Can a driving lesson be applicable to the current debate on the taxation of the digital economy? Andrés Báez of the University Carlos III thinks it can. He told a workshop on modern taxation systems hosted by the S&D group at the European Parliament and the Foundation for European Progressive Studies (FEPS), in partnership with the Maison Syndicale Internationale on Monday 9 April, that his instructor always told him that “if ever you don't know what to do, just stop”. “We should stop, think and wait. I can see no need for an urgent patchwork, for an interim solution”, he said.
In another panel session, Ruud de Mooij, head of tax policy at the IMF, stressed that the conclusions of a Commission expert group in 2014 had established that the digital economy needed no specific tax regime. “There are different degrees of digitisation and even when a company is digitised, there are very different business models, so we can't speak of this is a separate sector. The same opinion was echoed in the 2015 BEPS report (of the OECD concerning base erosion and profit shifting: Ed)”, he explained.
John Vella of the University of Oxford, said that the digitisation of the economy would not create new problems, but simply exacerbate the existing ones, in particular profit shifting. “Because companies have incentives to shift, states have incentives to lower tax rates to attract profits and activities”, he explained, stressing that the average taxation rate of businesses in the G20 countries has virtually halved in recent years. This means that we will need to end up taxing things that are not mobile, he argued, at the place where the consumers are, rather than in the place in which the company is located.
“We should move to a system that is destination-based. Either allocate all taxing rights to the destination country, although that may be too radical, or mostly to the destination countries, but also other countries”, he explained.
Peter Hongler of the University of Zürich called for a detailed analysis of who would pay the tax. Google, which, under the Commission's proposal, would be taxed on advertising revenue, for instance, could increase its prices and the tax would ultimately be paid by businesses, smaller ones, buying advertising slots. There is no standard response to the question, said Valeska Gronert of the Directorate General for Taxation and Customs Union (TAXUD) at the European Commission. She said that one alternative to a Commission proposal would have been to look at the full range of initiatives taken individually by the member states. In response to one of the members of the panel, who argued the case for a BEPS2 rather than a tax system specific to the digital economy, she explained that the issue was not aggressive tax planning, but the right to tax. It isn't something you can sort out with an anti-abuse rule, she stressed. (Original version in French by Élodie Lamer)