EU: Taxation of digital economy, public consultation launched

EU: Taxation of digital economy, public consultation

The European Commission (EC) launched a public consultation initiative regarding considerations for a possible proposal for taxation of the digital economy.

1000

Related content

According to the EC consultation release, interested parties are asked to provide feedback on an inception impact assessment, as well as to respond to a detailed public consultation questionnaire about challenges related to taxing the digital economy and on possible solutions to these issues. 

Background

The challenges of taxing the digitalized economy have been on the EU agenda for several years, but EU-wide initiatives were put on hold in anticipation of a global solution to be agreed upon at the OECD level. An EU long-term budget was formally adopted in December 2020, and this budget included a commitment to put forward a proposal for a digital levy as an “EU own resource.”

A proposal from the EC is expected by June 2021, with a view to the introduction of a digital levy by no later than 1 January 2023. 

Scope of consultation

The general objective of the EC consultation focuses on a to-be-designed measure that would allow for a “fair contribution” from companies active in the digital environment. In line with its ambitious target of publishing a proposal by the second quarter of 2021, the EC launched two requests for feedback.

Preliminary feedback on the inception impact assessment

A first step would be to collect feedback and relevant information from stakeholders on the intended initiative, and to reflect the EC’s understanding of the issue and the preliminary assessment of the expected economic, social, and environmental impact.

Details of the tax policy options have not yet been set out, but the EC has confirmed that the expected legislative proposal would take into consideration any agreement reached by the OECD and would identify additional measures such as:

  • A corporate income tax “top-up” to be applied to all companies conducting certain digital activities in the EU
  • A tax on revenues realized from certain digital activities conducted in the EU
  • A tax on digital business-to-business transactions conducted in the EU

The due date for comments and feedback is 11 February 2021. The comments and feedback received will be published on the EC’s website and will be taken into account in “fine tuning” the proposal for a digital levy.

Public consultation

As a second step, the EU on 18 January 2021 launched a more targeted public consultation, based on a questionnaire, asking stakeholders to provided their views on, among other items, the current challenges of taxation in the digitalized economy; possible solutions to address these challenges; the appropriate level for solving the issues (e.g., national, EU, beyond the EU or a combination of various levels); the scope of the digital levy; and the most appropriate options to determine where the revenues generated from digital activities are to be taxed. 

Interested parties are asked to provide further comments and explanations in a separate paper, to be uploaded as part of their response. Comments and feedback can be submitted by 12 April 2021. 

Next steps

The EC is expected to publish the draft proposal for the EU digital levy by June 2021.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal