Taxation of the digital economy

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1.11Last week the European Commission (EC) announced its intention to create a high level expert group on taxation, designed to examine the best ways of taxing the digital economy in the EU. Understanding that due to the intangible nature of e-commerce mixed with the out dated pre e-commerce tax rules; it makes these companies more prone to problems such as aggressive tax planning and corporate tax avoidance. The European Commission (EC) is trying to balance removing tax obstacles making it a more business-friendly environment, whilst at the same time making sure the digital sector contributes its fair share in tax. The groups focus will be on identifying the key problems with digital taxation; it will be led by a person of political profile with relevant background knowledge on the issue, and helped by at least seven internationally renowned experts on digital economy and taxation. The European Commission (EC) will be listening closely to what the group has to say, as any new initiatives for taxing this sector will come directly from their findings, which are expected as early as the beginning of 2014. Until then the European Commission (EC) will continue to work within the context of the OECD’s Base Erosion and Profit Shifting (BEPS). The commissioner for Taxation, Customs, Statistics, Anti-fraud and Audit was quoted last week as saying ‘Today’s tax systems were conceived in a pre-computer age. So it is no surprise that they often clash with the modern, digital economy. Taxation must not be an obstacle to all that is good about the digital revolution. Yet, we must also ensure that the digital sector plays fair and pays fair. The challenges linked to taxing the digital economy are immense and there are no ready-made answers. Therefore, we need deep, informed and focused reflection on this issue within the EU, to ensure that the next steps we take are the right ones’