EU committed to global minimum tax deal, digital levy tabled
In the state of the union address, European Commission President Ursula Von der Leyen said the Commission “will do everything in [its] power to secure the historic global deal on minimum taxation.” Three EU member states, Ireland, Hungary and Estonia, are still in talks regarding the global tax deal. To aid in negotiations, the European Commission has once again tabled its proposal of a digital tax levy following discussions and “not too subtle pressure from” the US.
Japan releases digital economy taxation report
On August 19, 2021, Japan’s Ministry of Economy, Trade and Industry released the Study Group on International Taxation in the Digital Economy,” a report which discusses the group’s findings on “what approaches to equitable international taxation will contribute to strengthening the competitiveness of Japanese companies and boosting the economy.” The full English version of the report is forthcoming. The report summary notes that the matters should be addressed in consultation with international discussions, particularly those involving the OECD. Japan has signed onto the OECD’s Pillar I and II consultation.
IMF predicts mixed revenue results in Asia from digital tax reform
In a September 14 report, the International Monetary Fund (IMF) released its report on “Digitalization and Taxation in Asia.” The report states that “[u]nilateral tax measures, such as digital services taxes (DSTs), adopted by a number of Asian countries are likely to have small revenue effect,” while “[e]xtending the value added taxes (VAT) to capture e-commerce and digital services more effectively could yield significant short-term revenue and other efficiency gains.” The IMF report predicts that the global tax reform would likely see Australia, Japan, China and Korea gaining revenue, while Vietnam, Singapore and Hong Kong are at risk for revenue loss.
Russia plans digital levy slated for Fall 2021
In an action plan released on September 14, the Russian government included a new tax on foreign-owned providers of digital services with a November 2021 deadline for plans of how the digital tax would work and the applicable rate. The Russian government hopes that the levy increases demand for domestic IT solutions, ensures accelerated digital transformation of the economic and social sectors, and improves conditions for doing IT business in Russia.
United States News
Illinois Department of Revenue determines try-before-you-buy subscription service not taxable
The Illinois Department of Revenue recently released General Information Letter ST-21-0025-GIL, providing that an e-commerce retailer’s provision of tangible personal property to its subscribers for sampling prior to deciding whether to buy was not a taxable transaction, while an eventual purchase of the property was taxable. The taxpayer, based outside of Illinois, operates an e-commerce website that offers a month-to-month subscription program, which, in exchange for the subscription fee, allows subscribers to try the taxpayer’s before deciding whether to purchase it. The Department determined that the subscription receipts were not subject to sales tax because there was no transfer of the ownership of the property. The Department also determined that the subscription receipts were not subject to the Illinois “rental purchase agreement occupation and use tax” which imposes tax on the rental of merchandise under an initial rental-purchase agreement of less than four months, because a subscription model with a separate option to purchase, such as the taxpayer’s, was different than “rent-to-own dealers” contemplated by the rental purchase agreement occupation tax. Lastly, the Department determined that the taxpayer was not making a taxable use of the sample merchandise in the state as the demonstration exemption would apply.