EU Commission launches consultation on the introduction of a digital tax

Taxation of the digital economy

 

The EU Commission launched a public consultation on the introduction of a digital tax on Tuesday 19 January 2021. The aim is to ensure fair taxation of the digital economy. Feedback can be submitted until 12 April 2021. The results of the consultation will be reflected in a proposal for a directive by the EU Commission scheduled for the second quarter of 2021.

Ensuring fair taxation in the digital age is a top priority for the European Commission. According to the Commission, tax systems have not been able to keep pace with global technological progress in recent years, which has resulted in digital companies being subject to inadequate taxation. According to the EU Commission, this imbalance has been exacerbated by the COVID 19 crisis, as the profits and revenues of a large number of online companies have skyrocketed.

In order to respond to the developments and challenges of the digital economy in a systematic way, a modern, stable regulatory and fiscal framework should be created according to the EU Commission. At the same time, however, digitalization should be supported for the sustainable upswing of the economy. In doing so, digital companies should make their fair contribution.

In line with the OECD's proposals (Pillar 1 and Pillar 2), the EU Commission's declared goal is to have taxation occur where the profits are generated. According to the EU Commission's proposal, a digital permanent establishment should therefore be introduced for digital companies without a physical presence in a country. This would mean that those profits based on the turnover generated in the respective country would effectively be subject to taxation in that country.

The results of the consultation as well as the proposed directive remain to be seen. We will keep reporting on this topic.

January 2021 | Authors: Dr. Samuel Bussmann, Dr. Daniela Arth

Your team

Contact

In need of legal, tax or compliance advice? We look forward to contacting you.