EU signals support for OECD digital tax

MEPs have pulled back on plans to introduce an EU digital tax as member states fail to reach agreement

The UK, France, Australia, Austria and Poland are already taking a unilateral approach, with the UK planning to introduce a digital services tax from April 2020.

The motion calls on the Commission and the Council to prepare the legal base for incorporating the outcome of an international deal on digital tax into EU law and to present a legislative proposal as soon as possible.

For this to happen the Commission and the EU have to agree on a joint position for the OECD negotiations, guaranteeing that the EU speaks with one voice ensures a fairer allocation of taxing rights and a minimum level of taxation, allowing for fairness in the international tax environment in order to tackle tax evasion, aggressive tax planning and tax avoidance.

MEP Luis Garicano said: ‘We are still facing up to these challenges with rules of the nineteenth century, we need to make sure that taxes policies adjust to the new realities. We need to find rules so that tax collection is related to generation of earnings so that there is true competition between the companies and between countries.’

‘This is an initiative that should be adopted at global level as a single country cannot do anything to fight tax evasion carried out by large multinationals.’

To achieve a common approach, the EU president Charles Michel must put forward this resolution to the Council, the Commission, the OECD Secretariat and the governments and parliaments of the member states.

As the OECD’s current proposals would change the tax rules to ensure that the largest multinationals would have to pay tax in the jurisdiction in which they are selling their services, rather than offshoring profits to reduce tax bills.

Once the Commission and the member states achieve a deal at international level, this would then be transposed at EU level through relevant EU and national legislation.

The OECD corporate tax reform proposals are composed of two pillars and the EU believes that they are complementary and therefor if an agreement is not reached by the end of 2020, the Commission President Ursula von der Leyen will propose an EU solution.

The EU believes this will strengthen the single market by establishing a minimum level of tax that would prevent unilateral measures.

The EU also wants member states to share all relevant data that can be used to draft the most accurate impact assessments and relevant analysis with both the OECD and the Commission.

The motion also highlights that an efficient and comprehensive international reform must be accompanied by transparency.

Economy commissioner Paolo Gentiloni said ‘the EU was committed to finding an international agreement on this issue’, but he assured MEPs that the European Commission was ready to act in any case.

At the debate Gentiloni told MEPs: ‘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.’

Garicano said: ‘Last year in Spain Apple paid €4m (£3.4m) corporate tax and they had an income of €320m.

‘This is one of the biggest challenges the European Union is faced with, citizens are looking at us and they want us to find a fair solution as we cannot ignore globalisation and digitalisation, it has changed the world.’

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