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Corporate taxation in the digital era

How can we address digital taxation in the EU? Is the proposed "equalisation tax" on turnover the best policy to tackle the challenges posed by digita


Dmitri Jegorov

Deputy Secretary-General for Tax and Customs Policy, Ministry of Finance, Estonia,

Stephen Quest

Director General, European Commission, DG Taxation and Customs Union,

Stef van Weeghel

Global Tax Policy Leader at PwC, Professor of International Tax Law, University of Amsterdam,

Johannes Becker

Professor and Director of Institute of Public Economics, University of Muenster,

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Presentation by Johannes Becker

Presentation by Dmitri Jegorov


The society has made substantial leaps in progress and the emergence of the digital era is a perfect illustration. Along with the wide range of benefits of digital economy, we faced certain obstacles in the area of corporate taxation among others. Issue of digital is an unresolved and increasingly urgent one, but It is not digitalization that is a problem and the launch of the Digital Single Market is of the highest importance. Fair and sustainable base for taxation is needed, which poses certain risks for the future and serves as the main motivation for rethinking what has happened. The new challenges arise from the difference between physical and economic activities (commercial) presence, which makes the situation cumbersome and go beyond BEPS.

The basic corporate taxation principle, which is about profits being taxed where the value has been created, is being challenged with the rise of digital era. In practice, there is a substantial divergence between where profits are made and where they are taxed, underlining the difference between the residence versus source. Overall, consensus on the four following features, that corporate taxation should possess was achieved. The corporate taxation principles should:
1) facilitate fairness,
2) help to reach sustainable revenue in the long term,
3) foster competition in the market and
4) safeguard single market.

Similarly, while one can follow rather pragmatic approach (keeping source and residence countries happy in the long term and ensuring that tax havens are out of the game) or normative one with the guiding principle of value creation (excluding pure imports and redefining auxiliary services as core activities), solutions to the challenges imposed must contain the following characteristics:
1) Solution should be international, which means that it must be globally applicable and the European Commission work with OECD is about to make some proposals on this issue. Openness and cooperation are critical components to achieve the stated objective and monitoring, discussions and communication at various levels should continue.
2) Clearly, there is a need for structural a solution, but immediate targeted measures are in a high demand as well.

Notes by Yana Myachenkova, Research Assistant, Bruegel