The EU Commission yesterday released a communication on a fair and efficient taxation of digital economy businesses ahead of the EU Tallinn Digital Summit on 29 September 2017.

The communication outlines the Commission’s long-term strategy and short-term solutions. It follows the decision of EU finance ministers on 16 September to seek common ground by year end to achieve fair taxation of the digital economy in the EU.

The Commission plans to present a legislative proposal on the taxation of profits in the digital economy by spring 2018, when an OECD report is also due. The Commission will focus on finding a long-term sustainable solution as part of the Common Consolidated Corporate Tax Base (CCCTB) proposal. It will also seek and support a fundamental reform of international tax rules, as regards the definition of taxable presence and the allocation of value to the different components of businesses and value chains. In parallel, the Commission will explore short-term solutions (equalisation tax on turnover of ‘digitalised companies’, withholding tax on digital transactions or levy on the revenue from certain digital activities).

The options for short-term and long-term solutions listed in the communication will support the discussion at the Digital Summit on 29 September. It is still uncertain whether political agreement can be reached in the EU on any of the approaches proposed by the Commission. See also our background paper on the taxation of digital business. We will publish brief summaries of the outlined options to increase the taxation of digital businesses in the coming days.