A summary of the Committee’s consideration of amendments is now available.
EP ECON Committee Meeting – 19 November 2018
Corporate taxation of a significant digital presence
– Consideration of amendments
Common system of a digital services tax on revenues resulting from the provision of certain digital services
–Consideration of amendments
View related documents and the next stage of the procedure in the Policy Pipeline
Luděk Niedermayer (EPP, CZ)
- this was the Committee’s second debate on the two proposals;
- regarding the report by Dariusz Rosati (EPP, PL) on the significant digital presence, he stated that 120 amendments had been tabled, 14 of which were by the Rapporteur;
- most of the amendments were aimed at creating a link to the CCTB proposals, to the ongoing work of the OECD and the double taxation agreements. Other amendments sought to add additional elements to the definition of digital presence, as well as add a review clause;
- regarding the draft report by Paul Tang (S&D, NL) on the digital services tax, almost 200 amendments had been tabled. Most of the amendments concerned the broadening of the scope of the Directive by including the supply of digital content via digital interfaces such as music and video, as well as the online sale of goods via digital interfaces. Increasing the tax rate and introducing a sunset and/or a review clause were also suggested;
- on both reports, two additional meetings of the Shadow Rapporteurs were expected to take place ahead of the votes to agree on a set of compromise amendments.
- he thanked Paul Tang (S&D, NL) and the other Shadow Rapporteurs for their fruitful work;
- virtually all of the amendments submitted supported the Commission’s proposal. A vast majority of the Members believed that a long-term solution for the taxation of digital activities was necessary to ensure that Member States (MS) did not take action unilaterally as this would lead to regulatory uncertainty;
- the compromise amendments that were being prepared could be split into four categories:
- those that suggested to reject the Commission’s proposal;
- those that in his opinion, went too far, and for which a majority could not be reached;
- those for which a majority could be found;
- those which should be decided on by separate votes, and not be placed in compromises;
- following the first meetings of the shadows, he believed that it would be possible to find compromises which could be supported by a majority of the political groups. There were eleven compromise amendments so far;
- the scope of services was addressed by the compromises under the definition of significant digital presence. A review of the implementation should follow three years after the implementation of the Directive, as well as some kind of sunset clause;
- he also mentioned data privacy.
Paul Tang (S&D, NL)
- concerning the draft report on significant digital presence, he stated that the meetings so far had been good and were building on the work already done on the CCTB and the CCCTB. He favoured a structural approach;
- discussions were still on going on the scope of significant digital presence. His group believed that online sales of goods and services should be included, and that MS should mandate the Commission to renegotiate double taxation conventions to include the concept of significant digital presence;
- the two proposals should be viewed together. There was a clear preference from the Parliament to have a structural and permanent solution, but the situation should also be addressed in the short-term;
- he stated that the Shadow Rapporteur meetings on the digital services tax had not yet begun. However he believed that most of the discussions would be about the scope, and in amendments there was a call to widen the scope to digital content and online sales. The Commission’s proposal would apply to companies such as Google and Facebook, but not to Amazon or Netflix;
- amendments had also been tabled to delete the 750 million threshold. There had also been an amendment suggesting to lower the threshold but to also make a distinction between large and very large companies which he thought was interesting;
- discussions were also ongoing regarding the sunset clause.
- regarding the taxation of digital services, he believed that the Parliament had to be realistic. An urgent solution was necessary to ensure that companies paid taxes and contributed to the economies of the MS;
- there were four key points to be addressed: the type of services that should be subject to taxation, the 3% level proposed by the Commission, a review clause, and ensuring that these were temporary measures;
- he was not in agreement with the Rapporteur on the first two points. The scope needed to be better defined;
- impact assessments would need to be carried out to guarantee that widening the scope and increasing the tax rate were proportionate. The Parliament should not make such decisions without being certain of the consequences;
- another option would be to introduce a review clause for the Commission;
- it was absolutely necessary to continue with the work on definitive measures.
- concerning the draft report by Dariusz Rosati (EPP, PL), he welcomed the work that had been done so far;
- he was particularly pleased that there was strong emphasis on ensuring that the scope of the proposal should be carefully thought through in order to ensure a smooth long-term solution;
- he was also working on ensuring that the long-term solution would respect the integrity of small businesses. He welcomed the suggestion of a review clause for the Commission;
- concerning the draft report by Paul Tang (S&D, NL), he welcomed the progress made by the amendments suggested by the Rapporteur and other Members;
- he welcomed the following elements that had been put forward:
- ensuring that the criteria of the scope and the definition of the digital services tax were adequate. He welcomed the suggestion made for a Commission review two years after the implementation of the Directive, instead of three years as put forward in the latest compromise on Article 24;
- the Rapporteur’s suggestion on thresholds, as it would limit the impact on SMEs. However, he had doubts about the amendments from other Members to include taxable persons or entities that had made over 25 million euro in revenues within the EU in one year in the definition, as it could be problematic for some MS. This Directive constituted an interim solution and this should not be forgotten, which was why he wanted to keep the scope of the digital services tax to companies that had made 750 million euro worldwide;
- he also disagreed with the amendments that set the digital services tax rate at 5% for revenues above 100 million euro. This would not be acceptable for several MS in the Council, which should be avoided given the pressing need to compromise before the end of the year. The Commission’s proposal of setting the tax at 3% should be followed.
- concerning the draft report by Dariusz Rosati (EPP, PL), her group believed that once a definition of significant digital presence had been agreed on, it should be incorporated into all bilateral tax treaties otherwise many loopholes would remain. For this reason, her group had tabled an amendment asking the Council to mandate the Commission to renegotiate tax treaties with third countries;
- regarding the sunset clause, her group believed that the digital services tax should only cease to apply with the adoption of the Directive on significant digital presence and the Directive on CCCTB;
- there was political disagreement over the issue, but work should continue towards a common minimum EU tax rate for corporate taxation;
- concerning the draft report by Paul Tang (S&D, NL), she thanked the Rapporteur for his work so far. She supported the extension of the scope to platforms such as Netflix and Amazon;
- her group also supported the increase of the tax rate from 3% to 5%, as they agreed that the estimation of margins had been very conservative in the Commission’s proposal;
- her group had submitted the amendment to delete the 750 million euro threshold, and suggested keeping the second threshold of 50 million. This was already high enough to avoid targeting small companies;
- the most important thing was to put pressure on the Commission and the Council to adopt a long-term solution soon. The best way to do this would be to make use of Article 116 of the TFEU.
Paul Tang (S&D, NL)
- he stressed that a European approach was needed for the integrity of the internal market;
- a level-playing was necessary so both the scope and the tax rate needed to be discussed. He was “not dogmatic” on this;
- regarding the call for an impact assessment, he stated that this was difficult because it would be entering “uncharted territory” and it would block quick adoption;
- he stated that by pushing for the digital services tax, the US would come to the table. Europe needed to push for an international solution;
- he agreed with the need for co-decision and majority voting. Many corporates were much larger than some countries in the EU.
Alain Lamassoure (EPP, FR)
- he wanted to reinforce the comments made by Paul Tang (S&D, NL). Some MS were going forward with their own digital service taxes, and he stated that they would “make themselves look ridiculous” and it was a disincentive for investments;
- he stated that impact assessments were needed, but the Parliament was not going to get them, as even MS were not giving impact assessments to the Council;
- he stated that if the EU wanted to work on an common international approach, it had to establish its own system first.
Source: One Policy Place