Brussels, 30/05/2014 (Agence Europe) - On Wednesday 28 May, a high-ranking group of experts, headed by former Portuguese finance minister Vitor Gaspar, published a report on taxation of the digital economy. They say that the digital economy does not need a special tax system, but current rules may need to be changed to fit. Countries like France and Germany say that a special system is needed to ensure that internet giants like Google and Amazon pay their fair share and do not take advantage of more profitable tax systems in some EU member states.
The digital economy provides opportunities for enterpreneurs and challenges for tax offices that have to adapt to the new reality, said Gaspar.
The experts say: “Digitisation greatly facilitates cross-border business. Removing barriers to the Single Market, including tax barriers, and creating a more favourable business environment through neutral, simplified and coordinated tax rules, is therefore more important than ever”. Gaspar commented: “I support the Group,s recommendation that the One Stop Shop approach should eventually be extended to all goods and services”
The experts welcome the general consensus that the VAT system should be based on the destination of digital services, a system that will come into force on 1 January 2015, along with simplification for both companies and consumers. Taxation Commissioner Algirdas Semeta welcomed the experts' report.
The experts say: “To ensure neutrality and provide a level playing field for EU business, the Group recommends the removal of the VAT exemption for small consignments from non-EU countries. This would be supported by a One Stop Shop and a fast-track customs procedure”.
Digital Strategy Commissioner Neelie Kroes said: “We must avoid punitive taxes, and we must ensure equal treatment of equal products and services. Personally I would prefer that taxes are equalised downwards”.
The experts say that, in order to prevent tax evasion by companies, the planned rules on the erosion of the tax base and the transfer of profits being drawn up by the G20 and OECD will be crucial. The experts recommend that the EU member states decide on a common position to ensure outcomes that are favourable for the whole of the EU. Key areas of the draft rules on tax base erosion and the transfer of profits are the battle against shopping around for tax systems, updating rules on the price of transfers and re-defining the concepts used to determine presence for tax purposes.
Semeta welcomed the way the report says: “The Common Consolidated Corporate Tax Base (Ed: CCCTB, unveiled by Semeta's department in 2011) provides an opportunity for the EU to expand on new international standards (such as transfer pricing profit split methods) and achieve additional simplification within the EU”. Semeta says CCCTB “could be the first step towards the more fundamental reform of corporate taxation in Europe, which the report suggests for the longer term.” More radical reforms suggested by the experts for the longer-term include company taxation based on the principle of destination.
Criticisms from European publishers. The federation of European publishers is unhappy that the group of experts has suggested that standard-rate VAT should apply to e-books and online newspapers and urges the Commission to act in favour of cultural diversity - online and offline - by allowing the member states which back the approach to reduce VAT on e-books. (EL)