do.