Digital Economy
Digital Services: European Solutions for Fair Taxation of Multinational Digital Service Providers
cepStudy
"Concrete solutions are needed to limit market power and establish fair competition in order to protect and strengthen Europe's innovative strength and digital sovereignty," says cep economist Matthias Kullas, who led the study together with cep Executive Board member Henning Vöpel and cep researchers André Wolf and Lukas Harta. "The EU must not become the big loser," says Vöpel.
"While our exports contribute to the financing of the American national budget through customs duties, corporate taxation and traditional levies, this is not the case with American high-tech exports to Europe. The large American digital companies use our infrastructure to a large extent, but pay practically no taxes and duties in Europe," seconds Paul-Bernhard Kallen, Chairman of the Board of Directors of Hubert Burda Media Holding.
Against this backdrop, the cep proposes three specific taxation options: A levy on imported system software (digital customs duty), a network access fee (digital toll) and a tax on the turnover from the user's value-added contribution to digital services. "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 instruments are therefore explicitly not necessarily cumulative, but complementary, i.e. they do not lead to unintentional multiple taxation. According to calculations by cep, the EU has lost around 30 billion euros since 2018 by foregoing such taxes. In view of the sharp rise in digital value creation, the tax shortfall is likely to be even higher in the coming years.
"This exemption from taxes and duties for American companies in Europe means a significant advantage in competition with European digital companies and accelerates the transfer of wealth to the USA," criticises Kallen. Germany and the EU need to change the rules of the game in order to establish their competitiveness and refinance their infrastructure costs more broadly.
