On Wednesday 21 March, the European Commission will present its short -and medium-term visions of the taxation of the internet giants.
Initially, a tax on the wealth created from the exploitation of personal data will be tabled, as called for by nearly 20 member states. In the longer term, the Commission will unveil the outlines of negotiations for which it is hoping to be mandated, seeking to review the bilateral tax treaties of the member states with third countries.
The short term. The proposed directive, of which EUROPE has had sight, brings in very little new compared to a previous explanatory text on which EUROPE has previously reported (see EUROPE 11970).
Two types of commercial model will be concerned: (1) making money out of personal data by offering advertising spaces (Facebook, Google, Twitter, Instagram and the free version of Spotify); (2) making sharing platforms available to users (intermediary services, such as AirBnB and Uber).
The provision of digital content (Netflix or Spotify on subscription, for instance) will not be covered by the scope of application of the text. E-commerce companies will also be excluded.
Concerning Amazon, however, only its so-called ‘marketplace’ section will fall within the scope of the short-term tax. The same applies for Apple, as the American digital giant should theoretically be taxed on its AppStore. In both cases, these are intermediary services.
Companies will come under the European legislation if revenue made by its digital services exceeds €50 million and its annual turnover is at least €750 million.
The tax will be payable where the user is located, based on IP address or other geo-location techniques. At this stage, the taxation rate is set at 3%, but this will probably be discussed by the college of European commissioners on Wednesday of next week.
The long term. The Commission will publish a recommendation on what the bilateral treaties negotiated by the member states with third countries should say about taxing the digital sector.
A significant virtual presence would have to be determined on the basis of the following three criteria: - revenue achieved by providing digital services to users within a given jurisdiction; - the number of users; - the number of contracts for the provision of the service (criterion in brackets in the draft text).
On Friday 16 March, the OECD will present its interim report on the taxation of the digital economy, a month earlier than anticipated.
On Thursday, the European Parliament agreed on its position for the opinion on a common consolidated corporate tax base (CCCTB) fit for the digital age (see other article). It considers that this approach, which brings in the notion of permanent digital presence, is more apt to deal with the challenge of the taxation of digital service platforms. (Original version in French by Elodie Lamer)