On 16 October, Ecommerce Europe sent another letter on the proposed Digital Services Tax to the members of the European Council, ahead of the European Summit of 18 October. The letter was also addressed to the EU28 Finance Ministers, who will meet for the next ECOFIN Council on 6 November, to also discuss about the DST.
The letter reiterates that the proposal, if adopted, would harm EU businesses and consumers. It points out to several studies and opinions that explain and confirm why adopting the proposal would be a mistake. The studies and opinions mentioned are those of the Scientific Advisory Board of the German Ministry of Finance as well as of the research institutes Ifo and Copenhagen Economics.
It also suggests EU Member States to focus their attention on the global OECD level solution instead of the short term one. Ecommerce Europe considers the OECD as the optimal forum to review the current international tax framework and adapt it to the digital world.
The letter warns that the DST would lead to double taxation and would intensify trade wars with the EU. It also highlights the fact that the proposal has a questionable legal basis. More precisely, the Council’s own legal department has recently concluded that the legal basis for the DST Proposal is not appropriate and that the European Commission is treating the DST wrongly, like an indirect tax. However, the DST is actually a direct turnover tax, over which the Commission has no mandate without treaty change, given its likely impact on the double tax treaty framework. Furthermore, the German Advisory Board is also of the opinion that the unilateral creation of such a tax is also incompatible with the intergovernmental cooperation-based BEPS project of the OECD.
Currently, France is pushing hard for the introduction of the DST. However, countries like Ireland, Estonia and the Czech Republic are against the proposal while Germany has reservations as it fears the DST might negatively impact its automotive industry.
Ecommerce Europe believes that the DST will ultimately delay the adoption of a structural, long-term and global solution and has called the European Council to push in favor of international efforts at OECD level and to end the discussions around the introduction of a unilateral Digital Services Tax.