23 04 2018

German Industry Cautions Against EU Digital Tax

The Federal Association of German Industry (BDI) has said that proposals for a tax on digital companies will be detrimental to the European economy and exacerbate trade tensions between Europe and the United States.

In comments published on the association's website, BDI Chief Executive Joachim Lang called for an "internationally coordinated approach" to the taxation of the digital economy, rather than short-term unilateral solutions that will increase the tax burden on companies investing in digitization.

"Our companies are increasingly pursuing digital business models and are therefore also affected by the EU digital tax. As they digitize their products and processes, they face additional tax burdens. An EU digital tax is detrimental to the industry," Lang said.

"The proposal for an EU digital tax comes at an inopportune time because it exacerbates transatlantic tensions. The European Commission is risking to intensify the trade conflict with the US. The expense and income of the planned tax are disproportionate. Instead of short-term interim solutions at EU level, we believe that an internationally coordinated approach is necessary," Lang added.

Last month, the EU proposed two measures: an interim tax on the turnover of companies engaged in digital activities that would otherwise go untaxed, at a rate of three percent; and a longer-term solution, which the EU will seek to achieve international consensus on under the leadership of the OECD, which would establish new digital permanent establishment rules.

The interim measure would be levied on revenues created from selling online advertising space; created from digital intermediary activities; and those created from the sale of data generated from user-provided information. Such would apply only to companies with total annual worldwide revenues of at least EUR750m (USD928m) and EU revenues of EUR50m.