France, which has made specific suggestions without the involvement of Germany, is not the only member state to have a few ideas about making sure that the web giants pay their fair share of tax, wherever they provide their services (see EUROPE 11854).
Austria has been thinking long and hard about the matter, Gunter Mayr, Director General for tax policy at the Austrian finance ministry, told an international conference hosted by the Estonian Presidency of the Council of the EU in Tallinn on Thursday 7 September.
Mayr pointed out that in 2006, Microsoft was the only company in the digital world to make the top 10 largest businesses. With the advent of the information society, this is no longer the case today.
Austria recommends a triple approach: - defining the concept of virtual permanent establishment; - extending the notion of physical presence to the notion of digital presence; - and carrying out a functional analysis.
Mayr explained the third point by stressing the fact that everything depends on a company's commercial model. It can be seen that some companies derive income from online advertising; some of them, such as Amazon, use intermediaries for the provision of physical goods; others develop mobile telephony or payment services applications, and so on.
The 'significant presence' of a company in a country could furthermore be defined by a number of indicators, such as a minimum number of website users or downloads, but also a minimum turnover.
Vienna would prefer an international solution. However, if the OECD's efforts fail, the European Union should start its own initiative. It is worth noting that Austria will hold the rotating Presidency of the Council of the EU in the second half of 2018. “The most important thing is to focus on the business model. Amazon, Google… It won't be easy to find a solution for them all”, he concluded.
Pascal Saint-Amans, the Director of the OECD's tax policy service, agrees. “Is Apple a digital company? Most of their turnover is selling goods”, he noted, referring in this case to computers and mobile telephones.
The expert also reiterated why the OECD's 'BEPS' (base erosion and profit shifting) action plan had failed to put this chapter definitively to bed.
The United States, Saint-Amans explained, “didn't want to jump to conclusions”, and felt that the work should conclude in around 2020. It was only under the German Presidency of the G20 in 2017 that the German finance minister, Wolfgang Schäuble, called for the work to be speeded up. The balance finally struck was to ask the OECD to produce an interim report for April 2018, he explained.
“You have to link digital platforms' profits to their origin”, said MEP Alain Lamassoure (EPP, France), rapporteur on one of the two legislative proposals aiming ultimately to establish a common consolidated corporate tax base (CCCTB) (see EUROPE 11851). The work carried out with Paul Tang (S&D, Netherlands) on the CCCTB has also led to a definition of 'digital presence', based on data such as the number of connections, digital contacts with individuals or the volume of data consumed.
“The questions we have are quite clear. We've been talking about them for quite a while”, said Valère Moutarlier, the Commission's Director for direct taxation matters within its 'taxation and customs' services. He supported the idea of finding European common ground, so as to make a stronger contribution internationally.
The alternative, as several of those who took the floor stressed, are national solutions going off in all directions. “The absence of a solution does not just harm the state”, explained Dmitri Jegorov, deputy secretary general for taxation at the Estonian Ministry of Finance. “It also harms companies, because those that are active on a cross-border basis will continue to have more and more unilateral solutions to deal with”. He said that the compromise could be a quick fix in the short term while continuing to work towards a long-term solution at international level. (Original version in French by Élodie Lamer)