Following on from a call for action from four EU finance ministers, the European Commission published a report on 21 September 2017 setting out the issues on how to tax digital business and some possible solutions. These included, by way of short term fixes, an ‘equalisation’ tax on insufficiently taxed digital income, or alternatively a gross withholding tax on payments to non-resident digital providers. In the longer term the EU document put its faith in the proposal for a harmonized corporate tax system in the EU – or CCCTB – to resolve the issues, in particular by incorporating new – virtual – PE rules and new transfer pricing approaches adapted to digital business models. Finance ministers from around 10 Member States have expressed support for the equalisation tax option according to media reports, and a common understanding is expected to be reached in December. More or less at the same time as the EU discussions started, the OECD has requested public input on similar issues and is expected to issue an interim report in Spring 2018.
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