Last month, the OECD and the European Commission published their views on reform of the taxation of the digital economy. The OECD released its long-awaited interim report on 16 March, although the ‘non-consensus’ document did not reach many firm conclusions. It largely describes the competing views of stakeholders, though it still provides useful commentary regarding user-generated value, long term reforms and interim measures. The following week, the Commission published its own proposals, which largely confirmed previously leaked material. It proposes the introduction of a short-term revenue tax for digital businesses and, in the longer-term, a new Directive on digital permanent establishments and profit allocation. Member states are not unanimously in favour of these proposals, and the views of other stakeholders are divided. The OECD’s report and the EU’s proposed reforms are by no means the only source of change in this area, however; many countries are going it alone in deciding to address concerns about tax in the digital economy.
Murray Clayson (Freshfields Bruckhaus Deringer) considers recent OECD and EC activity surrounding the taxation of the digital economy.
(a) complying with all international obligations;
(b) being temporary in nature;
(c) being targeted in scope (e.g. not capturing the delivery of goods ordered online);
(d) minimising over-taxation (e.g. avoid cascading issues);
(e) minimising the impact on start-ups, business creation and small businesses; and
(f) minimising cost and complexity.
To address the longer term, the Commission proposes the introduction of a Directive on digital PEs. Contrary to expectations, this Directive is presented as a new standalone instrument, rather than an amendment to the CCCTB (although see comments above regarding the approach of the European Parliament in this regard; the Commission acknowledges that the measure could eventually be integrated into the CCCTB).
Last month, the OECD and the European Commission published their views on reform of the taxation of the digital economy. The OECD released its long-awaited interim report on 16 March, although the ‘non-consensus’ document did not reach many firm conclusions. It largely describes the competing views of stakeholders, though it still provides useful commentary regarding user-generated value, long term reforms and interim measures. The following week, the Commission published its own proposals, which largely confirmed previously leaked material. It proposes the introduction of a short-term revenue tax for digital businesses and, in the longer-term, a new Directive on digital permanent establishments and profit allocation. Member states are not unanimously in favour of these proposals, and the views of other stakeholders are divided. The OECD’s report and the EU’s proposed reforms are by no means the only source of change in this area, however; many countries are going it alone in deciding to address concerns about tax in the digital economy.
Murray Clayson (Freshfields Bruckhaus Deringer) considers recent OECD and EC activity surrounding the taxation of the digital economy.
(a) complying with all international obligations;
(b) being temporary in nature;
(c) being targeted in scope (e.g. not capturing the delivery of goods ordered online);
(d) minimising over-taxation (e.g. avoid cascading issues);
(e) minimising the impact on start-ups, business creation and small businesses; and
(f) minimising cost and complexity.
To address the longer term, the Commission proposes the introduction of a Directive on digital PEs. Contrary to expectations, this Directive is presented as a new standalone instrument, rather than an amendment to the CCCTB (although see comments above regarding the approach of the European Parliament in this regard; the Commission acknowledges that the measure could eventually be integrated into the CCCTB).