MEPs lay out plans for a fairer tax system fit for the digital age

MEPs lay out plans for a fairer tax system fit for the digital age. International tax rules set in early 20th century are not fit for the digital economy.

Outdated international tax rules need to be overhauled, including a minimum effective corporate tax rate; the EU should go it alone if global negotiations fail.

Adopting their resolution a few months ahead of decisions expected from the OECD, MEPs are seeking to keep the momentum going at European level while pushing for changes on their primary concerns.

Global minimum tax rate

To reduce tax avoidance and make taxes fairer, MEPs make a number of suggestions to amend outdated rules established well before the digital economy existed.

They call for a minimum effective tax rate to be set at a fair and sufficient level to discourage profit shifting and prevent damaging tax competition. In this regard, the resolution also welcomes the US administration’s recent proposal of a 21 % global corporate tax rate.

Taxing rights should reflect that, as a result of digitalisation, the interaction between businesses and consumers significantly contributes to value creation in highly digitalised business models. This would allow more taxes to be paid where value is being created, as has always been the concept behind taxation, rather than where the rates are lowest.

Finally, MEPs insist that the EU should develop its own fall-back position, which would kick in if global negotiations do not yield results by the end of the year. By mid-2021, there should be a proposal on a digital services tax and a Commission road map with different scenarios, with or without agreement at OECD level.

The resolution was adopted 549 votes in favour, 70 against and 75 abstentions.