Developments in the field of the taxation of the digital economy are following one another in rapid succession. The EU Member States have not yet been able to reach agreement on an EU-wide tax measure and it is very doubtful whether such an agreement will be reached before the OECD comes with an international solution. In Paris, the OECD is currently discussing four proposals for a solution at international level. A number of countries (including France, Spain, Italy, Austria and the United Kingdom) no longer seem willing to wait and are already at an advanced stage with the introduction of unilateral tax measures (a ‘digital services tax’), which for the time being only appear to affect large online technology companies.
Digital services tax
Robert van der Jagt, partner and chair of the KPMG EU Tax Centre: “The exact outcome of the consultations within the EU and the OECD is still unclear and uncertain. We bear in mind that, in the near future, more countries will unilaterally introduce a digital services tax, which will be effective until the moment that an international solution is actually introduced. Companies affected by the unilateral digital service taxes should therefore be mindful of potential double taxation and would do well to consider their options.”
The OECD’s plans for taxation of the digital economy are still being worked out. The details are still unknown. Jaap Reyneveld, partner at KPMG Meijburg & Co, explains: “What the final tax system will look like, if it is introduced at all, is not yet certain. But if these OECD proposals for the digital economy do go through, they will not only affect online technology companies, but possibly also traditional multinationals. The OECD proposals represent a radical turnaround in the international tax system from the current status quo. Part of the profits will then no longer be allocated to the country in which the economic activities of the company take place but to the country in which the consumer/client is located.” Willem Jan Paardekooper, also partner at KPMG Meijburg & Co, adds: “This form of taxation also affects traditional companies. Multinationals that attribute part of the value to ‘marketing intangibles’ will have to allocate part of the profit to the country where their customers are located. This therefore not only affects the large digital technology companies, but also, for example, the pharmaceutical industry and media companies.”
Whatever happens, it is important for online tech companies and traditional multinationals not to be confronted with double taxation and that new tax measures are executable. Vinod Kalloe, head of international tax policy at KPMG Meijburg & Co: “We recommend that the larger technology companies keep a close eye on the developments concerning the unilateral digital services tax in the coming period. An important question here is whether these taxes may be in violation of European law. In addition, traditional multinationals would be well advised to pay particular attention to the OECD’s initiatives, which, in the absence of consensus, are very likely to lead to unilateral actions in the form of minimum taxation.”
The roundtable session was very successful and a follow-up session will take place in early July. There will then also be feedback from the OECD update, which it will present at the G20 summit on June 28 and 29 in Osaka, Japan.
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