The ins and outs of the Commission’s new digital tax proposal
The Commission has launched its digital tax package. Our analysis outlines its contents and reactions so far.
On Wednesday 21 March, the European Commission released a package of measures to establish a digital tax and modernise corporate tax rules on significant digital presence. Tabled following a strong push by France’s Finance Minister, Bruno Le Maire, the proposals provoked a strong reaction. The impact could be far-reaching for internet platforms and, if taken with the plans to harmonise the EU’s tax base through the Common Consolidated Corporate Tax Base (CCCTB), could recast the EU’s tax system to better reflect a digitalised economy.
But many Member States argue the timing is wrong and the proposals rushed, disregarding the value of the OECD’s proposals for an international solution expected later this Spring. While the Commission hopes to adopt the package before May 2019 when Europeans go to the polls, it appears Member States are already divided on the need for a new tax. Smaller Member States argue it will damage their financial competitiveness or not benefit them at all. Spain, Italy, Poland and the UK are receptive to the idea, but the growing hesitation of Germany will undermine the proposal’s future.
The need for unanimous support to enact tax reform and growing opposition to the plans for a DST could lead to only a partial agreement in favour of soft law measures, such as rules on significant digital presence. Progress on the discussions will be known in late April, following the meeting of Finance Ministers on the issue in Sofia, at which time the OECD will release its own policy recommendations for measures at international level.