A Quantum Leap: European Commission Proposes New Rules for the Taxation of the Digitalised Economy

    March 2018

    On 21 March 2018, the European Commission (EC) set out its proposals for a new framework of rules intended to ensure businesses operating in the digitalised economy are taxed “fairly and appropriately”.

    Although the EC states its support for efforts to find global, multilateral, solutions to the problems posed by the digital economy, the delay in reaching an international consensus (punctuated by unilateral action initiated by some Member States to protect their individual tax base) has led to the EC’s decision to publish its detailed proposals.

    There are many acknowledged problems and weaknesses in the current framework for the taxation of a globalised economy. The EC considers that a growing and evolving digitalised economy exploits those weaknesses resulting in a system that is both unfair and erodes Member States’ tax base.

    To address those risks, and to secure a stable and competitive environment within which digital companies can thrive, the EC has tabled a package of four, surprisingly broad, initiatives:

    Although far from perfect, the EC proposals represent a quantum leap forward in efforts to resolve the tax problems posed by the digitalisation of the global economy.