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Corporate taxation of a significant digital presence [EU Legislation in Progress][Policy podcast]

Written by Marcin Szczepański (2nd edition, updated on 7.12.2018),

Young businessman using innovative virtual touchscreen presses tax button. Tax payment. Government, state taxes. Data analysis, paperwork, financial research, report. Calculation tax return.

© wladimir1804 / Fotolia

Despite achieving unprecedented growth and profit rates, the digital economy seems to be relatively undertaxed when compared to more traditional ‘bricks and mortar’ companies. The current rules are based on the physical presence of taxpayers and assets, and there is a general understanding that they are not suited to taxing a digital economy characterised by reliance on intangible assets and ubiquitous services whose location is often hard to determine. International bodies are currently working on how to adapt tax rules to the digital reality.

The European Commission adopted a proposal in March 2018. It would allow taxation on the basis of digital rather than physical presence linked with the EU, for digital activities generating turnover of over €7 million, and with more than 100 000 users or 3 000 business to business contracts annually.

The proposal has met with mixed reactions from stakeholders. Although there is growing recognition that digital companies should pay similar tax rates to traditional companies, some consider the initiative to be premature given the ongoing search for a compromise at the level of the Organisation for Economic Co-operation and Development (OECD), which is thought of as the permanent solution. The report by Parliament’s Committee on Economic and Monetary Affairs (ECON) proposes to widen the scope and reach of the tax, and increase clarity for tax authorities and companies. The plenary vote on the report is expected during the December session.


Proposal for a Council directive laying down rules relating to the corporate taxation of a significant digital presence
Committee responsible: Economic and Monetary Affairs (ECON) COM(2018) 147
Rapporteur: Dariusz Rosati (EPP, Poland) 2018/0072(CNS )
Shadow rapporteurs:



Paul Tang (S&D, the Netherlands)
Ashley Fox (ECR, UK)
Petr Ježek (ALDE, Czech Republic)
Martin Schirdewan (GUE/NGL, Germany)
Eva Joly (Greens/EFA, France)
Marco Valli (EFDD, Italy)
Barbara Kappel (ENF, Austria)
Consultation procedure – Parliament adopts a non-binding opinion only
Next steps expected: Vote in plenary

timeline step 5 on 7 voted in plenary

Listen to podcast ‘Corporate taxation of a significant digital presence

Effective average tax rate in the EU for international enterprises

Effective average tax rate in the EU for international enterprises

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