The digital tax package includes a temporary solution, i.e.proposal for a directive on the taxation of services and a long-term solution, i.e. digitalproposal for a directive on permanent establishments. In addition, the package includes a communication and recommendations.
Proposal for a directive on the digital fixed location
The proposal for a directive would create a new way of sharing tax revenue between Member States. At present, the company taxed by its State of residence and, in addition, by its State of operation, if the company has a significant face (e.g. employees or property). In future, the State of operation would also have the right to tax presence (for example, consumers). The State of residence has to relinquish the right to the extent that the State of operation taxes.
The proposal would cover a wide range of digital services.
The importance of digitalization is expanding there fore the so-called traditional ones are widely covered by the proposal companies. The proposal would mainly concern companies from Member States, but the Commission aims to the content of the proposal would also be globally applicable. According to the proposal, the company’s operating state would be entitled to tax if the turnover of digital services in that state is 7 millionor there are more than 100,000 users or more than 3,000 business contracts. The amount of consumers and data would be affected to how much of the company’s profits can be taxed by the operating state. The tax rate should be corporate tax rate.
Impact on tax revenue
Preliminarily, the proposal is estimated to have a negative impact on Finnish tax revenues. With the proposal the State of operation of the company would be entitled to tax on the basis of the number of consumers. In view of the population and fact, local companies have a significant number of international contracts.
Impact on business
Businesses would have to pay more taxes than before to the state of residence in addition to the state of operation, from which imposes an administrative and financial burden on the company. Companies would have to apply different in tra country and other international situations. For filing business taxes this is important.
Impact assessments of tax changes and tax subsidies
Impact assessments of tax changes provide a good basis for decision-making, but they should also assess the combined effects of several changes. In contrast, little is known about the costs and effects of tax subsidies, although they have a significant impact on public finances. In order for decision-makers to better assess the appropriateness of each tax subsidy, information should be increased and improved.
Statements by the Audit Office
Taxation raises funds for general government to finance public services and income transfers. The accumulation of taxes and compulsory social security contributions totaled 96.9 billion in 2017. The tax base is reduced and nominal tax rates are reduced by various tax subsidies, which are exceptions to the standard tax system.