In response to the proposals on taxation of the digital economy published on 21 March 2018 by the European Commission, the European Banking Federation emphasises that only a global approach would have the potential to ensure a level-playing field and avoid unintended double taxation.
As main actors in the digital single market, banks take note of the new approach on digital taxation adopted by the EU. Unilaterally introducing new rules in the international corporate income tax framework and adopting an interim Digital Services Tax can challenge the way the digital economy is currently evolving.
The EBF expresses its support to the forward-thinking approach adopted by the OECD/G20 in their interim report of 16 March which aims to deliver a global consensus on the taxation of the digital economy. This OECD report recognizes that ring-fencing digital activities and services for tax purposes may prove to be extremely difficult and may have unintended consequences such as double taxation.
Existing OECD guidelines on the attribution of profits to permanent establishments with regards to banking activities very clearly set out the rules to be followed by financial institutions. Profits are taxed according to the creation of value generated and the risks taken by each entity involved in cross-border transactions.
Any specific tax on digital banking activities would be a surcharge tax which would be added to the existing corporate income tax (and VAT or hidden VAT cost) and would result in double taxation.
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