The term “ digital tax ” has recently become a household word and is on everyone’s lips. But why is it in detail, who is affected and what will the digital tax probably look like? With this article we give you an overview of the most important key points.
Definition – digital tax
The basic idea of the digital tax is that companies such as Facebook, Google and Co should also pay taxes in European countries. So far they have only done this to a minimal extent. We will show in detail why this is so in the following.
In short, the digital tax is intended to ensure that profits are taxed in the country in which they were made. This means that values should no longer be taxed where they are created, but where consumption takes place.
Background: What do you expect from the digital tax?
The political message sounds coherent and simple: digital corporations postpone their profits and hardly pay any taxes. With the new tax model, this procedure should be a thing of the past. Instead, the profits should have to be taxed locally, i.e. , for tax purposes, they should be assigned to the country in which they arise.
USA vs. Europe – conflicts of interest inevitable
So far, so good, but there is a clear catch within the line of argument. It is well known that an enormous number of vehicles are exported from Germany. Nevertheless, the taxation primarily benefits Germany here as well. This is often ignored in the political discussion, with the argument that Internet giants end up concealing their income through tax havens and end up paying taxes almost nowhere. However, in order to stay with the car comparison, it must be remembered that Google products are made in Silicon Valley and not in Germany. The introduction of the digital tax would undermine this principle with the overarching goal of establishing tax equity – or at least trying to do so. It remains unclear how the proposed approach can be reconciled with those products
Then why does the US allow companies to move much of their foreign profits to tax havens? On the one hand, this enables companies to expand rapidly on an international level, with the majority of jobs being created in the USA. On the other hand, the headquarters of the company remains in the USA – so high tax payments still flow here.
Viewpoints and concepts
If you go deeper into the details, it becomes clear that there are still some gray areas in the digital tax discussed that are not regulated.
European Commission proposal for the taxation of digital sales
In principle, the digital tax is to be introduced across Europe . The European Commission plans that the new tax should be 3% of sales , provided that these are generated online, for example by providing a marketplace, selling user data or online advertising. It also ensures that only corporations are affected, because the company’s global turnover must be over 750 million euros for it to be taxable.
This would mainly affect the typical Internet companies from the USA. It is therefore also obvious that the USA regards the digital tax as an import tariff, which, conversely, can lead to a corresponding backlash, such as punitive tariffs on products from Europe.
Objectives of the EU digital tax
The European Commission names several goals of the digital tax. The focus is on preventing individual countries from going it alone and minimizing loopholes through a holistic tax policy . It is also argued that European companies are currently disadvantaged by tax policy compared to international corporations from the USA. However, this line of reasoning is difficult to understand. On the one hand, corporations from Europe also appear on the global market, on the other hand, the statement would be valid for all companies, regardless of whether they are in digital markets or offline.
Structure of the EU digital tax
How the digital tax will ultimately look has not yet been finally decided. The value of the three percent of the achieved turnover and the limit that only companies with a global turnover of 750 million euros per year should be affected seem certain .
So taxation is designed in such a way that the focus is clearly on online corporations . Three percent sounds just as manageable at first, but it should be noted that the base value should be sales, not profit.
Digital tax in Germany
To assess the digital tax in Germany, you have to take a step back and look at the big picture. Germany is an export country. The digital tax aims to tax services not where they are created, but where they are consumed. For an exporting country, this is not a good thing in itself, after all, nobody in Germany wants the profits of automobile companies that arise from vehicle exports to be taxed where the vehicles are exported. This also explains why politicians are now becoming somewhat more hesitant with the previously spontaneously praised digital tax.
In the short term, it sounds good to tax large corporations using tax loopholes in Germany. In the long term, however, it would make more sense to ensure that digital services are created in Germany – or at least within the EU. The fact is that the majority of digital technologies are currently being imported and economically there can be arguments about whether it would be wise to tax according to the place of consumption.
In addition to a possible digital tax, your company in Germany also has to pay other taxes. Find out everything about sales tax in Germany compared to other countries in Europe & worldwide.