National Digitax does not solve international problem of taxing tech giants

A national taxation system for international tech giants, as some European countries are considering, will not solve the unfair competition of international internet platforms. That is the view EIT Digital’s CEO Willem Jonker shared yesterday on the Dutch radio station BNR Newsradio.

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The Dutch socialist party PvdA today launched a legislative bill for a so-called Digitax for international tech giants. Companies like Google, Facebook and Netflix currently hardly pay any tax in European countries on their revenues from subscriptions and ads. The proposed system is to tax companies in the countries where they create value.  A lot of members of the Dutch parliament seem supportive of the proposal. Other countries including France, Austria, the United Kingdom, Belgium and Spain are also considering introducing their own digital tax.

To Jonker this approach seems too local. “If every country invents their own tax system for digital companies, it will be even more difficult to come up with a common system. The European Digitax has not even come through yet.” Jonker refers to the decision by the European Commission in March 2019 to put its proposal for a single European Digitax on hold for now.

Jonker fully understands the frustration of digital companies not paying taxes deeply. But collecting taxes nationally on digital products and services is not the answer to the fundamental tax problem of digital platform monopolies. The problem of raising taxes on digital tech giants is international. Hence, the solution for this problem should also be an international one, believes the EIT Digital CEO. “For example, via the Organisation for Economic Cooperation and Development (OECD). “The digital world has no boundaries. You're dealing with multinationals, oligarchs.”

On top of this, raising taxes should be treated in conjunction. “If you tax a monopolist  in one country, it will certainly raise prices to the end consumer who will pay more for his or her subscription on Netflix. Besides, on a national level, the tax income would not collect that much money. In the Netherlands we are talking about 200 – 400 million euro. Companies like Facebook will not be affected.”

There  can be another side effect too. “A country such as America has a lot of internet tech platforms. If we are going to raise taxes in for example the Netherlands, how will Americans react, will they in return raise taxes on Dutch products and services?

Jonker advises to have an international approach. “You can only address these giants if you have sufficient power.” Above all, measurements like these should be thought well through, he says referring to a recently released EIT Digital report, Digital Transformation of European Industry – a policy perspective. The report concludes that although raising taxes on digital companies could lead, on the one hand, to social cohesion and economic growth, on the other, it could result in geopolitical instability on a European and global level.

You can listen to the BNR news broadcast here.

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