The European Commission (EC) has announced that it is to create a high level expert group on taxation of the digital economy to examine the best ways of taxing the digital economy in the EU, weighing up both the benefits and risks of various approaches.
Recognising that corporate tax avoidance and aggressive tax planning are particularly problematic in the digital economy due to the global and intangible nature of e-commerce companies, and the fact that current tax rules were not designed with e-commerce in mind, the EC is working towards finding a balance between fostering a business-friendly environment by removing tax obstacles that might discourage investment and growth of the digital sector within the eurozone, and at the same time, ensuring that the digital sector contributes fairly to public finances.
The expert group - comprising up to seven internationally renowned experts on the digital economy and on taxation - will focus on identifying the key problems with digital taxation from an EU perspective and presenting a range of possible solutions. It will be chaired by a person of political profile with relevant background on such issues.
From the group's recommendations, the EC will then develop any necessary EU initiatives to improve the tax framework for the digital sector in Europe.
As the pace at which the digital economy is developing demands a rapid tax response, the EC expects the expert group to begin its work before the end of the year, and report back to the EC in the first half of 2014.
In the meantime, the EU will continue to contribute actively to the work underway within the context of the OECD's Base Erosion and Profit Shifting (BEPS) work, to ensure a coherent and complementary approach to digital taxation at EU and international level.
Algirdas Aemeta, commissioner for Taxation, Customs, Statistics, Anti-fraud and Audit said: 'Today's tax systems were conceived in a pre-computer age. So it is no surprise that they often clash with the modern, digital economy. Taxation must not be an obstacle to all that is good about the digital revolution. Yet, we must also ensure that the digital sector plays fair and pays fair. The challenges linked to taxing the digital economy are immense and there are no ready-made answers. Therefore, we need deep, informed and focused reflection on this issue within the EU, to ensure that the next steps we take are the right ones.'
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