As of the beginning of 2021, the European Commission has restarted the formal process to develop a stable regulatory and tax framework to address the challenges of the digital economy. In 2018, the European Commission initially intended to gain political agreement on a Digital Services Tax (DST) proposal as a “quick fix” for the international tax framework, but member states could not reach a collective understanding of the draft directive. Since then, several EU member states have used the DST proposal as a framework for legislative actions at the national level. Unilateral reforms conflict with the OECD’s proposal to fundamentally reform worldwide corporate taxation and the efforts to gain a multilateral consensus. The European Commission now intends to consider the developments at the international level, but recommends three additional policy options to tax corporations active in the digital sphere. First, it reconsiders a Digital Services Tax, which is a tax on revenues created by certain digital activities conducted in the EU. Second, it proposes a corporate income tax top-up to be applied to all companies conducting certain digital activities in the EU. Third, it proposes a tax on digital transactions conducted business-to-business in the EU.

Spengel, Christoph, Daniel Klein, Christopher Ludwig, Jessica Müller, Raphael Müller, Stefan Weck and Sarah Winter (2021), EU Should Focus more on Indirect Taxes Instead of Proposals for a Digital Levy, ZEW policy brief No. 21-02, Mannheim. Download


Spengel, Christoph
Klein, Daniel
Ludwig, Christopher
Müller, Jessica
Müller, Raphael
Weck, Stefan
Winter, Sarah