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
Any solution for the taxation of digital business models proposed for the EU level must consider the global dimension and should be in line with international achievements in this field so as to ensure coherence and real support for consensus-building at OECD level. The legislative package put forward by the European Commission takes another path: Contrary to common international corporate taxation practice, it aims, for instance, to tax businesses' turnover instead of profits, and to levy taxes where sales take place instead of where value is created.
In the view of the European Economic and Social Committee (EESC), this approach could jeopardise the integrity of the EU single market and lead to double taxation. The Committee raises these and others concerns over the Commission's proposals in an opinion on the subject, which was adopted at the EESC plenary session on 12 July.
"It is essential that any solution on corporate tax rules for digital activities creates a level-playing field for all EU economies", said Krister Andersson (Employers' Group), rapporteur for the EESC opinion. As a consequence, the Committee calls for a complementary assessment of the impact of the proposed interim measure on investments, start-ups, SMEs, jobs and growth.
The EESC also emphasises the need for fair and consensus-based solutions. "It is very important to develop new principles on how to attribute corporate profits to an EU country and tax them, as the European economy is changing very rapidly because of digitalisation", said Petru Sorin Dandea (Workers' Group), the co-rapporteur.
What has to be taken into consideration for the assessment for an effective tax level is that tax codes are currently changing, due to the implementation of the rules of the Base Erosion and Profit Shifting agreement (BEPS) and US tax reform with regard to US digital firms operating in the EU.
Despite its concerns, the Committee welcomes the fact that the Commission has taken digital tax initiatives, and that it is aiming for a definitive global solution and cooperating to this end closely with Member States and the OECD. The EESC strongly advocates a global solution which –in its view- could better harness the benefits of globalisation.
Krister Andersson said in this regard: "The Commission has initiated an in-depth international debate about digital taxation with its proposals. What is now of the utmost importance is that the Member States come to a common position and advance the ongoing discussions, in order to achieve the necessary global solution at the OECD level."
Finally, the EESC highlights the urgent need for the swift establishment of tax principles which adequately cover the digital sector.
"All companies engaged in digital services must contribute to public finances and share the tax burden needed to finance public services. This is the only way to ensure a sustainable future for our next generations", said Petru Sorin Dandea.
The EU single market would benefit from a stable and up-to-date tax framework. It would stimulate investment and innovation, and as consequence growth. If the EU deviates with its provisions from OECD principles, the complexity of international tax systems and therefore uncertainty for investors could increase.