Procedure : 2018/0073(CNS)
Document stages in plenary
Document selected : A8-0428/2018

Texts tabled :

A8-0428/2018

Debates :

PV 12/12/2018 - 18
CRE 12/12/2018 - 18

Votes :

OJ 13/12/2018 - 72

Texts adopted :


REPORT     *
PDF 685kWORD 112k
5 December 2018
PE 627.911v02-00 A8-0428/2018

on the proposal for a Council directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services

(COM(2018)0148 – C8-0137/2018 – 2018/0073(CNS))

Committee on Economic and Monetary Affairs

Rapporteur: Paul Tang

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
 EXPLANATORY STATEMENT
 PROCEDURE – COMMITTEE RESPONSIBLE
 FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the proposal for a Council directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services

(COM(2018)0148 – C8-0137/2018 – 2018/0073(CNS))

(Special legislative procedure – consultation)

The European Parliament,

–  having regard to the Commission proposal to the Council (COM(2018)0148),

–  having regard to Article 113 of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C8-0137/2018),

–  having regard to the reasoned opinions submitted, within the framework of Protocol No 2 on the application of the principles of subsidiarity and proportionality, the Danish Parliament, the Irish Houses of the Oireachtas, the Maltese Parliament and the Netherlands House of Representatives, asserting that the draft legislative act does not comply with the principle of subsidiarity,

–  having regard to Rule 78c of its Rules of Procedure,

–  having regard to the report of the Committee on Economic and Monetary Affairs (A8-0428/2018),

1.  Approves the Commission proposal as amended;

2.  Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

3.  Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

4.  Asks the Council to consult Parliament again if it intends to substantially amend the Commission proposal;

5.  Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment    1

Proposal for a directive

Recital 1

Text proposed by the Commission

Amendment

(1)  The global economy is rapidly becoming digital and, as a result, new ways of doing business have emerged. Digital companies are characterised by the fact that their operations are strongly linked to the internet. In particular, digital business models rely to a large extent on the ability to conduct activities remotely and with limited or no physical presence, on the contribution of end-users to value creation, and on the importance of intangible assets.

(1)  The global economy is rapidly becoming digital and, as a result, new ways of doing business have emerged. Digital companies are characterised by the fact that their operations are strongly linked to the internet. In particular, digital business models rely to a large extent on the ability to conduct activities remotely and with limited or no physical or taxable presence in a given country, on the contribution of end-users to value creation, and on the importance of intangible assets.

Amendment    2

Proposal for a directive

Recital 2

Text proposed by the Commission

Amendment

(2)  The current corporate taxation rules were mainly developed during the 20th century for traditional businesses. They are based on the idea that taxation should take place where value is created. However, the application of the current rules to the digital economy has led to a misalignment between the place where profits are taxed and the place where value is created, notably in the case of business models heavily reliant on user participation. It has therefore become evident that the current corporate tax rules for taxing the profits of the digital economy are inadequate and need to be reviewed.

(2)  The current corporate taxation rules were mainly developed during the 20th century for traditional businesses. They are based on the idea that taxation should take place where value is created. However, the application of the current rules to the digital economy has led to a misalignment between the place where profits are taxed and the place where value is created, notably in the case of business models heavily reliant on user participation and intangible assets. Digitalisation has changed the role of users, allowing them to become increasingly involved in the value creation process. It has therefore become evident that the current corporate tax rules for taxing the profits of the digital economy are not taking this new factor into account and urgently need to be reviewed.

Amendment    3

Proposal for a directive

Recital 2 a (new)

Text proposed by the Commission

Amendment

 

(2a)  The objective is to close the gap between taxation of digital revenues and traditional revenues. Currently, on average, digital businesses face an effective tax rate of only 9.5%, compared to 23.2% for traditional business models1a. A taxation system must be fair and beneficial to society as a whole. There should be a level playing field for all companies operating in the Single Market.

 

_________________

 

1a Source: Computations from the Impact Assessment of the European Commission, based on ZEW (2016, 2017) and ZEW et al.(2017).

Amendment    4

Proposal for a directive

Recital 3

Text proposed by the Commission

Amendment

(3)  That review constitutes an important element of the Digital Single Market3, given that the Digital Single Market needs a modern and stable tax framework for the digital economy to stimulate innovation, tackle market fragmentation and allow all players to tap into the new market dynamics under fair and balanced conditions.

(3)  That review constitutes an important element of the Digital Single Market3, given that the Digital Single Market needs a fair, modern and stable tax framework for the digitalised economy to stimulate innovation and inclusive growth, tackle market fragmentation and allow all players to tap into the new market dynamics under fair and balanced conditions. Digitalisation affects the whole economy, which goes beyond the creation of a digital services tax; thus tax rules should be reformed. The ad hoc measures contained in this Directive should not delay works on the taxation of a significant digital presence and on the inclusion of such taxation within a Common Consolidated Corporate Tax Base.

__________________

__________________

3 Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee and the Committee of the Regions 'A Digital Single Market Strategy for Europe' (COM(2015) 192 final of 6.5.2015).

3 Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee and the Committee of the Regions 'A Digital Single Market Strategy for Europe' (COM(2015) 192 final of 6.5.2015).

Amendment    5

Proposal for a directive

Recital 5

Text proposed by the Commission

Amendment

(5)  Given the problem of taxing the digital economy is of a global nature, the ideal approach would be to find a multilateral, international solution to it. The Commission is actively engaged in the international debate for that reason. Work at the OECD is currently ongoing. However, progress at international level is challenging. Hence, action is being taken to adapt the corporate tax rules at Union level6 and to encourage agreements to be reached with non-Union jurisdictions7, so that the corporate tax framework can be made to fit the new digital business models.

(5)  Given the problem of taxing the digital economy is of a global nature, the ideal approach would be to find a multilateral, international solution to it. The Commission is actively engaged in the international debate for that reason. Work at the OECD, the International Monetary Fund (IMF), the United Nations (UN) and the World Bank Group (WBG), which form the platform for Collaboration on Tax is currently ongoing. However, progress at international level is challenging. Hence, action is being taken to adapt the corporate tax rules at Union level6 and to encourage agreements to be reached with non-Union jurisdictions7, so that the corporate tax framework can be made to fit the new digital business models. Coherence with the Base Erosion and Profit Shifting (BEPS) Inclusive Framework should be ensured, to guarantee no deviation from international standards and to avoid multiplied complexity.

__________________

__________________

6 Proposal for a Council Directive laying down rules relating to the corporate taxation of a significant digital presence (COM(2018) 147 final).

6 Proposal for a Council Directive laying down rules relating to the corporate taxation of a significant digital presence (COM(2018) 147 final).

7 Commission Recommendation relating to the corporate taxation of a significant digital presence (C(2018) 1650 final).

7 Commission Recommendation relating to the corporate taxation of a significant digital presence (C(2018) 1650 final).

Amendment    6

Proposal for a directive

Recital 6

Text proposed by the Commission

Amendment

(6)  Pending such action, which may take time to adopt and implement, Member States face pressure to act on this issue, given the risk that their corporate tax bases are being significantly eroded over time. Uncoordinated measures taken by Member States individually can fragment the Single Market and distort competition, hampering the development of new digital solutions and the Union's competitiveness as a whole. This is why it is necessary to adopt a harmonised approach on an interim solution that will tackle this issue in a targeted way until a comprehensive solution is in place.

(6)  Pending such action, which may take time to adopt and implement, Member States face pressure to act on this issue, given the risk that their corporate tax bases are being significantly eroded over time. Uncoordinated measures taken by Member States individually can fragment the Single Market and distort competition, hampering the development of new digital solutions and the Union's competitiveness as a whole. This is why it is necessary to adopt a harmonised approach on an interim solution that will tackle this issue in a targeted way until a comprehensive solution is in place. The interim solution should be temporarily restricted in order to avoid that it inadvertenly becoming permanent. Therefore, a sunset clause should be introduced that would result in this Directive automatically expiring upon the estalishment of a comprehensive solution, preferably on an international level. By 31 December 2020, if no comprehensive solution has been agreed, the Commission should consider a proposal based on Article 116 of the Treaty on the Functioning of the European Union, whereby the European Parliament and the Council act in accordance with the ordinary legislative procedure. This is essential to come to an agreement without delay to avoid the multiplication of unilateral national digital taxes by Member States.

Amendment    7

Proposal for a directive

Recital 7

Text proposed by the Commission

Amendment

(7)  That interim solution should establish the common system of a digital services tax ('DST') on revenues resulting from the supply of certain digital services by certain entities. It should be an easy-to-implement measure targeting the revenues stemming from the supply of digital services where users contribute significantly to the process of value creation. Such factor (user value creation) also underpins the action with respect to corporate tax rules, as described in recital (5).

(7)  That interim solution should establish the common system of a digital services tax ('DST') on revenues resulting from the supply of certain digital services, including online content by certain entities. It should be an easy-to-implement measure targeting the revenues stemming from the supply of digital services where users and intangible assets contribute significantly to the process of value creation. Such factor (user value creation and heavy reliance on intangible assets) also underpins the action with respect to corporate tax rules, as described in recital (5).

Amendment    8

Proposal for a directive

Recital 9

Text proposed by the Commission

Amendment

(9)  DST should be applied to revenues resulting from the provision of certain digital services only. The digital services should be ones that are largely reliant on user value creation where the difference between the place where the profits are taxed and the place where the users are established is typically greatest. It is the revenues obtained from the processing of user input that should be taxed, not the user participation in itself.

(9)  DST should be applied to revenues resulting from the provision of digital services that are largely reliant on user value creation and on their ability to deliver services with no or a very limited physical presence. In these cases, the difference between the place where the profits are taxed and the place where the users are established is typically greatest.

Amendment    9

Proposal for a directive

Recital 10

Text proposed by the Commission

Amendment

(10)  In particular, taxable revenues should be those resulting from the provision of the following services: (i) the placing on a digital interface of advertising targeted at users of that interface; (ii) the making available of multi-sided digital interfaces which allow users to find other users and to interact with them, and which may also facilitate the provision of underlying supplies of goods or services directly between users (sometimes referred to as "intermediation" services); and (iii) the transmission of data collected about users and generated from such users' activities on digital interfaces. If no revenues are obtained from the supply of such services, there should be no DST liability. Other revenues obtained by the entity providing such services but not directly stemming from such supplies should also fall outside the scope of the tax.

(10)  In particular, taxable revenues should be those resulting from the provision of the following (i) the placing on a digital interface of advertising targeted at users of that interface; (ii) the making available of multi-sided digital interfaces which allow users to find other users and to interact with them, and which may also facilitate the provision of underlying supplies of goods or services directly between users (sometimes referred to as "intermediation" services); (iii) processing, transmission and sale of data collected about users and generated from such users' activities on digital interfaces; and (iv) the supply of digital content such as video, audio, games or text. If no revenues are obtained from the supply of such content, goods and services, there should be no DST liability. Other revenues obtained by the entity providing such services but not directly stemming from such supplies should also fall outside the scope of the tax.

Amendment    10

Proposal for a directive

Recital 13

Text proposed by the Commission

Amendment

(13)  For cases involving multi-sided digital interfaces that facilitate an underlying supply of goods or services directly between users of the interface, the underlying transactions and the revenues obtained by users from those transactions should remain outside the scope of the tax. The revenues resulting from retail activities consisting in the sale of goods or services which are contracted online via the website of the supplier of such goods or services, and where the supplier does not act as an intermediary, should also be outside the scope of DST because the value creation for the retailer lies with the goods or services provided and the digital interface is only used as a means of communication. Whether a supplier is selling goods or services online on his own account or providing intermediation services would be determined by taking into account the legal and economic substance of a transaction, as reflected in the arrangements between the relevant parties. For instance, a supplier of a digital interface where third-party goods are made available could be said to provide an intermediation service (in other words, the making available of a multi-sided digital interface) where no significant inventory risks are assumed, or where it is the third party effectively setting the price of such goods.

(13)  For cases involving multi-sided digital interfaces that facilitate an underlying supply of goods or services directly between users of the interface, the underlying transactions and the revenues obtained by users from those transactions should remain outside the scope of the tax. The revenue resulting from retail activities consisting in the sale of goods or services which are contracted online via the website of the supplier of such goods or services, and where the supplier does not act as an intermediary, should also be outside the scope of DST. However, given that it is possible to process user data through a digital interface and thereby create further value from the transaction, and because the absence of physical presence may create opportunity for aggressive tax planning, the enlargement of the scope of those services should be considered during the review of this Directive.

Amendment    11

Proposal for a directive

Recital 14

Text proposed by the Commission

Amendment

(14)  Services consisting in the supply of digital content by an entity through a digital interface should be excluded from the scope of the tax, regardless of whether the digital content is owned by that entity or that entity has acquired the rights to distribute it. Even if some sort of interaction between the recipients of such digital content may be allowed and therefore the supplier of such services could be seen as making available a multi-sided digital interface, it is less clear that the user plays a central role in the creation of value for the company supplying the digital content. Instead, the focus from the perspective of value creation is on the digital content itself which is supplied by the entity. Therefore the revenues obtained from such supplies should fall outside the scope of the tax.

(14)  Services consisting in the supply of digital content by an entity through a digital interface should be included in the scope of the tax, regardless of whether the digital content is owned by that entity or that entity has acquired the rights to distribute it, The revenues obtained from such supplies should be evaluated by the Commission within...[ two years of the date of entry into force of this Directive].

Amendment    12

Proposal for a directive

Recital 15

Text proposed by the Commission

Amendment

(15)  Digital content should be defined to mean data supplied in digital form, such as computer programmes, applications, games, music, videos or texts, irrespective of whether they are accessed through downloading or streaming, and other than the data represented by a digital interface itself. This is to capture the different forms which digital content can take when acquired by a user, which does not alter the fact that the sole or main purpose from the user's perspective is the acquisition of the digital content.

(15)  Digital content should be defined to mean data supplied in digital form, such as computer programmes, applications, games, music, videos or texts, irrespective of whether they are accessed through downloading or streaming, and other than the data represented by a digital interface itself.

Amendment    13

Proposal for a directive

Recital 15 a (new)

Text proposed by the Commission

Amendment

 

(15a)  Digital companies tend to invest less in buildings and machinery than regular companies do.

Amendment    14

Proposal for a directive

Recital 16

Text proposed by the Commission

Amendment

(16)  The service described in recital (14) should be distinguished from a service consisting in the making available of a multi-sided digital interface through which users can upload and share digital content with other users, or the making available of an interface that facilitates an underlying supply of digital content directly between users. These latter services constitute a service of intermediation and should therefore fall within the scope of DST, regardless of the nature of the underlying transaction.

deleted

Amendment    15

Proposal for a directive

Recital 17

Text proposed by the Commission

Amendment

(17)  Taxable services consisting in the transmission of data collected about users should cover only data which has been generated from such users' activities in digital interfaces, but not data which has been generated from sensors or other means and collected digitally. This is because the services within the scope of DST should be those using digital interfaces as a way to create user input which they monetise, rather than services using interfaces only as a way to transmit data generated otherwise. DST should therefore not be a tax on the collection of data, or the use of data collected by a business for the internal purposes of that business, or the sharing of data collected by a business with other parties for no consideration. What DST should target is the generation of revenues from the transmission of data obtained from a very specific activity (users' activities on digital interfaces).

(17)  Taxable services consisting in processing, the transmission or sale of data collected about users should cover data which has been generated from such users' activities in digital interfaces. These taxable services should be those using digital interfaces as a way to create user input which they monetise. DST is not a tax on the collection of data as such. What DST should target is the generation of revenues from processing, sale or transmission to a third party of this data obtained from a very specific activity (users' activities on digital interfaces).

Amendment    16

Proposal for a directive

Recital 22

Text proposed by the Commission

Amendment

(22)  Only certain entities should qualify as taxable persons for the purposes of DST, regardless of whether they are established in a Member State or in a non-Union jurisdiction. In particular, an entity should qualify as a taxable person only if it meets both of the following conditions: (i) the total amount of worldwide revenues reported by the entity for the latest complete financial year for which a financial statement is available exceeds EUR 750 000 000; and (ii) the total amount of taxable revenues obtained by the entity within the Union during that financial year exceeds EUR 50 000 000.

(22)  Only certain entities should qualify as taxable persons for the purposes of DST, regardless of whether they are established in a Member State or in a non-Union jurisdiction. In particular, an entity should qualify as a taxable person only if only if it meets both of the following conditions: (i) the total amount of worldwide revenues reported by the entity for the latest complete financial year for which a financial statement is available exceeds EUR 750 000 000; and (ii) the total amount of taxable revenues obtained by the entity within the Union during that financial year exceeds EUR 40 000 000.

Amendment    17

Proposal for a directive

Recital 23

Text proposed by the Commission

Amendment

(23)  The first threshold (total annual worldwide revenues) should limit the application of DST to the companies of a certain scale, which are the ones mainly able to provide those digital services for which user contribution plays a fundamental role, and which heavily rely on extensive user networks, large user traffic, and the exploitation of a strong market position. Such business models, which depend on user value creation for obtaining revenues and are only viable if carried out by companies with a certain size, are the ones responsible for the higher difference between where their profits are taxed and where value is created. Moreover, the opportunity of engaging in aggressive tax planning lies with larger companies. That is why the same threshold has been proposed in other Union initiatives9. Such a threshold is also intended to bring legal certainty, given that it would make it easier and less costly for companies and tax authorities to determine whether an entity is liable to DST. It also excludes small enterprises and start-ups for which the compliance burdens of the new tax would be likely to have a disproportionate effect.

(23)  The first threshold (total annual worldwide revenues) should limit the application of DST to the companies of a certain scale, which are the ones mainly able to provide those digital services heavily relying on mobile intangible and/or digital assets, for which user contribution plays a fundamental role, and which heavily rely on extensive user networks, large user traffic, and the exploitation of a strong market position. Such business models, which depend on user value creation for obtaining revenues and are only viable if carried out by companies with a certain size, are the ones responsible for the higher difference between where their profits are taxed and where value is created. Moreover, the opportunity of engaging in aggressive tax planning lies with larger companies. The threshold is also intended to bring legal certainty, given that it would make it easier and less costly for companies and tax authorities to determine whether an entity is liable to DST. It also excludes small enterprises, and start-ups for which the compliance burdens of the new tax would be likely to have a disproportionate effect.

__________________

 

9 See Article 2 of the Proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) (COM(2016) 683 final).

 

Amendment    18

Proposal for a directive

Recital 27

Text proposed by the Commission

Amendment

(27)  In order to alleviate possible cases of double taxation where the same revenues are subject to the corporate income tax and DST, it is expected that Member States will allow businesses to deduct the DST paid as a cost from the corporate income tax base in their territory, irrespective of whether both taxes are paid in the same Member State or in different ones.

(27)  In order to alleviate possible cases of double taxation where the same revenues are subject to the corporate income tax and DST, a future Union wide common solution will have to be found on allowing businesses to deduct the DST paid as a cost from the corporate income tax base in their territory, irrespective of whether both taxes are paid in the same Member State or in different ones.

Amendment    19

Proposal for a directive

Recital 29

Text proposed by the Commission

Amendment

(29)  Where the users with respect of a given taxable service are located in different Member States or non-Union jurisdictions, the relevant taxable revenues obtained from that service should be allocated to each Member State in a proportional way on the basis of certain specific allocation keys. Such keys should be set out depending on the nature of each taxable service and the distinctive elements triggering the receipt of revenues for the provider of such a service.

(29)  Where the users with respect of a given taxable service are located in different Member States or non-Union jurisdictions, the relevant taxable revenues obtained from that service should be allocated to each Member State in a proportional way on the basis of certain specific allocation keys. Such keys should be set out depending on the nature of each taxable service and the distinctive elements triggering the receipt of revenues for the provider of such a service. Where the allocation key results in an imbalanced apportionment that fails to reflect the real economic activity, a dispute resolution mechanism could remedy such a situation. In light of the foregoing, the Commission should assess the possible establishment of a dispute resolution mechanism in order to ensure the proper resolution of disputes when different Member States are involved.

Amendment    20

Proposal for a directive

Recital 30

Text proposed by the Commission

Amendment

(30)  In the case of a taxable service consisting in the placing of advertising on a digital interface, the number of times an advertisement has appeared on users' devices in a tax period in a Member State should be taken into account for the purposes of determining the proportion of taxable revenues to be allocated in that tax period to that Member State.

(30)  In the case of a taxable service consisting in the placing of advertising or supplying content on a digital interface, or the number of times an advertisement or digital content has appeared on users' devices in a tax period in a Member State should be taken into account for the purposes of determining the proportion of taxable revenues to be allocated in that tax period to that Member State.

Amendment    21

Proposal for a directive

Recital 31 a (new)

Text proposed by the Commission

Amendment

 

(31a)  As regards the sales of goods or services which are contracted on e-commerce platforms, the allocation of taxable revenues in a tax period to a Member State should be carried out on the basis of the revenue in that tax period. Taxing rights over the revenues of the business contracting sales of goods and services online should be allocated to Member States where the goods or services are delivered to the buyer.

Amendment    22

Proposal for a directive

Recital 32

Text proposed by the Commission

Amendment

(32)  As regards the transmission of data collected about users, the allocation of taxable revenues in a tax period to a Member State should take into account the number of users from whom data transmitted in that tax period has been generated as a result of such users having used a device in that Member State.

(32)  As regards the processing , sale or transmission of data collected about users, the allocation of taxable revenues in a tax period to a Member State should take into account the number of users from whom data exploited, sold or transmitted in that tax period has been generated as a result of such users having used a device in that Member State.

Amendment    23

Proposal for a directive

Recital 34

Text proposed by the Commission

Amendment

(34)  Any processing of personal data carried out in the context of DST should be conducted in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council10, including that which may be necessary in relation to Internet Protocol (IP) addresses or other means of geolocation. In particular, regard should be given to the need to provide appropriate technical and organisational measures to comply with the rules relating to the lawfulness and security of processing activities, the provision of information and the rights of data subjects. Whenever possible, personal data should be rendered anonymous.

(34)  Any processing of personal data carried out in the context of DST should be conducted in accordance with Regulation (EU) 2016/679 of the European Parliament and of the Council10, including that which may be necessary in relation to Internet Protocol (IP) addresses or other means of geolocation, without allowing for identification of users. The Member States' tax authority shall be informed of the method used to determine the location of users. In particular, regard should be given to the need to provide appropriate technical and organisational measures to comply with the rules relating to the lawfulness and security of processing activities, especially with the principles of necessity and proportionality, the provision of information and the rights of data subjects. Whenever possible, personal data should be rendered anonymous.

_________________

_________________

10 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).

10 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).

Amendment    24

Proposal for a directive

Recital 35

Text proposed by the Commission

Amendment

(35)  The taxable revenues should be equal to the total gross revenues obtained by a taxable person, net of value added tax and other similar taxes. Taxable revenues should be recognised as obtained by a taxable person at the time when they become due, regardless of whether they have actually been paid by then. DST should be chargeable in a Member State on the proportion of taxable revenues obtained by a taxable person in a tax period that is treated as obtained in that Member State, and should be calculated by applying the DST rate to that proportion. There should be a single DST rate at Union level in order to avoid distortions in the Single Market. The DST rate should be set at 3%, which achieves an appropriate balance between revenues generated by the tax and accounting for the differential DST impact for businesses with different profit margins.

(35)  The taxable revenues should be equal to the total gross revenues obtained by a taxable person, net of value added tax and other similar taxes. Taxable revenues should be recognised as obtained by a taxable person at the time when they become due, regardless of whether they have actually been paid by then. DST should be chargeable in a Member State on the proportion of taxable revenues obtained by a taxable person in a tax period that is treated as obtained in that Member State, and should be calculated by applying the DST rate to that proportion. There should be a single DST rate at Union level in order to avoid distortions in the Single Market. The DST rate set at 3% is to achieve an appropriate balance between revenues generated by the tax and accounting for the differential DST impact for businesses with different profit margins

Amendment    25

Proposal for a directive

Recital 35 a (new)

Text proposed by the Commission

Amendment

 

(35a)  A single DST rate at Union level constitutes a first step towards further harmonisation of corporate taxation at Union level. In order to create a level playing field and to eliminate tax competition and the resulting race to the bottom as regards corporate taxation levels, a minimum effective corporate tax rate should also be introduced at Union level in the near future.

Amendment    26

Proposal for a directive

Recital 37

Text proposed by the Commission

Amendment

(37)  Member States should be able to lay down accounting, record-keeping or other obligations aimed at ensuring that the DST due is effectively paid, as well as other measures to prevent tax evasion, avoidance and abuse.

(37)  Member States should be able to lay down accounting, record-keeping or other obligations aimed at ensuring that the DST due is effectively paid, as well as other measures, including penalties and sanctions, to prevent tax evasion, avoidance and abuse.

Amendment    27

Proposal for a directive

Recital 37 a (new)

Text proposed by the Commission

Amendment

 

(37a)  Total digital service tax paid by a taxable person per Member State should be a part of the system of country-by-country reporting.

Amendment    28

Proposal for a directive

Recital 38 a (new)

Text proposed by the Commission

Amendment

 

(38a)  In case a taxable person is liable to DST in more than one Member State, the Commission should audit, every three years the DST return filed with the Member State of identification.

Amendment    29

Proposal for a directive

Recital 40 a (new)

Text proposed by the Commission

Amendment

 

(40a)  DST is a temporary measure awaiting a permanent solution, which should by no means delay the entrance into force of a permanent solution. This Directive should expire with the adoption of the earlier of the Council Directive laying down rules relating to the corporate taxation of a significant digital presence, or the Council Directives on a Common Consolidated Corporate Tax Base and Common Corporate Tax Base, including the digital permanent establishment as proposed in the legislative resolutions of the European Parliament of 15 March 2018 on the proposal for a Council directive on a Common Corporate Tax Base and on the proposal for a Council directive on a Common Consolidated Corporate Tax Base respectively, or a Directive implementing a political agreement reached in an international forum such as the OECD or the UN.

Amendment    30

Proposal for a directive

Recital 40 b (new)

Text proposed by the Commission

Amendment

 

(40b)  Member States should regularly report to the Commission on the payment of the DST by entities, the functioning of the One-Stop-Shop and the cooperation with other Member States for tax collection and payment.

Amendment    31

Proposal for a directive

Recital 40 c (new)

Text proposed by the Commission

Amendment

 

(40c)  Two years after...[the date of entry into force of this Directive], the Commission should make an assessment of the application of this Directive and present a report to the European Parliament and the Council, accompanied, where appropriate, by proposals for its review in accordance with the principles of fair taxation of the digital sector.

Amendment    32

Proposal for a directive

Recital 41

Text proposed by the Commission

Amendment

(41)  The objectives of this Directive aim at protecting the integrity of the Single Market, ensuring its proper functioning and avoiding distortion of competition. Since those objectives, by their very nature, cannot be sufficiently achieved by Member States but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives,

(41)  The objectives of this Directive aim at protecting the integrity of the Single Market, ensuring its fair and proper functioning and avoiding distortion of competition. Since those objectives, by their very nature, cannot be sufficiently achieved by Member States but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives,

Amendment    33

Proposal for a directive

Article 2 – paragraph 1 – point 7 a (new)

Text proposed by the Commission

Amendment

 

(7a)  ‘processing of data means any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means, such as collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction.

Amendment    34

Proposal for a directive

Article 3 – paragraph 1 – point c

Text proposed by the Commission

Amendment

(c)  the transmission of data collected about users and generated from users' activities on digital interfaces.

(c)  the processing, transmission of data collected about users and generated from users' activities on digital interfaces.

Amendment    35

Proposal for a directive

Article 3 – paragraph 1 – point c a (new)

Text proposed by the Commission

Amendment

 

(ca)  the making available to users of content on a digital interface such as video, audio, games or texts using a digital interface.

Amendment    36

Proposal for a directive

Article 3 – paragraph 4 – point a

Text proposed by the Commission

Amendment

(a)  the making available of a digital interface where the sole or main purpose of making the interface available is for the entity making it available to supply digital content to users or to supply communication services to users or to supply payment services to users;

(a)  the making available of a digital interface where the sole or main purpose of making the interface available is for the entity making it available to supply communication services to users or to supply payment services to users, as long as no further revenues are generated thanks to the processing, transmission or sale of users’ data;

Amendment    37

Proposal for a directive

Article 4 – paragraph 1 – point b

Text proposed by the Commission

Amendment

(b)  the total amount of taxable revenues obtained by the entity within the Union during the relevant financial year exceeds EUR 50 000 000.

(b)  the total amount of taxable revenues obtained by the entity within the Union during the relevant financial year exceeds EUR 40 000 000;

Justification

To increase the scope of the DST, the threshold of taxable revenues should be lowered to EUR 25 000 000.

To protect small companies and start-ups compared to bigger companies, the DST rate should be 3% over the revenues between EUR 25 000 000 and EUR 100 000 000 and a 5% over the revenues above EUR 100 000.

To avoid a big cliff effect and to protect small companies and start-ups, every company in scope should receive an annual tax allowance of EUR 750 000.

Amendment    38

Proposal for a directive

Article 5 – paragraph 2 – point c a (new)

Text proposed by the Commission

Amendment

 

(ca)  in the case of a service falling within Article 3(1)(ca) , the digital content in question appears on the user's device at a time when the device is being used in that Member State in that tax period to access a digital interface.

Amendment    39

Proposal for a directive

Article 5 – paragraph 6

Text proposed by the Commission

Amendment

6.  The data that may be collected from users for the purposes of applying this Directive shall be limited to data indicating the Member State where the users are located, without allowing for the identification of those users.

6.  The data that may be collected from users for the purposes of applying this Directive shall be limited to data indicating the Member State where the users are located, without allowing for the identification of those users. Any processing of personal data carried out in the context of DST shall be conducted in accordance with Regulation (EU) 2016/679, including processing which may be necessary in relation to Internet Protocol (IP) addresses or other means of geolocation.

Amendment    40

Proposal for a directive

Article 5 – paragraph 6 a (new)

Text proposed by the Commission

Amendment

 

6a.  The Commission shall analyse whether the establishment of a dispute resolution mechanism would further increase the effectiveness and efficiency of the settlement of disagreements between Member States. The Commission shall submit a report thereon to the European Parliament and the Council, including, if appropriate, a legislative proposal.

Amendment    41

Proposal for a directive

Article 8 – paragraph 1

Text proposed by the Commission

Amendment

The DST rate shall be 3%.

The DST rate shall be set at 3%.

Justification

The objective of the DST is to close the gap between corporate taxation on digital firms and traditional firms and create a level playing field between them. When setting the rate for this revenue based tax, we therefore should assess the implied profit tax rate. Therefore we need to do two things; set the target rate and a realistic estimate of the profit margins. In its staff working document the European Commission claims that large multinational groups with a digital business model, using tax aggressive tax planning, are not paying any corporate income taxes. The average corporate income tax rate in the EU is 21.3% in 2018, which should therefore be the target for the implied rate of profits of the EU-wide DST. When it comes to the profit margin it is clear from the data available for public traded companies that large multinational groups with a digital business model tend to have a high profit margin. For example Google and Facebook, have a profit margin of up to 40%. When setting the rate rate of the DST, the assumed profit margin of 15% taken by the European Commission is too conservative. An assumed profit margin of 25% for large digital firms is more in line with reality. When applying these two metrics to the DST, we arrive to a rate of 5% on digital turnover in order to tax the implied profits with a 20% tax rate. (5/25 = 20% )

Amendment    42

Proposal for a directive

Article 10 – paragraph 3 – subparagraph 1 a (new)

Text proposed by the Commission

Amendment

 

Where point (b) of this paragraph applies, the Commission shall every three years carry out an audit of the DST return filed with the Member State of identification.

Amendment    43

Proposal for a directive

Article 13 – paragraph 2

Text proposed by the Commission

Amendment

2.  However, if the taxable person ceases to be liable to DST in that Member State of identification chosen under Article 10(3)(b), the taxable person shall change its Member State of identification in accordance with the requirements of Article 10.

2.  However, if the taxable person ceases to be liable to DST in that Member State of identification chosen under Article 10(3)(b), the taxable person shall change its Member State of identification in accordance with the requirements of Article 10, without prejudice to paragraph 2a.

Amendment    44

Proposal for a directive

Article 13 – paragraph 2 a (new)

Text proposed by the Commission

Amendment

 

2a.  If the taxable person ceases to be liable to DST in the Member State of identification chosen under point (b) of Article 10(3), the taxable person may decide to keep the Member State of identification initially chosen, given that the taxable person may be liable to DST in that Member State again in the next tax period. If the taxable person is not liable to DST in that Member State for more than two consecutive tax periods, it shall change its Member State of identification in accordance with the requirements of Article 10.

Amendment    45

Proposal for a directive

Article 17 – paragraph 2

Text proposed by the Commission

Amendment

2.  The amendments referred to in paragraph 1 shall be submitted electronically to the Member State of identification within three years of the date on which the initial return was required to be submitted. Amendments after such period shall be governed by the rules and procedures applicable in each Member State respectively where DST is due.

2.  The amendments referred to in paragraph 1 shall be submitted electronically to the Member State of identification within two years of the date on which the initial return was required to be submitted. Amendments after such period shall be governed by the rules and procedures applicable in each Member State respectively where DST is due.

Amendment    46

Proposal for a directive

Article 18 – paragraph 3

Text proposed by the Commission

Amendment

3.  Member States may adopt measures to prevent tax evasion, avoidance and abuse with respect to DST.

3.  Member States shall adopt measures, including penalties and sanctions, to prevent tax evasion, avoidance and abuse with respect to DST.

Amendment    47

Proposal for a directive

Article 18 – paragraph 5 a (new)

Text proposed by the Commission

Amendment

 

5a.  After adoption of this Directive, the Commission shall make a legislative proposal to include in Directive 2013/34/EU as regards disclosure of income tax information by certain undertakings and branches, providing for the total amount of digital service tax paid by a taxable person to the different Member States to be added to the list of obligatory country-by-country reporting standards.

Amendment    48

Proposal for a directive

Chapter 4 – title

Text proposed by the Commission

Amendment

ADMINISTRATIVE COOPERATION

ADMINISTRATIVE COOPERATION AND MANDATORY EXCHANGE OF INFORMATION

Amendment    49

Proposal for a directive

Article -20 (new)

Text proposed by the Commission

Amendment

 

Article -20

 

Automatic and mandatory exchange of information

 

In order for tax authorities to assess tax due properly and to ensure the proper and uniform implementation of this Directive, the exchange of information on tax matters shall be automatic and mandatory, as laid down by Council directive 2011/16/EU. Member States shall allocate adequate staff, expertise and budget resources to their national tax administrations as well as resources for the training of tax administration staff focusing on cross-border tax cooperation and on the automatic exchange of information in order to ensure full implementation of this Directive.

Amendment    50

Proposal for a directive

Article 24 a (new)

Text proposed by the Commission

Amendment

 

Article 24a

 

Report and review

 

Two years after...[the date of entry into force of this Directive], the Commission shall make an assessment of the application of this Directive and present a report to the European Parliament and the Council, accompanied, where appropriate, by proposals for its review in accordance with the principles of fair taxation of the digital sector.

 

In particular, the Commission shall assess:

 

(a)  the increase in the DST rate from 3% to 5% together with a corresponding tax allowance in order to limit the difference in effective tax rates between traditional and digital companies;

 

(b)  the scope of the DST, including an increase in such scope to include the sale of goods or services which are contracted online via digital interfaces;

 

(c)  the amount of tax paid in each Member State;

 

(d)  the type of digital activities within the scope of this Directive;

 

(e)  the potential tax planning practices that were applied by entities to avoid paying the DST;

 

(f)  the functioning of the One-Stop-Shop, the cooperation between Member States; and

 

(g)  the overall impact on the internal market taking into account potential distortion of competition.

Amendment    51

Proposal for a directive

Article 24 b (new)

Text proposed by the Commission

Amendment

 

Article 24b

 

Reporting obligations

 

Member States shall report every year to the Commission relevant figures and information on the payment of the DST by entities, the functioning of the OSS and the cooperation with other Member States for tax collection and payment.

Amendment    52

Proposal for a directive

Article 25 a (new)

Text proposed by the Commission

Amendment

 

Article 25a

 

Sunset clause conditional on permanent measures

 

The DST is a temporary measure awaiting a permanent solution; therefore, this Directive shall expire with the adoption of the earlier of:

 

(a)  the Council Directive laying down rules relating to the corporate taxation of a significant digital presence;

 

(b)  the Council Directives on a Common Consolidated Corporate Tax Base and Common Corporate Tax Base including the digital permanent establishment as proposed in the legislative resolutions of the European Parliament of 15 March 2018 on the proposal for a Council directive on a Common Corporate Tax Base and on the proposal for a Council directive on a Common Consolidated Corporate Tax Base respectively; or

 

(c)  a Directive that implements political agreement reached in international fora such as the OECD or the UN.


EXPLANATORY STATEMENT

The current corporate tax systems designed for 'brick-and-mortar' businesses, with a clearly identifiable physical presence, do not fit to the reality of the 21st century economy. The rapid development of new digital business models based on user participation and intangible assets has created an unlevel playing field vis-a-vis traditional businesses. These digital businesses use the lack of physical presence in Member States to shift profits and tend to pay only a fraction of the corporate taxes paid by their competitors. This is unfair and goes against the European principles of fair competition.

In the absence of an international agreement on taxing the digital economy, it is paramount to introduce new rules regarding taxation of the digital business models operating in the Union Single Market, to ensure a fair tax contribution to European economies by all companies and to avoid unilateral measures by Member States. Even though the rapporteur believes that taxation of the digital activities should be based on defining a virtual permanent establishment as called for by the European Parliament in its reports on the Common Corporate Tax Base and the Common Consolidated Corporate Tax Base of March 2018, he agrees that a temporary measure is necessary.

The rapporteur essentially supports the Commission proposal, in particular the view that this tax should be limited to companies above EUR 750 million of total worldwide revenues in order to limit a negative impact on the development of small companies, start-ups and scale-ups in the digital sector.

The rapporteur proposes a number of targeted amendments in order to improve the Commission proposal, in particular:

•  Creating a level playing field by increasing the DST tax rate from 3% to 5%. As the Commission made clear in its Staff Working Document, traditional domestic companies pay an effective average tax rate of 20.9% and digital multinational groups engaged in tax planning a negative average tax rate of -2.3%. The Commission based its proposed rate on the digital revenue on the idea of an implied tax of profits. When aiming at creating a level playing field, the rate should bridge this gap in taxation between traditional and digital firms. The level of implied corporate taxes should therefore be set at the 20% average taxes paid by traditional firms, instead of the 13% taken in the proposal. In addition, a low profitability of the digital business models of 15% is assumed, while using a profit margin of 25% is more realistic. Large digital multinational companies like Facebook and Google tend to have profit margins of up to 40%. Taking these new metrics to set the DST rate at 5% would create a level playing field between traditional and digital companies, and allows for a larger tax contribution from a sector which has been, so far, undertaxed.

•  Broadening the tax base by including in the scope of taxable revenue the supply of digital content such as video, audio or text using a digital interface and the sale of goods or services which are contracted online via e-commerce’ platforms. Because of the ability of their to process user data and thereby create further value from the transaction, in addition to the fact that, their revenue attained online is susceptible to aggressive tax planning due to a lack of physical presence in the different Member States. Including these forms of digital revenue in the scope of the destination based DST goes in the same direction of the tax reforms proposed by the Commission in the CCCTB.

•  Clarification that DST should also apply to the sale and transmission of data attained through active participation of users on digital interfaces.

•  Introducing a sunset clause conditional on the proposed EU permanent measures, whereby the DST is due to lapse with the adoption of proposals for a digital significant presence or the CCCTB including the European Parliament position on digital permanent establishment.

•  Asking the Commission to review this Directive after 3 years in particular with regard to entities covered by the DST, the amount of tax paid in each Member State, the thresholds of the DST with regards to the size of the entities and its digital services revenue, the type of digital activities and the kinds of taxable revenues.

•  Introduction of an audit mechanism where the DST return filed with the Member State of identification is audited every three years audited.


PROCEDURE – COMMITTEE RESPONSIBLE

Title

Common system of a digital services tax on revenues resulting from the provision of certain digital services

References

COM(2018)0148 – C8-0137/2018 – 2018/0073(CNS)

Date of consulting Parliament

11.4.2018

 

 

 

Committee responsible

       Date announced in plenary

ECON

19.4.2018

 

 

 

Committees asked for opinions

       Date announced in plenary

IMCO

19.4.2018

JURI

19.4.2018

 

 

Not delivering opinions

       Date of decision

IMCO

23.4.2018

JURI

23.4.2018

 

 

Rapporteurs

       Date appointed

Paul Tang

31.5.2018

 

 

 

Discussed in committee

29.8.2018

9.10.2018

19.11.2018

 

Date adopted

3.12.2018

 

 

 

Result of final vote

+:

–:

0:

33

2

2

Members present for the final vote

Pervenche Berès, Esther de Lange, Markus Ferber, Jonás Fernández, Roberto Gualtieri, Brian Hayes, Petr Ježek, Wolf Klinz, Georgios Kyrtsos, Philippe Lamberts, Werner Langen, Bernd Lucke, Olle Ludvigsson, Ivana Maletić, Marisa Matias, Gabriel Mato, Alex Mayer, Bernard Monot, Luděk Niedermayer, Ralph Packet, Sirpa Pietikäinen, Anne Sander, Martin Schirdewan, Molly Scott Cato, Peter Simon, Paul Tang, Marco Valli, Miguel Viegas, Jakob von Weizsäcker

Substitutes present for the final vote

Mady Delvaux, Syed Kamall, Alain Lamassoure, Luigi Morgano, Michel Reimon, Lieve Wierinck

Substitutes under Rule 200(2) present for the final vote

Barbara Lochbihler, Jarosław Wałęsa

Date tabled

5.12.2018


FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE

33

+

ALDE

Petr Ježek, Lieve Wierinck

ECR

Bernd Lucke

EFDD

Bernard Monot, Marco Valli

GUE/NGL

Marisa Matias, Martin Schirdewan

PPE

Markus Ferber, Brian Hayes, Georgios Kyrtsos, Alain Lamassoure, Esther de Lange, Werner Langen, Ivana Maletić, Gabriel Mato, Luděk Niedermayer, Sirpa Pietikäinen, Anne Sander, Jarosław Wałęsa

S&D

Pervenche Berès, Mady Delvaux, Jonás Fernández, Roberto Gualtieri, Olle Ludvigsson, Alex Mayer, Luigi Morgano, Peter Simon, Paul Tang, Jakob von Weizsäcker

VERTS/ALE

Philippe Lamberts, Barbara Lochbihler, Michel Reimon, Molly Scott Cato

2

-

ALDE

Wolf Klinz

GUE/NGL

Miguel Viegas

2

0

ECR

Syed Kamall, Ralph Packet

Key to symbols:

+  :  in favour

-  :  against

0  :  abstention

Last updated: 5 December 2018Legal notice