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Parliamentary questions
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19 December 2018
E-005509/2018(ASW)
Answer given by Mr Moscovici on behalf of the European Commission
Question reference: E-005509/2018

The Commission’s proposal for a digital services tax (DST) is based on a thorough analysis, summarised in the impact assessment(1) (IA) accompanying the DST proposal, and the proposal laying down rules relating to the corporate taxation of a significant digital presence.

In line with the better regulation principles, the IA examines the underlying problem (pages 8-20 of the IA), sets out the objectives, and assesses and compares the merits of various options to address the problem. Together this provides the justification for the proposal.

In brief, the key issue is one of outdated rules for the allocation of taxable profits in an increasingly digitalised economy. One of a number of consequences arising from this problem and demonstrated in the IA is the difference in effective tax rates between digital and traditional business models.

The IA (Section 2.2.2.) clearly acknowledges that this difference is partly driven by current tax policy that incentivises Research & Development. The difference in effective tax rates indicates that countries compete for this very mobile tax base, and this is the point made in the IA.

Another consequence, which is crucial for the justification of the DST, is the risk of single market fragmentation through unilateral measures, which hurts the competitiveness of the EU, adds uncertainty and undermines the chances for agreeing on a comprehensive global solution (sections 2.2.4, 9.1 and 9.3.1 of the IA).

The Commission is aware of the opinion of Professor Spengel, including his contribution to the public consultation of the Organisation for Economic Cooperation and Development for its 2018 interim report.

(1)SWD(2018) 81/2.

Last updated: 20 December 2018Legal notice