Global Solution Needed to Tax Digital Economy: DIGITALEUROPE

Global Solution Needed to Tax Digital Economy: DIGITALEUROPE

DIGITALEUROPE, which represents the digital technology industry in Europe, has called upon governments to negotiate a comprehensive, global, long-term tax solution at the OECD-level to address the tax challenges of the digital economy.

In March 2018, the EU Commission announced it proposal to introduce an interim tax, which would cover the main digital activities that currently escape tax altogether in the EU.

The tax would apply to companies with total annual worldwide revenues of EUR750m and EU revenues of EUR50m, where these revenues are created from activities where users play a major role in value creation and which are the hardest to capture with current tax rules, such as revenues created from selling online advertising space.

“There is no digital economy, only a fast-digitizing economy, world-wide. Changes in the global tax framework should therefore cover the whole economy,” it said.

DIGITALEUROPE said that in shaping future rules, due regard should be given to safeguard the principle of fairness and integrity in tax policy. “Any tax on corporate activity should be linked to profit, not revenues; it should comply with applicable tax treaties and not result in double taxation,” it added.

The body urged national governments to wait until 2020 and participate with partners in the base erosion and profit shifting (BEPS) initiative. It said that the OECD should be given the time to complete its work on digital economy taxation by 2020, as scheduled.

Cecilia Bonefeld-Dahl, Director-General of DIGITALEUROPE, said: “National governments should be careful not to fall in the trap of agreeing by year-end a package of ill-designed digital tax measures to be implemented ‘as is’ in 2021, depending on the OECD final recommendations.”

“This is because this package will be as flawed then as it is today: as a matter of fact, agreeing to impose a tax based on gross revenues and targeted to one particular sector of the economy amounts to deciding to deliberately harm the competitiveness of the EU and risk retaliation measures from other countries.”

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