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Taxing the Digital Economy: Commission creates Expert Group to guide EU approach

28 October 2013   (0 Comments)
Posted by: Author: European Commission
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Author: European Commission

"Today's tax systems were conceived in a pre-computer age. So it is no surprise that they often clash with the modern, digital economy. Taxation must not be an obstacle to all that is good about the digital revolution. Yet, we must also ensure that the digital sector plays fair and pays fair. The challenges linked to taxing the digital economy are immense and there are no ready-made answers. Therefore, we need deep, informed and focused reflection on this issue within the EU, to ensure that the next steps we take are the right ones," said Algirdas Šemeta, Commissioner for Taxation, Customs, Statistics, Anti-fraud and Audit.

With this in mind, the Commission has today adopted a Decision to create a High Level Expert Group on Taxation of the Digital Economy. The task of this group will be to examine the best ways of taxing the digital economy in the EU, weighing up both the benefits and risks of various approaches. Its focus will be on identifying the key problems with digital taxation from an EU perspective, and presenting a range of possible solutions. The Commission will then develop any necessary EU initiatives to improve the tax framework for the digital sector in Europe.

The expert group will be comprised of up to seven members, who will be internationally renowned experts on the digital economy and on taxation. It will be chaired by a person of political profile with relevant background on such issues.

Given the pace at which the digital economy is developing, rapid progress in developing a taxation response is necessary. Therefore, the expert group should start its work before the end of the year, and report back to the Commission in the first half of 2014.

At the same time, the EU will continue to contribute actively to the work underway at global level in this sphere, within the context of the OECD's BEPS. The aim is to ensure a coherent and complementary approach to digital taxation at EU and international level.

Context

The digital economy is well recognised as an important source of growth and jobs for the EU, particularly given its reliance on a high level of research, innovation and skilled personnel. Regulatory changes for this sector must therefore be carefully conceived, to ensure that it can develop and deliver to its full potential within Europe. For tax policy, the focus needs to be on ensuring that tax systems support, rather than hamper, the growth of the digital sector in the Single Market. This means fostering a business-friendly environment and removing tax obstacles that might discourage investment and growth.

On the other hand, the digital sector must contribute fairly to public finances. Currently corporate tax avoidance and aggressive tax planning are particularly problematic in the digital economy. This is due to the global and intangible nature of these companies, and the fact that today's tax rules were not designed with e-commerce in mind. As a result, the taxes paid by the digital economy are frequently not in line with the presence and profits of this sector in the EU. A comprehensive approach to taxing the digital economy needs to be developed to protect Member States' tax bases and ensure that the principle of fair taxation is not undermined in the EU.

This article first appeared in europa.eu



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