In the short term, the European Commission can see only three options to ensure that the Internet giants are appropriately taxed. According to the communication it is to present this Thursday 21 September, of which EUROPE has had sight, it considers that in the long run, its proposed common consolidated corporate tax base (CCCTB) is the way forward.
As a stop gap, the Commission will be working mainly on the basis of the French idea, which now has the official support of ten countries and the unofficial support of a further nine. It believes it could be possible to tax all untaxed or “insufficiently taxed” income generated from all Internet-based business activities. Within this meaning, the activities by which these companies earn revenue vary enormously, the Commission stresses in its document. For instance, Amazon, Zalando and Alibaba sell goods or put vendors and clients in touch with each other in exchange for a commission, Facebook generates advertising revenue by offering advertising solutions targeting its users, Netflix and Spotify charge registration fees in return for access to their services and, finally, Airbnb and Blablacar put users together to share accommodation or cars, taking a commission on each transaction.
This idea of a “tax on insufficiently taxed income” is potentially explosive. How would the threshold above which revenue is considered sufficiently taxed be defined? The EU has previously tried to have this debate over the concept of minimum effective taxation (in other words making sure that profits are actually taxed at the minimum threshold) in the framework of the 'interest and royalties' directed, by initiative of France and Germany.
This tax on untaxed or insufficiently taxed income could be deductible from corporate income tax, the Commission writes. This is also the option called for by France.
The second short-term option could be a withholding tax on digital transactions. Basically, there would be a tax on certain payments made by, for instance, a Belgian consumer to Amazon (in Luxembourg) for online goods or services.
Finally, the third short-term option seems fairly close to the French proposal. It would involve a levy on revenues generated from the provision of digital services or advertising activity. “A separate levy could be applied to all transactions concluded remotely with in-country customers where a non-resident entity has a significant economic presence”, the Commission suggests. (Original version in French by Élodie Lamer)