CEOs and CFOs of 15 prominent European tech companies have come together to address EU Finance Ministers in a letter, urging them to extend the digital services tax (DST) standstill agreement. The signatories argue that DSTs have created instability within the international tax system and have disproportionately affected European technology companies, hindering their ability to compete on a global scale. They emphasize that DSTs are a blunt policy tool, as they tax gross revenues rather than profits, resulting in double or even multi-layer taxation. The letter also warns of the potential consequences of widespread DST implementation, including retaliatory actions, which would pose significant obstacles for new companies and those with low margins to expand and attract capital investment for emerging technologies. This, in turn, would hinder innovation, which serves as a catalyst for future employment and economic growth.
The CEOs and CFOs firmly recommend that governments agree to extend the DST standstill agreement beyond its current expiration date of 31 December 2023. They assert that such an extension would provide much-needed legal and tax certainty until the implementation of Pillar One, a proposed solution to address the challenges posed by the digital economy. By extending the agreement, governments can alleviate the concerns of European tech companies and foster an environment conducive to growth and innovation.
The digital services tax has garnered significant attention and debate in recent years. It is a tax levied on the revenues generated by certain digital services provided by large multinational companies. The aim of the tax is to ensure that these companies contribute their fair share to the countries in which they operate, particularly in light of the evolving digital landscape and the challenges it presents to traditional tax systems.
However, critics argue that the DST is an imperfect solution. By taxing gross revenues instead of profits, it fails to account for the unique business models and cost structures of digital companies. This can result in excessive taxation and hinder the growth and competitiveness of European tech companies. Furthermore, the potential for retaliatory actions from other countries, in response to the implementation of DSTs, poses a significant threat to the global economy and the ability of companies to operate across borders.
The signatories of the letter believe that extending the DST standstill agreement is a necessary step in addressing these concerns. By doing so, governments can provide a stable and predictable tax environment for European tech companies, allowing them to focus on innovation and growth. This, in turn, will contribute to the creation of new jobs and economic prosperity.
The CEOs and CFOs stress the importance of Pillar One in achieving a long-term solution to the challenges posed by the digital economy. Pillar One, a proposal put forth by the Organisation for Economic Co-operation and Development (OECD), aims to reallocate taxing rights and ensure a fair distribution of profits among countries. It seeks to address the issues raised by DSTs, while also taking into account the unique characteristics of the digital economy.
In conclusion, the letter from the CEOs and CFOs of European tech companies serves as a plea to EU Finance Ministers to extend the DST standstill agreement until the implementation of Pillar One. They argue that DSTs have created instability within the international tax system and disproportionately affected European tech companies. By extending the agreement, governments can provide the necessary legal and tax certainty for these companies to thrive and contribute to future employment and economic growth. It is now up to EU Finance Ministers to carefully consider this request and take the necessary steps to support the European tech industry.
