MEPs push for fairer tax system fit for digital economy

Decisions from the OECD in this respect are expected in a few months

Photo: EP Andreas Schwab

In a resolution backed on Thursday, MEPs said that outdated international tax rules need to be overhauled, including a minimum effective corporate tax rate; the EU should go it alone if global negotiations fail.

A few months ahead of decisions expected from the OECD, EU lawmakers are seeking to keep the momentum going at European level while pushing for changes on their primary concerns.

The resolution suggests to amend outdated rules established well before the digital economy existed as to reduce tax avoidance and make taxes fairer.

MEP call for a minimum effective tax rate to be set at a fair and sufficient level to discourage profit shifting and prevent damaging tax competition. The resolution also welcomes the US administration’s recent proposal of a 21% global corporate tax rate.

Taxing rights should reflect that, as a result of digitalisation, the interaction between businesses and consumers significantly contributes to value creation in highly digitalised business models. This would allow more taxes to be paid where value is being created, as has always been the concept behind taxation, rather than where the rates are lowest.

Parliament insists that the EU should develop its own fall-back position, which would kick in if global negotiations do not yield results by the end of the year. By mid-2021, there should be a proposal on a digital services tax and a Commission road map with different scenarios, with or without agreement at OECD level.

We have had a big problem in the last few years with digital services because they have been taxed more lightly than traditional ones, outlined during the debate before the vote, one of the co-rapporteurs, Andreas Schwab (EPP, DE).

This problem grew further during the Covid-19 pandemic, he said noting that equal treatment in taxation is not only fair but it is also necessary for fair competition.

“This resolution provides clear and simple guidelines for how to break away from taxing digital and traditional businesses differently,” he explained.

Martin Hlaváček (Renew, CZ), the second co-rapporteur said that large digital players cannot have an unfair advantage over SMEs. “We have a moral responsibility to ensure that digital multinationals will contribute their fair share, just like all other companies and citizens. Although this problem is best resolved at international level, this must be the last try - either there is agreement by the summer at the OECD or else the EU must adopt its own strategy. We cannot sit back forever and rely on the international level,” he underscored.

Similar articles