The EU looks at regulating tax paid by tech companies

(content provided by EuroCommerce) Following a call by ten EU Finance Ministers for action on the tax paid by multinational tech companies, European Commission Vice President Valdis Dombrovskis has launched ideas for fair taxation of the digital economy.

Real progress may be hard to achieve

The European Commission noted that the top 5 online players grew by 32% over the last 9 years, while the retail sector as a whole grew by only 1%. At the same time, online players paid half or less the tax paid by other retailers.

In the long term the European Commission is seeking to change the rules of permanent establishment in the draft measures on a Common Consolidated Corporate Tax Base (CCCTB), but meanwhile will consider proposing an equalisation tax on the turnover of digitalised companies, a withholding tax on digital transactions and a levy on revenues generated from the provision of digital services or advertising activities.

Legislative proposals are expected in spring 2018, after the OECD has presented an interim report on the taxation of the digital economy. Agreement will be difficult to reach, given that tax measures are covered by unanimity in the Council. While European Commission President Jean-Claude Juncker suggested in his State of the Union speech that the European Council could waive this without treaty change, such a move in itself requires unanimity.

As an alternative, the European Commission is also looking at enhanced cooperation among a group of willing Member States. The Council is already discussing making marketplaces liable for collecting VAT from non-EU sellers, to reduce circumvention in direct consumer imports from third countries.