While on Tuesday 4 December the European Finance Ministers are expected to fail to reach a compromise (see EUROPE 12150) on the proposal to tax 3% on gross income from the activities of digital platforms ('digital services tax' or DST), on Monday 3 December, MEPs of the Parliament's Committee on Economic and Monetary Affairs (ECON) approved the two draft reports by Dariusz Rosati (EPP, Poland) and Paul Tang (S&D, Netherlands) on this subject.
If, as far as taxation is concerned, Parliament is only consulted, it intended with this vote to send a clear message to the Council, Paul Tang explained at a press conference. In Parliament too, a large majority of MEPs prefer a long-term structural solution, but this did not prevent them from supporting the DST as a temporary solution and even proposing a much more “ambitious” approach than the Council, he explained.
This need for action is also shared by European citizens, according to Paul Tang, who presented a study from the Kieskompas Institute, showing that more than 80% of citizens surveyed in France, Germany, the Netherlands, Denmark, Sweden and Austria are in favour of an STD.
“The quarrels and mutual vetoes in the Council lead to the EU being unable to tackle the problem. The European Union should be a trendsetter, while also continuing to work on an international solution on the OECD level”, said Dariusz Rosati in a statement.
Paul Tang's report on the DST was approved by 33 votes in favour, 2 against and 2 abstentions.
As a reminder, during the examination of the amendments in the parliamentary committee, a dividing line was drawn between the rapporteur and the EPP Group (see EUROPE 12140), which called for caution on certain proposed extensions and requested a detailed impact study.
Finally, a compromise was reached and MEPs adopted the rapporteur's proposal to extend the scope to include the provision of video, audio, games or text using a digital interface, covering in particular Netflix and YouTube.
But for the sale of goods or services contracted online via e-commerce platforms, they preferred to use a revision clause, whereby two years after the entry into force of the Directive, the Commission assesses - and, if necessary, presents a new proposal - the need to include it in the scope.
The rate was finally left at 3%, but again the text provides in the review clause that the Commission should assess a possible increase to 5%, with a corresponding tax allowance, in order to “limit the difference between the effective tax rates of traditional and digital companies”.
As for the thresholds for taxable person, the Parliament text retains the total amount of worldwide revenues that exceeds 750 millions euros per year, but has lowered the second total amount of worldwide revenues to 40 million euros per year in the EU, instead of the 50 million euros proposed by the Commission.
MEPs also agreed on a 'sunset clause', linking the expiry of the DST, i.e.: - the adoption of the long-term solution, namely the Directive to define the concept of 'significant digital presence'; - either the common corporate tax base (CCTB) and the common consolidated corporate tax base (CCCTB); or - a Directive implementing a political agreement concluded at international level, within the framework of the OECD or the United Nations.
It should also be noted that the text also specifies that if, by 31 December 2020, no overall solution has been found, the European Commission should examine a proposal based on Article 116 of the Treaty on the Functioning of the European Union, whereby Parliament and the Council act in accordance with the ordinary legislative procedure.
Significant digital presence. Dariusz Rosati's report on the long-term 'structural' solution, approved by 36 votes in favour, 1 against and 2 abstentions, introduces few changes compared to the Commission's initial proposal.
The main purpose of the amendments is to include several issues to be addressed in the future in a revision clause. Three years after entry into force, the Commission should in particular assess the administrative burden and possible additional costs for businesses, in particular SMEs, and review whether the types of services covered by the Directive or the definition of 'significant digital presence' should be modified.
The text makes a clear link with the CCCTB and the CCTB by providing for the concept of 'significant digital presence' to be incorporated into these texts and for the DST to expire automatically upon the entry into force of this Directive.
It also calls for the creation of an advisory 'DigiTax’ committee to examine questions relating to the application of the Directive. It should be composed of representatives of the Member States and the Commission as well as an observer from Parliament.
At the international level, Parliament suggests the establishment for an empowered United Nations tax body as a forum for debates and discussions on global agreements and other issues related to the international tax system.
Both texts have yet to be approved as a whole by Parliament at the December plenary session. (Original version in French by Marion Fontana)