The European Commission should consider increasing the proposed rates in the controversial digital tax plans, MEPs from the European Parliament’s Economic and Monetary Affairs committee suggested on Tuesday (9 October).
As part of the measures currently on the table, the Commission proposes to hit digital firms with total annual revenues of €750 million or above and yearly EU taxable revenues of €50 million, with a 3% levy on revenues.
The file has provoked opposition from some in the digital sector, who say that firms may end up being taxed twice.
Moreover, Ireland, Finland, Sweden and the Czech Republic have also issued a joint paper highlighting their difference to the proposals, which they say could breach international treaty obligations.
On Tuesday, MEPs backed the general principle of the Commission’s taxation plans in the field of digital services, yet were keen to push the proposals even further.
S&D’s German MEP and co-rapporteur, Paul Tang, underlined the need to hike up the rates from 3% to 5%, widen the scope of the directive to close any loopholes that larger firms may seek to exploit, and carry out an audit of national tax authorities to ensure compliance.
“We have the largest companies in the world paying the lowest taxes. That is wholly inefficient. It is not a level playing field,” Tang said.
“The tax rate of 3% is too low. It should be closer to 5%.”
Polish MEP Dariusz Rosati of EPP highlighted concerns in his report on the lack of progress in the OECD discussions to establish a global framework as well as the importance of reaching a common EU agreement on digital taxation.
“The OECD work on the taxing of the digital economy has not delivered sufficient progress, which illustrates the need for the union to advance on this matter at an EU level,” he said.
“In the absence of a common union approach, member states have already started adopting unilateral solutions which lead to regulatory uncertainty and the fragmentation of the single market, which should be avoided.”
The OECD is currently working through a set of plans to apply a global tax framework to companies operating digitally, but progressed has stalled.
British Chancellor Phillip Hammond recently cited frustrations in the OECD negotiations as a reason why the UK will seek to go it alone in the field of digital taxation, and last week the Spanish ministry of finance announced plans to introduce a special tax on digital platforms, affecting firms such as Air BnB and Uber.
In total, eleven member states are currently planning their own digital tax regimes.
In light of the difficulties in finding an agreement amongst OECD members, in September French finance minister and staunch advocate of the measures, Bruno Le Maire, attempted to calm divisions by suggesting that the digital tax plans should include a “sunset clause.”
Such an inclusion in the directive would mean that the new EU tax would end once a deal is reached at the global level.
Austrian Finance Minister Hartwig Loeger has supported the idea of a sunset clause and sees it as a viable solution for bridging the gap in waiting for the OECD to reach consensus and making progress on the matter now.
The Commission’s proposal already makes clear that any digital tax will already only be actioned on a temporary basis, but the sunset clause establishes a definitive end-date for such measures.
In order to be adopted, the reforms require unanimous agreement in the council.
The Austrian presidency hopes to reach a compromise by the end of the year and has scheduled a review of the plans during a meeting of representatives on October 26.