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EU Parliament Adopts Position On Digital Tax Reforms

by Ulrika Lomas,, Brussels

23 December 2019

Members of the European Parliament have said that the EU should be prepared to act if global plans to reform the taxation of the digital economy fail.

MEPs discussed the issue of the digital economy with the new European Commission on December 16, and adopted a resolution on December 18 by 479 votes to 141, with 69 abstentions.

The plenary discussion centred on international reform efforts led by the OECD. According to a press release from the European Parliament, economy commissioner Paolo Gentiloni said that the EU is committed to achieving an international agreement, but assured MEPs that the Commission is ready to act in any case.

Gentiloni said: "If no or limited agreement is reached internationally by 2020, it is crystal clear that the strong rationale for action at EU level will remain and that the Commission will act on this basis."

In their resolution, MEPs called on the Commission and member states to agree on a joint, ambitious EU position for the OECD BEPS negotiations and to strive to achieve a deal at an international level. They supported "the commitment of the Commission President to propose an EU solution should an international deal not be reached by the end of 2020, on the condition that this EU solution is not limited to digital businesses."

Parliament's resolution stressed that "any international corporate tax reform should ensure the smooth running of the single market, notably by safeguarding a level playing field for all firms, in particular for SMEs, including by ensuring that companies pay a fair share of tax where their substantive and genuine economic activity and value creation take place and that tax income is fairly distributed throughout the member states."

MEPs were said to have welcomed "the idea of developing a new nexus that goes beyond the concept of having a physical presence in a country to giving that country taxing rights" and suggested that "the nexus should be designed in order to include all firms that interact with customers and users in that country, also by digital means."

The resolution also welcomed "the idea of developing a new allocation of taxing rights that goes beyond the arm's length principle and that will allocate new taxation rights to market jurisdictions."

The resolution argued that the Commission's proposals for a common (consolidated) corporate tax base are "beneficial for both companies and citizens as they would simplify the tax framework and help fight tax avoidance." It added that consolidation would reduce the administrative burden, compliance costs, and tax obstacles for cross-border companies in the EU and would remove the need for complex transfer pricing arrangements. It expressed regret at member states' inability to reach a joint approach on the proposals.

TAGS: compliance | tax | business | European Commission | tax compliance | tax avoidance | corporation tax | transfer pricing | tax rates | tax reform | European Union (EU) | Europe | Tax | Tax Evasion | BEPS

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