Online Business Shouldn’t Get Special Tax Treatment

May 30, 2014 Taxation in EU

BRUSSELS – Online businesses in the EU should be treated just like a standard physical business, and they should not face extra targeted taxes or have access to specialized tax breaks or tax planning opportunities.

On May 28th an Expert Group appointed by European Commission released a new report on potential changes to the taxation of online businesses operating in the EU, and stated that steps should be taken now to establish a viable and efficient system of taxes for digital businesses, in order to ensure economic growth, tax compliance and stable tax revenues into the future.

The report addressed the currently pertinent issue of special taxes on the profits of online businesses, as currently is being discussed in France and Spain, and it was stated that enacting such charges would be detrimental to the economy, and, instead of a separate taxes, “…general rules should be applied or adapted so that “digital” companies are treated in the same way as others.”

The question of the application of VAT on the online sale and delivery of physical goods was also addressed, and the Expert Group took the opinion that VAT should be levied in the jurisdiction where the goods are headed, and not in the jurisdiction in which the supplier is headquartered, otherwise large businesses will be able to unfairly minimize their tax obligations by relocating to an advantageous territory.

In addition to the specific recommendations, the Group added that in the future, any consideration on the taxation of online businesses should be focused on facilitating a straightforward and predictable system, which does not lock out small and medium sized businesses, and does not rely on unnecessary tax breaks or incentives.

Photo by: Martin Terber