The Digital Services Tax: State of Play

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The introduction of a digital services tax has been looming in several European countries, and is at the verge of creating a trade war between France and the US.

France, Spain, the United Kingdom, Italy and Austria have all presented a digital services tax to ensure that big tech giants would be taxed on the revenue made:

  • France: it was the first country to introduce a 3% digital tax in July 2019, retroactively applied as of 2019. The tax applies to tech companies with a minimum revenue of €750 million globally of which at least €25 million in France.
  • Spain: on 18 January 2019, the Spanish Government approved the bill for a digital services tax. The bill proposes a digital tax of 3% on digital advertising, services whose purpose is to make users find other digital e-commerce platforms and on the transmission of data collected via digital interfaces.
  • United Kingdom: The UK’s digital services tax is a 2% tax on the revenue of businesses providing internet search engines, social media platforms and online marketplaces. The intention of the government is that the tax will apply from April 2020.
  • Italy: in the week of 23 December, Italy passed a digital tax of 3% on revenue for companies with turnover of more than €750 million globally of which at least €5,5 million in Italy.
  • Austria: it passed legislation imposing a tax on digital advertising starting 1 January 2020. The digital tax will be 5% on the turnover from advertising services rendered by service providers in Austria. Like France, Austria applies a minimum turnover of €750 million globally of which at least €25 million in Austria.

While these countries are in favor of putting forward national measures, other countries oppose national initiatives and prefer to let the Organization of Economic Cooperation and Development (OECD) develop a global solution. Indeed, work is undergoing at OECD level to address the tax challenges arising from the digitalization of the economy, and Ecommerce Europe is very much supportive of these efforts. However, although countries that support unilateral measures, generally also support a global solution at OECD level, they are not willing to wait until the OECD delivers its solution.

Ecommerce Europe is convinced that only a multilateral, global solution will be able to solve the taxation challenges arising from the fast-digitalizing economy and thus reduce the risk of double taxation and international trade distortions, or even retaliation from non-EU countries, as we are seeing now in the context of the French digital tax and the United States’ reaction. In fact, the US has threatened to introduce tariffs on French products as a reaction to the French digital services tax.

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