Digital Tax: European Commission’s proposals could combat profit shifting

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Liberal and Democrat MEPs have this evening welcomed the expected announcement by the European Commission tomorrow of a new “Digital Tax”, targeting large multinational digital companies, aimed at ensuring they are taxed based on where they generate revenue, rather than where they have their regional headquarters.

It has been reported that the new proposed tax is likely to apply to companies with annual global revenue of more than 750 million euros.

On the 19 October 2017, the European Council concluded there was a “need for an effective and fair taxation system fit for the digital era” and the European Parliament has consistently called for a more transparent, coordinated and convergent corporate tax policies within the Union.

Commenting ahead of the European Commission’s announcement, Petr Ježek MEP, member of the European Parliament’s TAX3 committee, said:

“In the last decade, digital technology companies have outperformed more “traditional” industries and transformed our economy. However, our tax system has not yet adapted to this new business model. It still contains loopholes which prevent Member States from collecting their fair share of tax on the profits of such companies. The Commission proposal will address this gap and apply a simple and fair logic: taxing companies where value is created. It will be challenging to find the right balance between fair taxation and innovation, but for the integrity of our Single Market, the EU should accept this challenge.”

Lieve Wierinck MEP, a member of the European Parliament’s Economic and Monetary Affairs Committee, commented:

The digital economy and digital giants are becoming an ever more important and valuable part of our society. But we also have to ensure that our taxation system is well equipped for this new reality. I welcome the Commission’s proposal as it is essential that we can collect the revenues needed to continue investment in our infrastructure. This is also important for these same companies who make use of our networks, our well-educated labour force and our legal system. By contributing to society they can continue to thrive in it.”

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