18 September 2017 / article

Ecofin agrees that ‘digital economy’ companies should pay more tax in the EU

The EU Council of Economy and Finance ministers (Ecofin) agreed at their meeting in Tallinn on 16 September 2017 that companies active in the ‘digital economy’ in EU countries should pay more tax.

The Ecofin aims at reaching a common understanding on the outline of the new EU-wide tax rules by December this year. This development will have an important impact on cross-border businesses in the EU. The European Commission will first present a white paper setting out the available options.

Many EU Member States consider that digital businesses pay insufficient tax in the market countries of their customer base. In particular, digital businesses can interact with customers without a taxable presence in the countries of their customer base.

A quick pace of change?

The OECD plans to issue a further report on the taxation of the digital economy in the first half of 2018, but some EU Member States have now called for quicker progress. Recent initiatives include a note by the Estonian Council presidency and a French-led initiative supported by Germany, Italy, Spain and six other EU Member States. The latter initiative advocates the introduction of an ‘equalisation tax’ on European revenue as a ‘quick fix’. Momentum seems to be growing for such approach, although several EU Member States expressed clear reservations. Read more about these initiatives in our summary of 14 September 2017.  

Updated roadmap

To facilitate the discussion, the EU Commission will outline five or six options, including the Estonian and French proposals, in preparation for the EU Tallinn Digital Summit on 29 September 2017. If a common understanding is reached  by the Ecofin, the EU Commission would be responsible for drafting a proposal in the spring of 2018. 

More information

We will continue to keep you informed of further developments. In the meantime, if you have any questions, please contact your trusted adviser at Loyens & Loeff.

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