Innovation and digital – FEPS Post Summit Briefing: European Council, 28 June 2018

The Council’s commitment to the fights against tax avoidance, evasion and fraud at global level merits a positive mention. In line with the agreement that Chancellor Merkel and President Macron reached in Meseberg last month, the Council decided to take forward Moscovici’s proposals of a digital tax, which is likely to come to an agreement in early 2019. The Commission’s plan to introduce a 3% tax on corporate turnover from digital advertising and online intermediation services certainly represents a positive step to make US-based digital giants pay their fair share to the European economy. It is also the right move into the direction of collecting taxes where profits are made, i.e. where companies have significant interactions with users through digital channels.

Nonetheless, two risks are evident here. First, progress towards a digital tax should not divert the attention from what matters most, namely a modernisation and reform of the entire corporate tax system in Europe. Member states should rather commit to the introduction of a common corporate tax base (CCTB) and common consolidated corporate tax base (CCCTB), as the priority should be on addressing tax competition and taxing fairly all giants, not only the digital ones. Second, despite the rather modern design of the digital tax put forward by the Commission, it is still not clear how it will be ensured that it actually impacts big digital companies rather than their clients, users and SMEs which make use if their services.

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