EU: Taxing the Digital Economy

“Today’s tax systems were conceived in a pre-computer age. So it is no surprise that they often clash with the modern, digital economy. Taxation must not be an obstacle to all that is good about the digital revolution. Yet, we must also ensure that the digital sector plays fair and pays fair.” These are the words of Mr. Šemeta, EU Commissioner for Taxation, Customs, Statistics, Anti-fraud and Audit, published in the recent press release of the European Commission.

“The digital sector must contribute fairly to public finances. Currently corporate tax avoidance and aggressive tax planning are particularly problematic in the digital economy. This is due to the global and intangible nature of these companies, and the fact that today’s tax rules were not designed with e-commerce in mind. As a result, the taxes paid by the digital economy are frequently not in line with the presence and profits of this sector in the EU.”

The press release with the title “Taxing the Digital Economy: Commission creates Expert Group to guide EU approach” informs us that the EU will create a special group of internationally renowned experts on the digital economy and taxation to address the issue of the fair taxation of the digital economy. Additional experts with specific competences might be invited to participate in the group on an ad hoc basis. The expert group will be formed before the end of the 2013 and should prepare its report before 1 July 2014.

This action of the EU is in line with the international trends we have been observing in the last years and months. Examples of these are the French activities towards taxing the digital businesses and OECD’s reports and discussions about taxation of the digital economy.

Some further information about the expert group and its goals can be found here.