In the May edition of our newsletter, we have reported the initiative of the OECD to find new ways to tax internet-sourced wealth, especially in light of reports showing multinational organizations shifting their internet-sourced profits to zero or low-rate corporate tax jurisdictions. It seems that the European Commission is right on cue with OECD’s latest initiative, having assembled a group of six experts across the EU with different backgrounds in order to brainstorm on the possible solutions to this growing problem. Mr. Vítor Gaspar, former finance minister of Portugal, chaired the Group of experts and the main conclusions following deliberations that span over the previous five months are as follows:

• At present, the digital economy does not require a separate tax regime. Current rules may need to be adapted to respond to the digitisation of our economy;
• Digitisation greatly simplifies cross-border business, hence removing barriers, including tax barriers, and creating a more favourable business environment through neutral, simplified tax rules is more important;
• The upcoming move to a destination-based VAT system for digital services is welcomed. The report suggests that this could be further expanded to all goods and services (in business-to-consumer transactions) in the future;
• To ensure neutrality for EU business, the Group recommends the removal of the VAT exemption for small consignments from non-EU countries supported by a One Stop Shop and a fast track customs procedure;
• In the area of corporate taxation, the G20/OECD Base Erosion and Profit Shifting (BEPS) project will be fundamental to tackling tax avoidance globally. Member States should take a common position to ensure a favourable outcome for the entire EU;
• Priority areas for the EU within the BEPS project, according to the report, are facing strong tax competition, revising transfer pricing rules and reviewing concepts for applying taxation;
• The Common Consolidated Corporate Tax Base (CCCTB ) provides an opportunity for the EU to expand on new international standards and achieve additional simplification within the EU;
• Further reforms of the tax system, such as destination-based corporation tax, might also be taken into consideration in the future.

At current stage the Commission will examine the report and make its final decisions on new policies affecting the digital economy.