The US Chamber and European Tech Leader wrote a letter to the EU Secretary and Ministry of Finance respectively to reconsider the implementation of proposed proposal on digital service tax.
The U.S. Chamber and European Tech Leader have the same concerns on the proposed measure initiated by the commission in March. Both parties believe that the proposed DST hinders investment and discourages innovation and entrepreneurship. Further, as indicated in leaked drafts of the current interim proposal, the threshold for the EU DST may cause unfair treatment, putting in-scope companies at a competitive disadvantage without objective justification.
Moreover, the DST may violate the long-held principle that taxes on multinationals should be profit-based, not revenue based. Taxing revenues, as opposed to profits, will also impose a significant compliance cost, requiring new processes and infrastructure to be established. The EU already has a revenue tax based on the location of users – the VAT. Consequently, both parties agree that the DST will undoubtedly lead to double taxation of multinational companies.
Finally, the European Tech Leader including Spotify, Zalando, and Booking.com also added another concern about the unclear proposal in defining user contributions to digital platforms as a tax base and reciprocal treatment from third countries. Thus, new companies will have difficulties to grow to scale and to attract capital investment for emerging technologies.
Given these many issues are arising from the EU DST Proposal, both US Chamber and EU tech businesses urge EU not to adopt this measure and refocus on reaching multilateral consensus with other leading economies within the OECD, rather than taking the unilateral action.
One of TPA’s technology partners Cygnet Infotech has developed a comprehensive VAT solution named R7VAT MTD, which is amongst others recently approved by HMRC for use by companies in the UK to automate and manage their VAT returns filing process but can also be used broadly within the EU.
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