The Austrian Presidency of the Council of the European Union is continuing its work on the proposal to tax gross income from the activities of digital platforms at a rate of 3% ('digital services tax' or DST). On Friday 16 November, it submitted two options for discussion amongst national experts in order for the French proposal for a "reverse sunset clause" aimed at winning Germany's support to be realised in the text (see EUROPE 12131).
On Tuesday, German Chancellor Angela Merkel confirmed that her country was aiming for an international agreement before a European directive on digital taxation (see EUROPE 12136).
First Option The first option, set out in a compromise document dated 14 November, requires Member States to adopt, by 31 December 2020 at the latest, the necessary provisions to comply with the DST. However, they would only apply these provisions from 1 January 2021.
A third paragraph then stipulates that Member States would not be required to apply these provisions if, by 31 December 2020 at the latest, the Commission has submitted and the Council has adopted a proposal for a Directive implementing an agreement reached within the OECD to address the challenges arising from digitisation. In this case, it would be the provisions of this new directive which would apply from 1 January 2021.
The DST would then expire upon the entry into force of this new directive or, at the latest, on 31 December 2030.
Second Option The second option seems to leave more room for manoeuvre. It incorporates the same provisions as the first option, with the exception that it deletes the third paragraph and replaces it with an accompanying statement by the representatives of the governments of the Member States meeting within the Council and of the Commission.
They should commit themselves to "working towards an agreement of a global solution at OECD level by 2020".
The proposed draft declaration also indicates that, by 30 September or 30 June 2020, the Commission would be required to prepare a report assessing progress in the implementation of revisions of relevant international standards at OECD level, accompanied, if appropriate, by a proposal to postpone or even repeal the application of the DST.
It should be noted that all the dates indicated in the document are in square brackets and are therefore not yet officially confirmed.
However, the postponement of the application of the DST does not resolve all of the issues. Ireland, Sweden and Denmark uphold their objections. Moreover, there is still uncertainty about the nature of the decision that could be taken at the Ecofin Council on 4 December.
The German Finance Minister, Olaf Scholz, continues to remain unclear when talking about “the position" while his French counterpart, Bruno Le Maire, remains adamant about obtaining a binding agreement. (Original version in French by Marion Fontana)