New EU digital tax rules: a good first step in right direction

23 March 2018
New EU digital tax rules are a good first step to address public outrage over the dodgy tax practices of some of the world’s biggest corporations says Public Services International, a Global Trade Union Federation at the centre of the campaign for corporate tax forum.

The new rules will tax large digital media companies based on where they generate revenue, rather than where they have their regional headquarters, which are often in countries like Ireland and Luxembourg which have low tax rates.

Read more: PSI work on public funding and tax justice.

Many digital companies benefit from public services without paying their fair share of tax, said Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, ahead of the report’s release.

According to data from the European Commission, digital companies pay on average an effective tax rate of 9.5 percent — compared to 23.2 percent for traditional businesses.

PSI: The tax debate is about equal treatment

It's important to keep in mind that the tax debate is about equal treatment: workers pay their fair share, the grocery store on the corner pays its fair share - now it’s time for tech companies to do the same, said Daniel Bertossa, PSI’s director of policy and governance.

We welcome steps to fix the current broken system. We particularly welcome the acknowledgement that new ways must be found to tackle tax avoidance. These temporary EU measures show they understand that the OECD BEPS process has not done enough to fix the problem.

There is an urgent need to stop this sort of unhealthy financial acrobatics. Corporate tax avoidance and evasion deprives communities of the funding necessary for public schools, hospitals and infrastructure. We applaud the EU’s decision to highlight this sort of bad behaviour- however this must be extended beyond the digital realm and across the globe.

While the new proposed rules could help rein in the excesses of major tech companies within the EU, PSI and its partners have been calling for an urgent rethink of tax rules at the international level.

Star economists suggest roadmap for fairer global taxation

The Independent Commision for the Reform of International Corporate Taxation, which counts Joseph Stiglitz and Thomas Piketty among its members, recently published a “Roadmap for Taxing Multinationals” which contains a range of feasible policy options to address corporate tax avoidance and evasion including:

  • Unitary Taxation: taxing multinationals as single entities
  • Global formulary apportionment: allocating profits to different countries in a balanced way using factors reflecting both supply (e.g., assets, employees, resources used) and demand (sales)
  • A UN Global Tax Body: international taxation addressed at the UN, which alone can provide the legitimacy for rules to coordinate such a central element in the sovereignty of all states

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