New Study Reveals Why EU Digital Services Tax Discriminates Against American Companies

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Posted by Andreas Hellmann & David Cohen on Thursday, February 21st, 2019, 4:55 PM PERMALINK

The European Centre for International Political Economy (ECIPE) and the European Policy Information Center (EPICENTER) published a new study on European corporate and digital service tax policy.

The report reflects what many critics of the European Digital Services Tax initiative have been saying, that tech companies are not, in fact, paying less in taxes than their traditional counterparts, and that this levy is nothing more than another layer of European corporate taxation designed to extract more money from American businesses.

According to the study:

Company data demonstrate that many large US-based digital companies show substantially higher effective tax rates than many traditional companies headquartered in France, Germany, Italy and Spain. At the same time, several large and well-known European companies, e.g. Renault, Volkswagen and Deutsche Telekom, show very [low] effective tax rates compared to the statutory tax rates applied in the countries in which they are headquartered.

The researchers looked at international data for effective corporate tax rates of various corporations and found the concern about tech companies paying their fair share of taxes to be groundless: 

… real-world data for effective corporate tax rates demonstrate that there is no systematic difference in income taxes paid by digital corporations compared to their traditional, less digital peers. The effective corporate tax rates of traditional companies indicate that EU- headquartered firms utilize differences in national tax laws to the same extent as companies based in non-EU countries like the US – irrespective of whether these companies are based on traditional brick-and-mortar or more digital business models.

The study demonstrates that all arguments of the EU Commission and some EU member states that have introduced a digital services tax are in fact not true and this levy is a direct attack on American tech companies. 

This tax poses unprecedented dangers to tax competition, tech-fostered innovation, and American and worldwide economic growth. The new tax would represent a dramatic and irreversible shift for the international tax system.  It would mean damage to the transatlantic relationship and could lead to a spiral of retaliation.

Read the full study here

Photo Credit: ATR

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