On 29 January, the European Economic and Social Committee (EESC) organized a public hearing on the taxation of the digitalized economy. Various stakeholders and speakers from the EU and the US took part in a fruitful discussion over how to respond to the modern challenges of taxing the digital economy.
The event was opened by Mr. Stefano Palmieri, President of the Section for Economic and Monetary Union and Economic and Social Cohesion (ECO) of the EESC. Mr. Palmieri stated that, in order to be effective, solutions for the taxation of digital economy must be applied on a global level because unilateral solutions are inadequate.
Mr. Wolfgang Schön, Managing Director at Max Planck Institute for Tax Law and Public Finance in Germany, said that 2019 may be the decisive year for the taxation of the digitalized economy. He also added that there is still no consensus whether the question of taxation of the digital economy should be viewed in light of tax avoidance or not. Mr. Schön proposed amending the VAT Directive in order to put under its scope the “free” services that are offered by large digital companies, like Google and Facebook.
Mr. Robert Stack, Managing Director at Deloitte Tax LLP and previous Deputy Assistant Secretary for international tax affairs at the U.S. Department of Treasury, warned that any solution must be of such nature that would avoid double taxation and would not inhibit growth. He also stressed that a good dispute resolution system, in cases when countries cannot agree which one has the right to tax, is an important thing to consider as well.
David Bradbury, Head of the Tax Policy and Statistics Division at the Centre for Tax Policy and Administration of OECD, briefly presented the future OECD work in this area. He referred to a press release in which the OECD announced that progress on addressing the tax challenges in the digital economy had been made. The focus of OECD work will be on two central pillars. The first pillar will focus on how the existing rules that divide up the right to tax the income of multinational enterprises among jurisdictions could be modified to take into account the changes that digitalization has brought to the world economy. The second pillar aims to resolve remaining BEPS issues and will explore two sets of interlocking rules designed to give jurisdictions a remedy in cases where income is subject to no or only very low taxation.
The hearing was concluded with an open discussion among the participants of the event and it remains to be seen how the situation will develop on the EU level as well as on the global level. Ecommerce Europe favors a global solution for the taxation of the digital economy, which is a global problem that can only be addressed at OECD level
More information can be found in our factsheet.