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.
The European Commission and EU consumer authorities are calling on Airbnb to align their terms and conditions with EU consumer rules and be transparent on their presentation of prices.
The Committee calls for a fair, consensus-based international solution at the OECD level which contributes to achieving fair taxation principles and fair revenues for small and large countries alike.
Despite achieving unprecedented growth and profit rates, the digital economy seems to be relatively undertaxed when compared to more traditional ‘bricks and mortar’ companies. The current rules are based on the physical presence of taxpayers and assets, and there is a general understanding that they are not suited to taxing a digital economy characterised by reliance on intangible assets and ubiquitous services whose location is often hard to determine. International bodies are currently working on how to adapt tax rules to the digital reality. The European Commission adopted a proposal in March 2018.