EL replies to the European Commission public consultation on fair taxation of the digital economy

Following a narrative that the current tax framework does not fit with modern realities, the European Commission ran a public consultation between October 2017 and January 2018 with the objective of defining the approach which would ensure fair taxation of the digital economy. EL replied to the consultation by underlining the primacy of subsidiarity principle in gambling regulation, outlining the relation between taxation and pay-out rates and addressing the issue of taxation and illegal operators. Following the synopsis report which is expected to be published in the following weeks, the Commission says it intends to take action (most likely by proposing legislation) before summer 2018. Given the fact that this initiative is a part of a broader international discussion, the Commission intends to take into account the OECD activities on this issue. In its public submission, EL underlined the primacy of subsidiarity principle in gambling regulation, outlined the relation between taxation and pay-out rates and addressed the issue of taxation and illegal operators.

The current tax framework does not fit with modern realities

Following a narrative that the current tax framework cannot capture activities which are increasingly based on intangible assets and data, the European Commission ran a public consultation on fair taxation of the digital economy between October 2017 and January 2018. The objective of the consultation was to define the approach which would ensure a fair and effective taxation model while supporting public revenue and a level playing field across businesses.

Highlights of EL submission

  • Gambling regulation and the subsidiarity principle. As recognised in more than 40 preliminary rulings of the European Court of Justice, gambling is a field of particularly sensitive nature where for the overriding reasons of protection of public order and consumers regulation is best enacted at the national level. Gambling regulation needs to strive for coherence and ensure that the players are not overly stimulated to gamble.
  • A gambling operator does not become legal just by paying tax. Legal gambling operators are those recognised as such by the national governments. It is not because an operator pays a VAT or corporate tax of some form that they can be considered legal.
  • Gambling regulation, taxation and pay-out rate. Taxation levels and pay-out rate are both closely related to the competitiveness of a respective product and the danger it represents for consumers if not properly protected. Whether a gambling service is taxed at 30% of the GGR or the stakes or, at 10 % of GGR or the turnover, or not at all makes a more than substantial difference regarding the pay-out rate that the gambling provider is able to offer to players. The pay-out rate is also one of the most important factors that contribute to the risk of addiction – the higher the pay-out rate, the more attractive the game for players and the more dangerous it is if not properly regulated.
  • Illegal operators and taxation. Many illegal operators are based in countries with extremely low corporate taxation such as Malta and Gibraltar. When they offer their products in countries where they do not hold a license – while paying the low corporate tax of Malta and Gibraltar – they represent an unfair competition to the legal operators and are harmful to the consumers by offering substantially higher pay-out rates which can easily lead to addiction.

Next steps

The fair taxation of digital economy initiative is a part of a broader international discussion and linked to the activities of the Organisation for Economic Co-operation and Development  (OECD). Following the synopsis report expected to be published in the following weeks, the Commission says it intends to take action (most likely proposing legislation) before summer 2018, while taking into account OECD activities on this matter. Namely, OECD announced publishing its own report on how best to tax the digital economy during the G20 finance ministers meeting in Washington in late April.

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Synopsis

Français

EL répond à la consultation publique organisée par la Commission européenne pour garantir une imposition de l’économie numérique qui soit équitable

Partant de l’hypothèse que le cadre fiscal annuel actuel n’est pas adapté au monde moderne, la Commission européenne a mené une consultation publique entre octobre 2017 et janvier 2018, en vue de définir une approche garantissant une imposition de l’économie numérique qui soit équitable. EL a répondu à cette consultation en insistant sur la primauté du principe de subsidiarité dans la réglementation des jeux, en soulignant la relation entre les taux d’imposition et de paiement et en abordant la question de la taxation des opérateurs illégaux. La Commission a indiqué vouloir prendre des mesures (très certainement sous forme de législation) avant l’été 2018, après la publication du rapport de synthèse attendu dans les prochaines semaines. Étant donné que cette initiative s’inscrit dans un contexte international plus large, la Commission tiendra compte des activités de l’OCDE [en anglais, Organisation for Economic Co-operation and Development, en français Organisation de coopération et de développement économiques) sur cette question.

Español

EL responde a la consulta popular de la Comisión Europea sobre equidad tributaria en la economía digital

De acuerdo con la idea de que el marco tributario actual no se ajusta a las realidades actuales, la Comisión Europea llevó a cabo una consulta popular entre octubre de 2017 y enero de 2018 con el objetivo de definir un enfoque que garantizara la equidad tributaria de la economía digital. EL respondió a la consulta subrayando la primacía del principio de subsidiariedad en la legislación del juego, exponiendo una descripción general de la relación entre impuestos e índices de pago y abordando la cuestión de impuestos y operadores ilegales. Tras el informe resumen que se espera que salga a la luz en las próximas semanas, la Comisión afirma que su intención es tomar cartas en el asunto (probablemente mediante propuestas legislativas) antes del verano de 2018. Dado que esta iniciativa es parte de un debate internacional más amplio, la intención de la Comisión es tener en cuenta las actividades de la OCDE en esta cuestión.

Deutsch

EL antwortet der Europäischen Kommission im Rahmen der öffentlichen Konsultation zur fairen Besteuerung der Digitalwirtschaft

Die Europäische Kommission wägt derzeit ab, ob das aktuelle Steuersystem für die moderne Geschäftswelt noch tauglich ist. In diesem Zusammenhang führte sie zwischen Oktober 2017 und Januar 2018 eine öffentliche Konsultation durch mit dem Ziel, eine faire Besteuerungslösung für die Digitalwirtschaft zu finden. EL stellte in ihrer Antwort hinsichtlich der Regulierung von Glücksspiel das Subsidiaritätsprinzip in den Mittelpunkt, erläuterte die Beziehung zwischen Besteuerung und Gewinnausschüttung und ging auch auf das Thema Besteuerung und illegale Betreiber ein. Nach Veröffentlichung des Abschlussberichts, der in den kommenden Wochen veröffentlicht werden soll, will die Kommission noch vor dem Sommer 2018 Maßnahmen ergreifen, höchstwahrscheinlich durch einen Legislationsvorschlag. Da diese Initiative im Kontext einer internationalen Debatte zum Thema durchgeführt wird, will die Kommission auch Vorhaben der OECD in diesem Bereich berücksichtigen.

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