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International Internet Magazine. Baltic States news & analytics Friday, 22.11.2019, 23:31

EU finance ministers agree to develop new digital taxation rules

BC, Tallinn, 18.09.2017.Print version
Finance and economic affairs ministers of the European Union at an informal meeting in Tallinn on Saturday discussed updating international tax rules for companies so that these rules could also be applied to taxing enterprises that use digital technology, reports LETA/BNS.

"For us, it is important to agree on new international tax rules that also take into account the business models of the digital economy. This would guarantee the equal taxation of all companies regardless of their location or place of activity. I hope that Saturday's discussion helped us get a step closer to a suitable solution," Estonian Minister of Finance Toomas Toniste said after the meeting. "Tax problems connected with the digital economy and the need for new solutions have been a subject of discussion for a long time. At the same time, companies have to operate in unequal conditions. Countries are deprived of tax income and to compensate for that, they impose unilateral measures. This, however, harms our common market and the entire European Union."

The ministers agreed that it is important to move on quickly with the taxation of the digital economy and wished to reach common standpoints already at an official ministerial meeting in December. Toniste said that the sooner the EU reaches a solution the better as this guarantees the fairer taxation of companies and creates a better business environment. The minister added that a common solution that covers the entire European Union is also important because different tax rules in member states can create multiple taxation and lead to a belief that doing business outside of the EU is more lucrative than inside the European Union.

"If we can agree on the approach inside the European Union, then we can also affect the global rules in a way that is favorable to us. We all agree that a global solution would be the best solution," Toniste said.

Business models of the digital economy differ substantially from the business models of the traditional economy, and companies often operate virtually in several countries. The international rules for taxing the profit of companies, however, still assume that in order to create a taxable profit, the company has to be physically present. This allows many companies not to pay their taxes because the tax rules are out of date. This is also one of the reasons why this situation cannot simply be solved with measures that stop companies from evading their taxes.

Estonia is of the opinion that when bringing the tax rules up to date, it is important to abandon the requirement that companies have to be physically present in a country or own assets there, and replace this with the concept of a virtual permanent establishment. A precondition for this is a more precise agreement on the virtual taxpayers who have to start paying taxes.

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