The independent Expert Group on the Taxation of the Digital Economy has issued its report. The high level Expert Group was established by the Commission in October 2013 for the purposes of making recommendations to improve the tax framework for the digital sector in Europe. The Group consisted of a chair and six members including Chartered Accountant and tax expert Mary Walsh. The Group concluded that the digital economy does not require a separate tax regime, and instead recommends that general rules should be applied or adapted so that “digital” companies are treated in the same way as others.

Other conclusions reached in the report include:

• Digitisation greatly facilitates cross border business. Removing barriers to the Single Market, including tax barriers, and creating a more favourable business environment through neutral, simplified and coordinated tax rules is therefore more important than ever.
• The upcoming move to a destination-based VAT system for digital services is commended, along with the simplification that the mini-One Stop Shop will bring for businesses (see IP/13/1004). The report recommends that this could be further expanded to all goods and services (in business-to-consumer transactions) in the future.
• To ensure neutrality and provide a level playing field for EU business, the Group recommends the removal of the VAT exemption for small consignments from non-EU countries. This would be supported by a One Stop Shop and a fast track customs procedure.
• In the area of corporate taxation, the OECD Base Erosion and Profit Shifting (BEPS) project will be fundamental to tackling tax avoidance and aggressive tax planning globally. The report recommends that Member States take a common position to ensure a favourable outcome for the entire EU.
• Priority areas for the EU within the BEPS project, according to the report, are countering harmful tax competition, revising transfer pricing rules and reviewing the concepts for defining and applying taxable presence
• The Common Consolidated Corporate Tax Base (CCCTB - see IP/11/319) provides an opportunity for the EU to expand on new international standards (such as transfer pricing profit split methods) and achieve additional simplification within the EU.
• More radical reforms of the tax system could also be looked at in the longer term, including a destination-based corporation tax.

The Commission will now consider the report and decide on policy orientations in due course.

The full report is available on the Commission’s website.