The European Parliament has agreed to a proposal to impose taxes on digital services. The vote does not mean that the tax is due because the European Commission and the Council of Ministers still have to agree.
The measure would allow the Member States to levy taxes on revenues from digital services, even if companies are not physically present in the country. That would affect, for example, Google, Facebook, and Amazon. It is now the case that companies can pay the tax in the country where they are located, allowing them to avoid higher tax rates by keeping their offices in ‘tax-friendly’ countries.
The new rules prescribe that if a company has a lot of interaction with users, which is enough for a Member State to be able to levy taxes. The vote comes a week after the Council of Ministers has rejected such a proposal and came up with an attenuated version that will only enter into force three years.
The tax rules would only apply to large companies because a limit applies to income in a country of seven million euros and a limit of 100,000 users in a country or more than three thousand contracts for the business market.
The vote does not change much. The Council must now consider Parliament’s opinion but is not bound by the will of the majority of Parliament. As a result, it is still unknown whether the reforms of the tax rules will come about.