The European Parliament’s Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE 2) published a study titled: “Tax Challenges in the Digital Economy” on its website. The study was provided/prepared by Policy Department A (Economic and Scientific Policy) at the request of the TAXE2 Committee of the Directorate General for Internal Policies.
The paper analyses direct and indirect tax challenges in the digital economy in light of the conclusions of the OECD’s BEPS (Base Erosion and Profit Shifting) Project. While assessing the recent reforms in the area of taxation within the EU and third countries, it revisits the question of whether or not specific measures are needed for the digital sector. Taking into account the recent scandals involving big digital companies and their aggressive tax planning practices in the EU, the specificities of the digital sector and the legal landscape in the 28 Member States, the paper makes policy recommendations for further tax reforms in order to tackle tax avoidance and harmful competition.
The study is 88 pages long and discusses subjects like a.o.:
· Key features of the digital economy
o Digital Business Models
· Tax challenges, tax-related investigations and common tax avoidance practices in the digital sector
o Nexus, Data and Characterisation at the Heart of the Tax Challenges in the Digital Sector
o EU and Member States’ Investigations on Digital Tech Giants
§ Legal Basis
§ EU and Member States Investigations
o Common Tax Avoidance Practices
§ Avoiding Taxable Presence in the Market Country Due to the Difficulty to Determine Tax Jurisdiction or Nexus
§ Avoiding Withholding Tax
§ Eliminating or Reducing Tax in Various Jurisdictions
o Major BEPS Risks in the Area of Direct Taxation
§ Preferential Tax Regimes
§ Transfer Pricing
§ Artificial Contractual Arrangements to Avoid PE
§ Hybrid Mismatches to Avoid PE
§ Issues Arising from Different Approaches to Corporote Tax
o Major BEPS Risks in the Area of Indirect Taxation
· Are special tax measures in the digital sector needed?
o Unitary taxation with formulary apportionment system
o Virtual PE
o Equalisation levy
o Further Challenges Posed by the Sharing Economy
o Existing or Potential Specific Measures in Member States
§ Diverted Tax Profit
§ Bandwidth Tax
o Reform Effots in the US Tax System Relevant to the Digital Sector
· Analysis of BEPS measures relevant to the digital economy
o Preventing the Artificial Avoidance on PE Status (OECD / G20 BEPS Action 7)
o Addressing Harmful Tax Practices (OECD / G20 BEPS Action 5)
o Addressing Transfer Pricing Documentation by Country-by-Country Reporting (OECD / G20 BEPS Action 13)
o Restoring taxation of stateless income in the market jurisdiction (BEPS Action 6 on Treaty Abuse)
o Regulating transfer pricing (OECD / G20 BEPS Actions 8-10)
o Modifying CFC Rules (OECD / G20 BEPS Action 3)
o Limiting Interest Deductions and Other Financial Payments (OECD / G20 BEPS Action 4)
· Legislation addressing tax challenges in the digital economy at the EU level
o Anti-Tax Avoidance Directive
§ Interest Deductions
§ Exit Taxation
§ Hybrid mismatches
§ CFC rules
§ Switch-over clause
o Recommendation on Tax Treaties
o Directive on Administrative Cooperation (DAC)
o Communication on an external strategy for effective taxation regarding tax havens
o Action Plan for Fair and Efficient Corporate Taxation
§ Parent Subsdiary Directive, and Interest and Royalty Directive
§ CCCTB
o Legislation in the Area of Transparency
o Legislation to Tackle Harmful Tax Practices
· Addressing VAT challenges in the digital economy
o VAT Measures in the EU
§ The VAT Action Plan
Click here to be forwarded to the study as available on the website of the European Parliament, which will open in a new window.
Copyright – internationaltaxplaza.info
and
Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!
