Commission adopts proposals for the fair and efficient taxation of the digital economy and presents measures on listed tax heavens
The European Commission has today proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The measures would make the EU a global leader in designing tax laws fit for the modern economy and the digital age.
The taxation of the digital economy is a key part of the Commission's fair taxation agenda with President Juncker noting the need for digital companies to pay their fair share of taxes in his 2017 State of the Union speech.
Concretely, the Commission proposed two legislative proposals which will lead to a fairer taxation of digital activities in the EU.
The first initiative aims to reform corporate tax rules so that profits are registered and taxed where businesses have significant interaction with users through digital channels. This forms the Commission's preferred long-term solution. This proposal is accompanied by a Recommendation to Member States to amend their Double Taxation Treaties with third countries so that the same rules apply to EU and non-EU companies
The second proposal responds to calls from several Member States for an interim tax which covers the main digital activities that currently escape tax altogether in the EU. This interim tax for digital services would apply to the most urgent gaps and loopholes in the taxation of digital activities. The measure ensures that those activities which are not currently effectively taxed would begin to generate immediate revenues for Member States.
The EU has embraced the development of the digital economy, which is making a great contribution to economic growth. But this has also created a major fiscal distortion: the effective tax rate for digital companies – such as social media companies, collaborative platforms and online content providers - is around half that of traditional companies – and often much less. On average, digitalised businesses face an effective tax rate of only 9.5%, compared to 23.2% for traditional business models.
Counter-measures on listed tax havens
The Commission also delivered today on its pledge to ensure that the EU's common EU list of non-cooperative tax jurisdictions is backed up by effective countermeasures. The guidelines adopted today by the Commission mark the first step in stopping the transit of EU funds through non-cooperative tax jurisdictions. They will ensure that EU funds do not inadvertently contribute to global tax avoidance. Today's guidelines should guarantee in particular that EU external development and investment funds cannot be channelled or transited through entities in countries on the EU's common list. The first-ever list was agreed and published in December 2017 and is being updated on a continuous basis. The new requirements seek to align the EU's objective of tackling tax avoidance at the global level with the rules governing the use of EU funds by International Financial Institutions (IFIs) such as the European Investment Bank (EIB), development financial institutions (DFIs) – including the European Fund for Sustainable Development (EFSD) - and other eligible counterparties.
Global Compact for Safe, Orderly and Regular Migration
The College adopted two proposals for Council Decisions which will authorise the Commission to approve, on behalf of the European Union, the Global Compact on Migration. The Global Compact on Migration will be an intergovernmentally negotiated agreement on safe, orderly and regular migration, prepared under the auspices of the United Nations, which should be adopted later this year.
Michel Barnier, the Commission's Chief Negotiator for Article 50 negotiations with the UK, updated the College on the state of play of the last discussions on the draft withdrawal agreement as transmitted to the United Kingdom.
European Citizens' Initiative
The College of Commissioners today decided not to register a proposed citizens' initiative, from a group of non-British EU citizens, entitled: "British friends – stay with us in the EU", whose stated objective is "to create a platform which would enable all European citizens to take part in this initiative and to reach a majority of British Citizens... thereby giving to all British citizens an opportunity to voice their opinion." No further information was provided about the legislative tool which could potentially support this initiative, and enable EU citizens outside the UK to overturn the sovereign Brexit decision by the British people or compel them to change their minds. The conditions for admissibility of a European Citizens' Initiative are that the proposed action does not manifestly fall outside the framework of the Commission's powers to submit a proposal for a legal act, that it is not manifestly abusive, frivolous or vexatious and that it is not manifestly contrary to the values of the Union. While the Commission regrets the decision of the United Kingdom to withdraw from the European Union, there is no legal basis in the Treaties which would allow for the adoption of an EU legal act challenging or overturning the UK's decision to withdraw from the Union. As such, the College has no legal basis to register this proposed Initiative.
The Commission took a decision to fine eight producers of capacitors €254 million for participating in a cartel. Capacitors are electrical components that store energy electrostatically in an electric field, and are used in a wide variety of electric and electronic products. The Commission has fined Elna, Hitachi Chemical, Holy Stone, Matsuo, NEC Tokin, Nichicon, Nippon Chemi-Con, Rubycon € 253 935 000. Together with the immunity applicant, Sanyo, they operated a cartel for the supply of aluminium and tantalum electrolytic capacitors between 1998 and 2012.
21 March 2018