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Business Europe Rejects EU Digital Turnover Tax Proposal

by Lorys Charalambous, Tax-News.com, Cyprus
Tuesday, September 26, 2017

Markus J Beyrer, Director General of Business Europe, has expressed concerns about the proposed introduction of a European Union turnover tax on digital businesses.

On September 21, the European Commission launched a new agenda to ensure that the digital economy is taxed "in a fair and growth-friendly way." This could lead to the announcement of new tax rules by the spring of 2018.

The European Commission believes that the challenges posed by the digital economy necessitate reform of international tax rules on permanent establishments, transfer pricing, and profit attribution. The Commission is continuing to press for the adoption of its common consolidated corporation tax proposal and, in the meantime, for the consideration of one of three alternative policy options. These are: an equalization tax on the turnover of digital companies; a withholding tax on digital transactions; and a levy on revenues generated from the provision of digital services or online advertising.

In a statement released on September 21, 2017, Beyrer said that the proposal "would violate the long-standing international principle of taxing corporate profits and could risk undermining the growth prospects for businesses, particularly those employing innovative digital technologies, which may have considerable turnover but are yet to reach profitability."

Beyrer said that "any initiatives regarding digital taxation must both respect members states' competences to set their own tax policies, and be developed on the basis of global taxation principles in order to protect European companies' competitiveness and to guarantee a global level-playing field."