The European Banking Federation has denounced the European Union’s decision to singularly implement the taxation of the digital economy, saying that the bloc should instead have supported efforts to achieve a global level-playing field.
The European Commission had on March 21 released two proposed amendments to international tax rules to ensure digital business activities are taxed “fairly” and in a growth-friendly way in the European Union.
The first measure, which was described by the Commission as temporary seeks a three percent excise tax on certain digital firms’ turnover from certain online activities from which they derive revenue that would likely otherwise go untaxed.
This tax is aimed at online advertising, the monetization of users’ data; and digital intermediary services.
A news report by Tax-News.com indicated that the Federation was opposed to the temporary measure, saying only a global solution will ensure that double taxation is avoided.
It stated: “As main actors in the digital single market, banks take note of the new approach on digital taxation adopted by the EU. Unilaterally introducing new rules in the international corporate income tax framework and adopting an interim Digital Services Tax can challenge the way the digital economy is currently evolving.
“The EBF expresses its support to the forward-thinking approach adopted by the OECD/G20 in their Interim Report of March 16, which aims to deliver a global consensus on the taxation of the digital economy. This OECD Report recognizes that ring-fencing digital activities and services for tax purposes may prove to be extremely difficult and may have unintended consequences such as double taxation”, the EBF added.
Commenting on the EU’s fiscal proposal, the Chief Executive Officer, European Banking Federation, Wim Mijs, noted further that “digital activities carried out by banks and banking groups are exercised in a very strict regulatory framework and do not induce base erosion and profit shifting by nature.
“Existing OECD Guidelines on the Attribution of Profits to Permanent Establishments with regards to banking activities very clearly set out the rules to be followed by financial institutions, i.e. profits are taxed according to the creation of value generated and the risks taken by each entity involved in cross-border transactions.”
“Any specific tax on digital banking activities would be a surtax which would be added to the existing corporate income tax (and value-added tax (VAT) or hidden VAT cost) and would result in double taxation”, Mijs added.