Debate: Digital taxation: OECD negotiations, tax residency of digital companies and a possible European Digital Tax
Date: WEDNESDAY, 28 APRIL 2021
Speaker: Paolo Gentiloni
Language: EN

So we will redouble our efforts to reach an agreement at global level – both on the reallocation of taxing rights and on minimum effective taxation – by mid—2021, because a global solution is of course the best way to address these challenges.  In this domain, we welcome the recent decision of the US to withdraw their ‘safe harbour’ proposal. We know that the US are also proposing a few new ideas to simplify and widen the scope of pillar one to capture the largest and most profitable multinationals worldwide. An agreement on pillar one along these lines, covering the global share of the taxable base of six or seven digital companies, should not prevent the EU and its Member States from adopting a digital levy, since this has a different scope and is needed to restore a level playing field in the single market and contribute to financing the recovery and the resilience of the EU economy.  Regarding the project for the other pillar – global minimum effective taxation – the recent announcement by the US Government on a possible US tax reform will also bring a new dynamic. The new administration is in favour of a minimum effective tax rate that is higher than the one previously discussed at the OECD. So, undoubtedly, work still needs to be done to bridge differences, but recent US announcements and the ongoing work on the OECD blueprints create a good chance for a political agreement at G20 level in the coming months and we must maintain momentum. From the European Commission’s point of view, the two pillars under discussion are, and should remain, a package. Their objectives are complementary and we need a solution on both of them to provide a comprehensive answer to the tax challenges of modern economies. At the same time, the Commission services are working on a proposal for the digital levy, which will also serve as the basis for a new EU own resource. This stems, as you know, from the clear mandate from the European Council last year, which is also enshrined in the interinstitutional agreement on the multiannual financial framework (MFF) of last December. We will be ready to table this proposal in mid-2021, as agreed, with the aim to make it operational from 2023 onwards. Let me reassure you that finding a global solution remains the key priority for the Commission. This is why we will work to develop a design that does not interfere with the OECD process. There are ways to do this so that we meet EU objectives and actively support the OECD. Moreover, we will ensure that the design of such a digital levy is not discriminatory and thus fully in line with the EU international obligation under World Trade Organization (WTO) agreements. The digital levy should not fuel trade tension in any way. The Commission will also ensure that the design of the digital levy is compatible with the EU’s key policy objective of supporting and accelerating the digital transition. In conclusion, this terrible and extraordinary crisis could pave the way for new progress on global and digital taxation. I’m sure that we will work together to seize this opportunity.