EU Digital Tax ‘Ship’ Has Sailed: Commissioner Moscovici

Europe will introduce changes to address the tax challenges posed by the digital economy

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Europe is determined to introduce key changes to the EU corporate tax framework to address the tax challenges posed by the digital economy, EU Tax Commissioner Pierre Moscovici has said.

In a keynote speech delivered at the Masters of Digital 2018 event, which took place in Brussels on February 20, 2018, Moscovici said: “I know this will raise some eyebrows in this audience – it is happening. And by that I mean that several member states are determined to take action to address what they see as a ‘problem’ that must be ‘fixed.’ This perception is now shared at the highest political level in many European governments. Digital taxation is no longer a question of ‘if’ – this ship has sailed.”

The proposals

Moscovici said that the EU digital tax proposals will find a fair and balanced way to establish taxing rights, taking into account that a business may provide digital services to users in a market without being physically present. The rules would establish a fair and effective way to reflect new forms of value creation, such as the user contribution in the allocation of profits.

The Commissioner said that member states may also need to consider some more immediate targeted measures. “I have already outlined the risks of each member state taking its own national approach within a Single Market. A simple, stop-gap measure at EU level may be the only way to address such risks. The aim of any targeted measure should be to address the most serious voids in our corporate tax systems when it comes to digital taxation, and to prevent unnecessary burdens for companies through a patchwork of national measures in our Single Market – especially SMEs.”

Consensus-based approach

Moscovici said that Europe would avoid a disorderly outcome and that member states should come to a common understanding of the challenges they face and a common view of how they can best address them. “Ideally, progress should be registered at international level, to ensure as much consistency as possible – but that is not a prerequisite,” he said.

Moscovici stressed the need to “secure a common approach to digital taxation to avoid serious disruptions and ensure business’ certainty in the field of taxation. “Help us shape the best possible way forward for your industry and the best possible outcome for the European economy. Some of you question that the digital economy can be ring–fenced. Others feel strongly that Europe should not move forward without its international partners,” he told the audience.

“These are all important and legitimate questions that will have to find answers in the months to come. Where you want to position yourself in this debate is up to you, but I would urge you to be part of the conversation and more importantly, to be part of the solution,” he said.