BRUSSELS – EU finance ministers meeting Tuesday have some way to go before they can agree on the digital service tax directive, aimed at addressing the most urgent gaps and loopholes in the taxation of digital activities.
The Finance Council discussion focused on two key issues in the Commission’s March 2018 proposal for a digital services tax (DST): the scope of taxable services and the question of the expiry of the directive – the so-called “sunset clause”.
On the sunset clause, member states agreed that the directive should expire once there is a comprehensive solution to taxing digital economy at OECD level.
Progress was also achieved on a number of issues such as definitions, tax collection, and administrative cooperation, differences remained between member states on several issues, including the precise scope of services which would be subject to the future tax.
“What we see is that many Member States consider that the scope should stay as proposed by the Commission, with all included data uses, advertisement, and things like that,” said Austria’s finance minister Hartwig Loeger, for the EU presidency: “On the other side, some member states are sceptical.” The minister hoped a political agreement would be forthcoming at the next December Council meeting.
According to the Commission’s proposal, the DST would apply to companies with total annual worldwide revenues of EUR 750 million and annual EU revenues of EUR 50 million. The DST would be applied a rate of 3%. The Commission has estimated that under such parameters, member states could generate about EUR 5 billion in revenues per year.
Commission vice-president Valdis Dombrovskis said it was important that the tax system be updated to reflect the economic realities of the 21st century. While an ambitious global deal at the OECD remains the EU’s preference,”it is more realistic to forge a deal at the EU level, and this will also provide momentum for a global deal.
Also at the meeting, the Council adopted conclusions on the financing aspects of climate change ahead of the COP24 conference on climate change which will be held in Katowice (Poland) from 3 to 14 December.
The draft conclusions call for swift and ambitious progress in ensuring that finance flows reflect the objectives set by the Paris agreement. They underline the importance of carbon pricing in shifting financial flows towards green and sustainable investments.
The EU and its member states are committed to increasing their financial contribution to help developing countries implement the Paris agreement. They continue to be the largest provider of public climate finance, with an overall contribution of €20.4 billion in 2017.
At the Council, ministers also adopted a directive allowing for the alignment of VAT rules for electronic and physical publications. From now on, member states will also be able to apply reduced, super-reduced or zero VAT rates to electronic publications.