EU sets out proposals for digital tax

Released 28 April 2021

The European Union is moving ahead with plans for a new digital taxation rate for multinational companies with proposals due to be debated in the European parliament.

MEPs are calling for a new and fairer allocation of taxing rights for highly digitalised multinationals and a revision of the traditional concept of permanent establishment, as it fails to cover the digitalised economy. On average, digital businesses face an effective tax rate of only 9.5%, as opposed to 23.2% for traditional business models across the EU.

The revenue from the introduction of an EU digital tax, according to the EU documents, could raise an estimated several billions of euro to several tens of billions of euro, depending on a range of factors including the exact definition of the taxable base, the taxable entity, the place of taxation, the calculation and the rate of tax, as well as economic growth rates in the sectors concerned.

Further details can be found on the European Parliament website.

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