European Parliament keeps the pressure up to tax digital economy more fairly

Following the financial crisis, G20 addressed tax evasion, tax avoidance and money laundering through the Base Erosion and Profit Shifting (BEPS) project, leading to the BEPS action plan. This action plan, however, did not address the detrimental practices existing in the digitalised economy and this led to further work.

In October and November 2019, OECD launched two separate public consultations on the matter to find consensus on a way forward. As the next step, MEPs have recently adopted a resolution in which they express their concern that there is no common approach at EU level on the ongoing international negotiations and call on the Commission and Member States to agree on a joint and ambitious EU position. According to the MEPs, at international level, the EU’s position should aim to ensure that the Single Market functions smoothly, notably by safeguarding a level playing field for all types of firms. They demand that firms pay a fair share of tax where the actual economic activity and value creation take place and that the income from taxes is fairly distributed across all the Member States. The European Parliament also supports the Commission’s commitment to propose an EU solution, should an international deal not be reached by the end of 2020.

In 2018/2019, the EU came close to adopting its own set of rules (legislation on a digital services tax, and legislation defining a significant digital presence), however, the need for unanimity within the Council resulted in that a few Member States were able to prevent a final deal being reached.

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