A Digital Liberation Day for Europe?

“The EU should use the current situation to assert its own fiscal sovereignty and strengthen digital sovereignty. Europe's digital freedom is at stake,” says cep board member Henning Vöpel, who co-authored the cepAdhoc with Matthias Kullas and Andre Wolf. The authors propose a three-part taxation model: A levy on imported system software (digital duty), a tax on the turnover from users' value-added contribution to digital services and a network access fee (digital toll). “The idea behind the concept is to develop an alternative taxation model for territorially elusive digital services that addresses the central foundations of digital value creation such as software, data and networks,” emphasises Wolf.

The EU is recording a growing net import of digital services compared to the USA. At the same time, Europe's digital dependency is growing, with risks for technological innovation, social resilience and democratic sovereignty. “The market power of a few corporations is consolidating and with it an asymmetrical balance of power. Without a fiscal counterweight, Europe will not only lose revenue, but also control over critical infrastructures,” says cep economist Matthias Kullas.

The instruments are explicitly not cumulative, but complementary and do not lead to unintended multiple taxation.  They should not be a long-term ideal solution to the problem of digital dependency, but rather as a supplement to the EU's range of defence measures. The aim is to strengthen the European negotiating position and create fair competitive conditions for the domestic digital sector. However, effective and credible taxation of digital companies requires breaking the monopoly power of these providers and building up their own digital infrastructure.