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Tax experts to discuss taxation of digital economy in Tallinn

7. September 2017 - 10:49

A conference will be held in Tallinn on Thursday within the framework of the Estonian Presidency of the European Union where tax experts, politicians, and scientists will discuss the present conditions in the European tax law while focusing on issues related to taxation of digital and sharing economy.

“The topic of taxation of digital economy raised by Estonia initiated a lively discussion both in the European Union and globally. It became clear quite soon that tax rules dating more than 100 years back no longer function and we are in need of new ones. These are the rules we are looking for at the Tallinn conference,” said Dmitri Jegorov, Deputy Secretary-General for Tax and Customs Policy of the Ministry of Finance.

The business models of companies have substantially changed in the last decade and instead of their previous physical form and place of operations, companies have increasingly moved their operations to the internet, which assumes that a different approach is needed for the taxation of their revenue.

At tomorrow’s conference, Estonia wants to examine the current taxation of various new digital business models with the aim of initiating a debate on the need to amend the tax rules. The amendment must take into account new forms and methods of entrepreneurship. This in turn allows for mapping the specific shortcomings in current company taxation rules.

For example, profits of companies offering their services and products via digital means are not taxed in the country in which the revenue is earned and at the same time the company is not in breach of applicable legislation and international rules. Since the digitalisation of business models is a rising trend, it could in the future lead to a greater mismatch of tax receipts that does not correspond to where profits are actually earned. The OECD has also drawn attention to this threat. On the other hand, the companies physically present in a country still pay their taxes into the budget of the respective country. Therefore, companies operating in the digital economy and those operating in the traditional economy face different conditions of competition.

Due to lack of a joint vision in the EU, some member states have adopted unilateral measures in order to ensure that at least partly profits earned in their jurisdiction are subject to tax. However, this may have a negative impact on the EU’s internal market and limit the freedom of establishment. It must also be considered that businesses will face problems, too, as currently companies that are physically situated in more than one member state are paying more taxes than companies that are only present digitally.

Estonia’s aim is to agree on the necessity and principles for modernising and harmonising tax rules by the end of the Estonian Presidency. Since a similar discussion is simultaneously being held at the OECD, the EU has the opportunity to provide its contribution and input to the global tax debate.

In addition to matters pertaining to taxation of the digital economy, the topics of the conference will also include the recently approved directive on dispute resolution mechanisms and the new draft directive on the intermediaries’ mandatory disclosure rules.

The conference will be organised by the Ministry of Finance in cooperation with the IBFD and with the support of the consulting firms PWC, E&Y, Deloitte, KPMG and the Sorainen law firm.

The conference will be broadcast live and can be viewed on the internet at the address