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EU Moving Forward With Digital Company Tax Plans

by Ulrika Lomas, Tax-News.com, Brussels

20 September 2017


The European Union's Economic and Financial Affairs Council (ECOFIN) met on September 16, 2017, in Tallinn, Estonia, to discuss ways to tackle international tax challenges posed by the digital economy.

Toomas Toniste, Estonia's Minister for Finance, said following the meeting: "Tax problems connected with the digital economy and the need for new solutions have been a subject of discussion for a long time. At the same time, companies have to operate in unequal conditions. Countries are deprived of tax income and to compensate for that, they impose unilateral measures. This, however, harms our common market and the entire EU. Thus, the sooner we reach a solution the better. This guarantees the fairer taxation of companies and creates a better business environment."

"For us, it is important to agree on new international tax rules that also take into account the business models of the digital economy. This would guarantee equal taxation of all companies regardless of their location or place of activity. I hope that today's discussion helped us get a step closer to a suitable solution."

Earlier this month, the finance ministers of France, Germany, Italy, and Spain called on the Estonian Presidency to introduce a tax based on revenue, in addition to existing taxes on companies' profits, to be known as an "equalization tax."

According to Toniste, a common solution that covers the entire EU is important because different tax rules in member states can create multiple taxation and lead to a belief that doing business outside of the EU is more lucrative than inside the EU. "If we can agree on the approach inside the EU, then we can also affect the global rules in a way that is favorable to us. We all agree that a global solution would be the best solution," he said.

Estonia said that it is of the opinion that when bringing the tax rules up to date, it is important to abandon the requirement that companies have to be physically present in a country or own assets there, and replace this with the concept of a virtual permanent establishment.

The ministers agreed to move forward swiftly and to reach a common understanding at their upcoming meeting in December.

TAGS: environment | compliance | Finance | tax | investment | business | tax compliance | tax avoidance | law | Organisation for Economic Co-operation and Development (OECD) | Estonia | tax authority | agreements | multinationals | legislation | tax planning | transfer pricing | tax reform | trade | European Union (EU) | Europe | Tax | BEPS

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