Are we en route to a common digital taxation in the EU? The ongoing debate on this issue does not only happen in Brussels these days, but was also subject to debate in our latest edition of "EU to go spezial“ in Berlin.
Fair taxation of digital behemoths is key to a level playing field and it has been high on the European policy agenda since last year. Yet, creating the right framework that suffices both equity and efficiency is difficult – mainly because current rules fail to appropriately take into account the increasing role of digital value creation. At this EU to go spezial, the Jacques Delors Institute Berlin and Bertelsmann Stiftung presented their latest proposal on the taxation of digital value creation in the Single Market. This proposal is part of the latest study titled “Users, Data, Networks. Taxing the Digital Economy”, authored by Pola Schneemelcher and Paul-Jasper Dittrich (both Jacques Delors Institute Berlin).
Dominic Ponattu (Bertelsmann Stiftung) gave an introductory statement, emphasizing why digital taxation matters beyond mere law making: Albeit holding great potentials, digitalization and digital companies could lead to increased concentration, excessive market power and, eventually, more inequality – mainly due to a decline in the labor share. One of the levers to prevent this from happening could thus be an appropriate taxation of digital value creation. Paul-Jasper Dittrich then took over to present the authors’ concept in more detail. At the heart of the proposal are clear criteria and principles for the assessment of digital value creation in company taxation that should apply EU-wide. Specifically, the proposal holds to determine whether a user network is existent in a member state and thus taxes could be levied at all. In addition, it is paramount to determine the extent to which a local user network contributes to value creation. Finally, a data declaration would bolster transparency on data usage and ownership.
After the presentation, the audience was eager to further discuss the proposal, its ramifications for policy making and the ongoing debate in the EU Commission and the OECD. Clearly, the proposal is seen as a complementary input to the different ongoing strands of the debate.