On Thursday 13 December, MEPs will vote on two reports which call on the EU to introduce a common system for taxing digital services from tech giants, allowing member states to tax profits generated within their territory even if a company does not have a physical presence there.

While the global economy has become increasingly digital, resulting in new ways of doing business, the current corporate taxation rules were mainly developed during the 20th century. They fail to capture the scope of digital activities, say the reports, where physical presence isn’t a requirement to be able to supply digital services.

Challenges involved

Given that the problem of taxing the digital economy is of a global nature, the European Commission is actively working within the OECD to push for an international solution.

However, until that solution is found, the Parliament wants to establish a common system for a digital services tax. 

The report written by Dutch S&D member Paul Tang proposes to target major digital companies generating revenues worldwide stemming from the supply of digital services, such as search engines, social media platforms or online marketplaces.

Another report by Polish EPP member Dariusz Rosati says determining whether a company has a taxable "digital presence" in a member state should be based on the revenues from the supply of digital services (annual revenue higher than €7 million), the number of users (more than 100,000 users in a member state) or the number of business contracts for digital services (more than 3,000).

Rosati said “it’s high time to act” and that the EU should be a trendsetter, while also continuing to work on an international solution at the OECD level.

Tang said he regretted that EU finance ministers failed to adopt a digital services tax during their meeting last week failed. Instead they presented a watered-down proposal, he said, which won’t enter into force before 2021.

“Postponing such a vital decision is unfair to honest taxpayers and harmful to the EU economy as a whole,” he added.

“We want to ensure that digital multinationals such as Google, Facebook and Amazon pay their fair share of taxes, as all ordinary citizens and small firms do. We have fought to increase the scope and the rate of this digital tax and will continue to fight for tax justice in Europe.”

Next steps

MEPs will debate the digital tax package on the afternoon of Wednesday 12 December and vote on it the following day. The Parliament only has a consultative role in this:  the decision has to be taken in the Council by unanimity.

Retrieved from the EU Parliament

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