Sun. Oct 24th, 2021

7 July 2021

On 5 June, the GFinance Ministers reached a historic agreement on significant and ambitious changes to the international corporate tax system. This meeting, in which the EU Commission was an active participant, is an important step towards our common goal of reaching a harmonised global agreement to address the tax challenges of the digitalised economyAt the same time, participants also committed to the “removal of all digital services taxes, and other relevant similar measures“.

We understand that the Interinstitutional Agreement on Own Resources of 16 December 2020 commits the Commission to put forward a digital levy, with a proposal expected on July 20Howeverin light of the recent progress at the OECD Inclusive Frameworkand considering that senior MEPs have asked the Commission to drop the proposalwe also urge you to think carefully about the consequences of bringing it forward at this critical junctureIf such a proposal is still to be presented, howeverwe believe it is essential as an absolute minimum that the Commission sets out in full to its institutional partners the risks attached of such a unilateral measure to both breaking the spirit of the G7 agreement and the potential damage to the digitalisation of the EU economy.

We welcome the European Commissions wishas set out in the roadmap for the digital levy ‘not to undermine the on-going discussions athe OECD, nor to fuel international trade tensions’but are nevertheless concerned that a proposal for a unilateral levy can only undermine the global discussionsWe are particularly concerned that suca levy could damage relations with oumajor trading partner the US – where concerns have already been raised abouthe EU’s digitalevy – with the potential for on-going tariff retaliationand endanger future prospects for the swift agreement and implementation of a global deal in both the US and other countries.

More broadly, adopting a unilateral EU digital levy could hamper the development of the EUs broader digital transition and hence ouoverall competitivenessBy proposing a tax on digital companiesthe EU would risk undermining the very objectives that the NextGenerationEU instrument is seeking to achieve.