Commitment to a fair taxation of the digital economy and plan to deepen the Economic and Monetary Union
On 7 May 2018, the European Commission (Directorates-General for Communication Networks, Content and Technology – CONNECT and for Employment, Social Affairs and Inclusion – EMPL) announced the creation of the high-level expert group on the impact of the digital transformation on EU labour markets.
A delegation of S&D MEPs travelled to the United States this week to meet leading digital and hi-tech players in Silicon Valley, and to discuss how best to meet the challenges and opportunities of the new digital environment.
The Commission adopted a proposal for a regulation on promoting fairness and transparency for business users of online intermediation services on 26 May 2018. Providers of online intermediation services (e.g. Amazon and eBay) and online search engines (e.g. Google search) are required to implement a set of measures to ensure transparency and fairness in the contractual relations they have with online businesses (e.g. online retailers, hotels and restaurants businesses, app stores) which use such online platforms to sell and provide their services to customers in the EU. The proposal is still at an early stage in consideration in the European Parliament, where it has been assigned to the IMCO committee.
There is a consensus that the digital economy is relatively undertaxed when compared with traditional businesses. Certain inherent characteristics such as reliance on cross-border provision of services without physical presence, easy transfers of intangible assets, and novel ways to create value make it particularly easy for enterprises to limit their tax liabilities. In order to provide a solution to this problem, in March 2018 the Commission adopted the ‘fair taxation of the digital economy’ package, comprised of two proposals. One concerns a permanent reform of corporate tax regime while the second is a proposal for a directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services, which would apply as an interim measure until the permanent reform has been implemented. The tax is to cover businesses above two thresholds: total annual worldwide revenues exceeding €750 million and annual revenues in the EU exceeding €50 million. The proposed single rate is at 3 %, levied on gross revenues resulting from the provision of certain digital services where user value creation is essential. The stakeholders and the Member States seem to be divided on the issue.