Past Event

Internet taxation: challenges and policy recommendations

As the economy moves online, it becomes more difficult for national tax authorities to collect revenue. How great is the impact, and what should corporate taxation look like in the digital age?

Date: June 7, 2016, 12:30 pm Innovation & Competition Policy Tags & Topics

summary

See below for video, audio recording and event materials

The digital economy is creating new challenges for taxation and there is still a low level of effectiveness of taxation for internet platforms in the US. This may partly be due the current rules, that are designed for the old industrial and manufacturing world, whereas in the digital era we now face different problems. Moreover, the various initiatives and projects of the OECD and several member states, addressing these challenges, are still in their infancy.

Professor Francis Bloch gave an academic view on alternative tax policies and their impact on social welfare. Internet taxation has some distinguishing features that change traditional intuitions, e.g. blurred geographic lines, two-sided platforms, data collection and large network effects. So far, several papers have been written for the French Prime Minister’s Think Tank with recommendations on internet taxation, leading to specific recommendations for France.

However, several unanswered questions remain: How to redefine the “Permanent Establishment” principle? How should profits be shared among countries? How do we quantify likely effects of industry-based taxation on fiscal revenues and welfare and what are the effects of the switch from origin to destination on (indirect) tax competition?

Helena Kiurusalmi, Senior Tax Manager at Zalando, outlined the challenges that corporates face in these times of taxation uncertainty. Challenges include new business models and how they fit traditional definitions of products and services, as well as what will happen to these definitions in the future. Taxation poses challenges in particular for small companies, as VAT registrations in countries can take two to three months. Tax compliance is also essential and another layer on the authority level should be there to help firms to comply.

Caroline Edery spoke mainly about VAT and the European Commission’s initiatives. It is important that all companies are treated in the same way and that they comply. The rules are different everywhere and a mini-one-stop-shop initiative has been launched to simplify VAT by allowing firms to file in one member state. Furthermore, the Commission supports the development and compliance at national level and is test cooperating with Norway and meeting with businesses to broaden the scope of cooperation.

Dmitri Jegorov underlined how the main issue here is the principle of establishment, as it relies on locations, people and outdated principles that are not as essential to the digital economy as to conventional business. The main suitable basis for where value is created seems to be where the consumers are. Transparency is crucial, both locally and globally. Especially with legalisation of Uber, Countries such as Estonia are seeking solutions for these new challenges with ambiguous rules.

Scott Marcus indicated that it is essential to determine how to address these challenges without creating distortions. Some business models may also be affected when taxation is changed and it is crucial to determine which risks this imposes. Different taxation rates for physical versus virtual goods can also create distortions.

Finally, transparency is crucial when addressing these challenges. For corporate income tax a destination principle could help define where value is created.

Event summary by Nuria Boot, Research Assistant

VIDEO RECORDING


event materials

Presentation by Francis Bloch

Presentation by Dmitri Jegorov

DSC_0474
DSC_0482
DSC_0457
DSC_0460
DSC_0478
DSC_0480

Schedule

Jun 7, 2016

12.30 - 13.00

Check-in and lunch

13.00 - 13.25

Presentation

Francis Bloch, Professor of Economics, Université Paris 1 and the Paris School of Economics, France

13.25 - 14.30

Comments and Audience Q+A

Chair: Georgios Petropoulos, Research Fellow

Caroline Edery, Head of Unit, Tax administration and fight against tax fraud, European Commission, DG TAXUD

Dmitri Jegorov, Deputy Secretary General, Tax and Customs Policies, Ministry of Finance, Estonia

Helena Kiurusalmi, Senior Tax Manager, Zalando

J. Scott Marcus, Senior Fellow

Speakers

Francis Bloch pic

Francis Bloch

Professor of Economics, Université Paris 1 and the Paris School of Economics, France

Caroline Edery

Head of Unit, Tax administration and fight against tax fraud, European Commission, DG TAXUD

Dmitri Jegorov

Deputy Secretary General, Tax and Customs Policies, Ministry of Finance, Estonia

Helena Kiurusalmi

Senior Tax Manager, Zalando

Scott Marcus

J. Scott Marcus

Senior Fellow

IMG_20151119_103626

Georgios Petropoulos

Research Fellow

Location & Contact

Bruegel, Rue de la Charité 33, 1210 Brussels

Matilda Sevón

Matilda Sevon

matilda.sevon@bruegel.org

Read article More on this topic More by this author

Blog Post

Marek Dabrowski

Challenges to debt sustainability in advanced economies

The gross general government debt-to-GDP ratios in many advanced economies have reached the highest levels in peacetime history and continue to grow, putting into question sovereign solvency in these economies.

By: Marek Dabrowski Topic: European Macroeconomics & Governance Date: December 8, 2016
Read article More on this topic More by this author

External Publication

9783319418445

Policy and Politics in the Era of the Industrial Internet: How the Digital Transformation Will Change the Political Arena

The digital transformation has already had an impact on policymaking, and this trend will continue in the years to come. How will the political process change and how can influencers guide this change?

By: Giuseppe Porcaro Topic: Innovation & Competition Policy Date: December 7, 2016
Read article Download PDF More on this topic

Policy Contribution

pc-22-16

Going local: empowering cities to lead EU decarbonisation

Decarbonisation and digitalisation are reshaping the European energy system, which will become more decentralised and interconnected with other sectors. Cities have the opportunity to be the key drivers of decarbonisation, but this will require the implementation of a new bottom-up governance system. This paper outlines a four-step mechanism in order to achieve decarbonisation at city level.

By: Simone Tagliapietra and Georg Zachmann Topic: Energy & Climate Date: November 30, 2016
Read article More on this topic More by this author

Blog Post

IMG_20151119_103626

Search engines, big data and network effects

Search engines are intermediaries in a two-way market between users and advertisers. Their huge stocks of data about users and their preferences can help search engines offer better services to all parties. But does this make market entry difficult for new players? And can we see network effects emerging in the search engine market?

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: November 22, 2016
Read article More by this author

Blog Post

DSC_0794

Trump, NATO and European defence spending

US President-Elect Donald Trump made critical statements about low European defence spending during the election campaign - signaling an expectation that Europe should contribute more to the cost of its security. Indeed, most European NATO members have spending well below the 2% target that NATO membership entails. Reaching this target could cost the EU27 NATO members 96 billion USD per year.

By: Justine Feliu Topic: European Macroeconomics & Governance, Global Economics & Governance Date: November 15, 2016
Read article Download PDF More on this topic More by this author

Policy Contribution

pc_21_16_page_01

Are advanced economies at risk of falling into debt traps?

One of the consequences of the global financial crisis has been rapid growth in public debt in most advanced economies. This Policy Contribution assesses the size of public debt in advanced economies and considers the potential consequences of sovereign insolvency.

By: Marek Dabrowski Topic: European Macroeconomics & Governance Date: November 10, 2016
Read article Download PDF More on this topic

Blueprint

cover4

An anatomy of inclusive growth in Europe

This Blueprint offers an in-depth analysis of inequalities of income and wealth in the EU, as well as their causes and consequences. How evenly are the benefits of growth distributed in our economies, and what does this mean for fairness and social mobility? How could and should policymakers react?

By: Zsolt Darvas and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: October 27, 2016
Read article More on this topic More by this author

Blog Post

Silvia Merler

Should we rethink fiscal policy?

What’s at stake: there has been quite some discussion recently on whether we should rethink the framework of fiscal policy in order to make it more appropriate and effective in a world where demand seems to be chronically anemic, inflation is low and the interest rates are likely to stay close to zero (if not negative) for a long time. According to some of the authors, in the Eurozone these concerns are particularly pressing.

By: Silvia Merler Topic: Global Economics & Governance Date: October 24, 2016
Read about event More on this topic

Past Event

Past Event

Digital platforms: A policy and research agenda

The number of digital platforms is currently rising in many countries and sectors. What are the opportunities of platforms and which kind of regulation and policy framework is necessary to promote healthy competition?

Speakers: Bruno Basalisco, Diane Coyle, Jacques Crémer, Werner Stengg, Nicolas Petit, Georgios Petropoulos, Bruegel and Simon Wilkie Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 20, 2016
Read article More by this author

Blog Post

Giuseppe Porcaro

The industrial internet will transform policymaking

The ‘internet of things’ will bring major changes in many areas of life, including the political arena. What will be the new communication tools, strategies and narratives for policymakers?

By: Giuseppe Porcaro Topic: Innovation & Competition Policy Date: September 28, 2016
Read article Download PDF More on this topic More by this author

External Publication

jsm-ext-paper-cover

New network neutrality rules in Europe: comparisons to those in the U.S.

This paper explains the similarities and differences between European and U.S. net neutrality rules.

By: J. Scott Marcus Topic: Innovation & Competition Policy Date: September 15, 2016
Read article More on this topic More by this author

Blog Post

Silvia Merler

The Apple of Discord

What’s at stake: On August 30th, following the results of an in-depth state aid investigation started in 2014, the European Commission concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. The decision is based on state aid grounds: the Commission argues that two tax rulings issued by Ireland effectively granted Apple preferential treatment, which amounted to state aid. The Commission ordered Ireland to recover up to €13 billion (plus interest) from Apple, but the decision is controversial and opinion differ as to the effects it will have. We summarize reactions.

By: Silvia Merler Topic: Innovation & Competition Policy Date: September 12, 2016
Load more posts