kom (2018) 0147 - Bilag 4: Kopi af SAU alm. del - bilag 202 - Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148

Europaudvalget 2017-18
KOM (2018) 0147 Bilag 4
Offentligt

Mr Jean-Claude Juncker

President of the European Commission

Rue de la Loi 200

B-1049 Bruxelles

Belgium

Re: Reasoned opinion (subsidiarity) regarding the EU proposals for a Council Directive laying down

rules relating to the corporate taxation of a significant digital presence (COM(2018) 147), and a

Council Directive on the common system of a digital services tax on revenues resulting from the

provision of certain digital services (COM(2018) 148)

Dear Mr Juncker,

The House of Representatives of the Netherlands has examined the EU proposals for a Council

Directive laying down rules relating to the corporate taxation of a significant digital presence

(COM(2018) 147), and a Council Directive on the common system of a digital services tax on

revenues resulting from the provision of certain digital services (COM(2018) 148) in terms of the

principle of subsidiarity.

I am writing to inform you that the opinion of the House of Representatives with regard to the

subsidiarity of the aforementioned proposals is negative.

The House of Representatives agrees that taxing the digital economy and reforming the financial

system in order to achieve this are important goals, but takes the view that taxation and taxation policy

are primarily a concern of the member states themselves, and that member states can also achieve this

reform without European harmonisation or interference. The House also has its doubts about the

potential benefits of a European proposal compared to a national approach, especially since member

states are already working on a joint strategy in an OECD context.

As far as the legal basis is concerned, the House considers Article 115 of the Treaty on the

Functioning of the European Union (TFEU) to be the appropriate legal basis for both proposals. The

House therefore also disagrees with the European Commission’s choice of basing the proposal

COM(2018) 148 on Article 113 of the TFEU, because, in its view, it is clear that in this proposal the

purpose of the taxation is also a levy on profit. As such, this proposal, as is also the case for proposal

COM(2018) 147, does not actually concern indirect taxation, for which Article 113 is intended.

The annex sets out the contributions to the debate from the different parliamentary parties, in which

they explain their standpoints with regard to subsidiarity and other matters in greater detail. I would

appreciate your taking these contributions into consideration in your reply to this letter.

A copy of this letter will also be sent to the European Parliament, the European Council and the

Government of the Netherlands.

Yours sincerely,

The Speaker of the House of Representatives,

Khadija Arib

kom (2018) 0147 - Bilag 4: Kopi af SAU alm. del - bilag 202 - Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning

Annex: Contributions of the different parliamentary groups to the debate

The House of Representatives of the Netherlands has 150 seats. These seats are distributed as follows:



People’s Party for Freedom and Democracy

- VVD (33)



Party for Freedom - PVV (20)



Christian Democratic Appeal - CDA (19)



Democrats 66 - D66 (19)



Green Left - GL (14)



Socialist Party - SP (14)



Labour Party - PvdA (9)



Christian Union - CU (5)



Party for the Animals - PvdD (5)



50PLUS (4)



Reformed Political Party - SGP (3)



DENK (3)



Forum for Democracy - FvD (2)

In evaluating the proposals in terms of subsidiarity, eight parliamentary groups provided an

explanation of their views.

Standpoints regarding subsidiarity

The

members of the VVD parliamentary group

take the view that there are sufficient arguments for

applying a subsidiarity test to the proposals under discussion. They have the following reasons for this.

General:



Taxes are primarily a concern of the member states themselves. A European solution should

only be considered in the case of major, serious problems that the member states are unable to

resolve themselves. The VVD members agree that the taxation of the digital economy and

reform of the financial system to achieve this is important, but note that many member states

are currently reaching solutions without European harmonisation or interference, such as the

French tax on visual content and the Hungarian tax on advertisements. They therefore have

doubts about the benefits of a European proposal, especially since these national measures can

apparently resolve the problem effectively without European interference.



Various member states have already joined forces in reviewing taxation for the digital

economy within an OECD context. A definitive report outlining solutions for this issue is

expected to be published in 2020. It therefore appears that member states are already proving

able to reach joint solutions without European intervention.



The House of Representatives has previously indicated that it will only consider solutions

involving supranational measures on taxation in cases where national measures prove

ineffective

and it also previously applied a subsidiary test (‘drew a yellow card’) in the case of

the proposals concerning the CCCTB. The current proposals are related to this and provide a

stepping stone towards these

–

previously rejected

–

proposals. The VVD considers this to be

problematic.

European Commission’s arguments:



The Commission argues that the fact that companies conduct cross-border trade could itself be

a reason for justifying European harmonisation. As far as the VVD is concerned, this is



jumping the gun. Any assessment of whether European intervention is necessary should in

part be based on the fact that member states are themselves unable to resolve the problem. The

general arguments outlined above demonstrate that the member states are already applying

initiatives, both individually and jointly, to resolve the problem. For this reason, the

Commission has not provided persuasive arguments to demonstrate that no solution could be

found without European intervention.

The Commission argues that European harmonisation has added value that transcends the

actions of individual member states, jointly or otherwise. There is no further explanation

provided for this, which makes it, in the view of the VVD, not convincingly proven. In

addition, the Commission itself states that various member states are taking measures. It does

not claim that these measures are inefficient and would therefore not be workable, but merely

that this would result in a fragmented policy. As such, the Commission has not provided

sufficient proof that supranational European policy should take precedence over national

policy.

The Commission argues that a joint, harmonised tax creates a level playing field with regard

to competition. This is untrue for as long as the other fiscal provisions and taxes in the

member states differ from each other. The Commission’s proposal therefore fails to achieve its

intended objective which raises the question of whether member states would be better

advised to apply policy at national level.

The Commission asserts that it would be undesirable for a member state to take ‘unilateral’

and ‘divergent’ action. The VVD takes the view that acting unilaterally and divergently is part

of a member state’s sovereignty. Enforced joint action can only be permitted

if countries

decide on it

–

jointly and divergently

–

or if a national solution alone provides no remedy. The

VVD takes the view that the Commission has failed to prove this convincingly.

The Commission argues that as soon as a measure affects the

‘internal market as a whole’,

coordinated action at European level is the ‘only’ option. The VVD questions this

argumentation, both in the case of the assumption that measures taken nationally will affect

the internal market as a whole and the conclusion that, if this were the case, a European

solution would be the only ‘appropriate way forward’. They believe that this dismisses the

principle of subsidiarity too easily.

The Commission states that the proposed measure is proportionate and does not interfere with

member states’ freedom to set policy. The members of the VVD do not agree with this

assertion, since it imposes an obligation to levy a specific (temporary) tax.

The Commission argues that the member states cannot take national measures without

‘hampering the single market’. The members of the VVD consider this to be a remarkable

accusation in view of the right of a member state to set its own national policy that may

possibly conflict with the principle of subsidiarity.

The members of the

PVV parliamentary group

consider this proposal to be at odds with the

subsidiarity principle. They refute the argument that only an EU solution, implemented by the EU, is

possible. The collection of taxes and taxation policy are a national power by definition, in which no

EU interference is appropriate. If it should appear that actions are necessary, this should of course only

be in an OECD context.

The opinion of the members of the

CDA parliamentary group

with regard to the subsidiarity of the

long-term solution (COM(2018)147) is positive. It concerns an issue of profit attribution and these

members recognise the advantages of maximum possible agreement between countries when it comes

to profit attribution. This means that coordination at OECD level takes preference over agreement at

EU level and, if that proves unsuccessful, coordination at EU level takes precedence over national

regulations. The taxation of digital services should not be seen as a stepping stone towards a

CC(C)TB.

The opinion of the members of the CDA parliamentary group with regard to the subsidiarity of the

temporary solution (COM(2018)148) is partly positive. The taxation of profit is not a concern of the

European Union, but of the member states themselves. This also applies to the introduction of new

taxes. However, indirect taxation is covered by the powers of the European Union and the temporary

solution takes the form of an indirect tax on digital services. It is not clear to the members of the CDA

parliamentary group whether the European Commission has opted for an indirect tax for practical

reasons or because of its own powers.

The members of the

D66 parliamentary group

take a positive view with regard to the subsidiarity of

the EU proposals on taxation in the digital economy. According to these members, the objectives of

the proposal cannot be effectively achieved at the level of individual member states. Another key

factor is that efforts made within an OECD and G20 context have so far achieved unsatisfactory

results. The internet is a cross-border technology by definition. Companies in the digital economy

often operate beyond national borders. Since these companies often have limited or no actual physical

presence, measures are required in order to ensure that profit is as far as possible taxed where value is

created and in order to protect the basis for taxation. For the digital internal market to operate

effectively, it is therefore important that member states take concerted action in modernising taxation.

The European Commission’s proposals for a temporary and permanent solution contribute to

achieving this. These proposals also help create a level playing field and are therefore in the interests

of Dutch businesses and consumers. The D66 parliamentary group will monitor the further

implementation, feasibility and interaction with other international initiatives.

The members of the

Green Left parliamentary group

agree with the analysis below by the European

Commission, which describes why the two EU proposals are in line with the principle of subsidiarity:

“As digital businesses are able to operate across borders without having any physical presence, both

inside the Union and from third countries, uniform rules are needed to ensure that they pay taxes

where they make profits. Given the cross-border dimension of digital activities an EU initiative is

needed and adds value as compared to what a multitude of national measures could attain. A common

initiative across the internal market is required for a direct and harmonised application of the rules on

a significant digital presence within the Union so as to ensure a level playing field for all member

states and provides taxpayers with legal certainty. Unilateral and divergent approaches by each

member state could be ineffective and fragment the single market by creating national policy clashes,

distortions and tax obstacles for businesses in the EU. If the objective is to adopt solutions that

function for the internal market as a whole, the appropriate way forward is only through coordinated

initiatives at EU level.”

The members of the

SP parliamentary group

takes the view that digital companies that operate

‘without borders’ should also pay tax. They believe that it is reasonable to apply a subsidiarity test to

these proposals. They would like to see particular consideration given to the following issues:



Taxation of turnover and profit is a competency of the member states. The fact that

agreements are made for member states to collect this new tax from large digital companies



does not undermine the subsidiarity of collection. The SP would like to know how the

European Commission’s initiative will be assessed with regard to this (apparently) new tax

base.

In the Commission’s proposal 147 the place of business is expanded to a digital presence,

based on users, contracts and turnover. The members would like to know whether the

determination of these criteria is at odds with or in line with the subsidiarity principle.

Proposal 148 proposes a uniform tax of 3% in order to prevent fragmentation. The SP takes

the view that this undermines the competency of member states to opt for a higher rate

because the notion of a ‘uniform rate’ appears to rule out a higher percentage.

The SP would like to know whether the levying of the tax can actually be seen as an indirect

tax because it cannot be considered to be a ‘surcharge’ (like excise duty) or a fine since it is

levied on profit at source. This raises the question of whether invoking Article 113 in the case

of COM(2018) 148 is applicable.

The members of the

PvdD parliamentary group

take a negative view with regard to the subsidiarity

of both Directives. It has not become clear from both proposals whether they concern a direct or an

indirect tax, which stands in the way of a full-fledged subsidiarity check. In addition to this the PvdD

thinks Member States should have maximum policy and tariff freedom, and these proposals do not

make clear whether this is guaranteed.

The members of the

PvdA parliamentary group

consider this legislation to be in agreement with the

subsidiarity principle. In general, they recognise that direct tax policies are in principle reserved for

individual Member States. This does not detract from the fact that the Member States have large

common interests in this area. There is a broad international consensus that tax avoidance is

undesirable. There is also a broad consensus that tax avoidance can best be tackled internationally. In

addition, harmonization of tax legislation contributes to the better functioning of the internal market,

and harmonization helps to stop undesirable competition between Member States in the field of

taxation.

Digital companies such as Facebook and Google are characterized by the fact that they are no longer

tied to a physical location for their activities. Their profit derives from the provision of online services,

which is difficult for the national profit tax systems of the Member States to get a grip on. The

members of the PvdA parliamentary group note that the result is that these companies pay very little

tax in the European Member States. In order to correct this, the 'fixed base' concept in the profit tax

system needs to be adjusted. And because these digital companies operate online, independently of

their location, they are international in nature. Because these large companies, which are the subject of

this proposal, operate in all member states of the EU, there is an advantage to be gained from a

European approach. The alternative is a fragmented approach to the taxation of digital companies,

which can disrupt the digital economy that is still under development. In addition, a patchwork of tax

rules will create new opportunities for tax avoidance by these companies. The purely cross-border

business activities of the large tech companies in Europe justify taking a European approach above an

individual Member State approach. In view of the damage caused by a fragmented approach as a result

of different policies by individual member states, the members of the PvdA parliamentary group also

consider the proposal proportionate. In conclusion, the members of the PvdA parliamentary group take

a positive view of the subsidiarity of this EU proposal.

Standpoints regarding legal basis

The members of the

VVD parliamentary group

note that the Commission describes the tax as

‘characteristic for an indirect tax’. The VVD members question this comment, since the new tax is

intended to be levied on the profit of digital companies. Only because this is inherently problematical

in view of the digital economy, is the turnover taxed instead. However, the purpose of the tax is still to

tax profit. As such, in view of its purpose, the tax should be considered to be a direct tax (sui

generis)

rather than an indirect tax. The VVD therefore believes that another legal basis from the Treaty on the

Functioning of the EU, for example Article 115 TFEU, would be more appropriate and suitable, if a

positive approach is adopted to the proposal, than the chosen Article 113 TFEU.

The members of the

PVV parliamentary group

take the view that, with these proposals, the EU is

acting unlawfully because there is no need to harmonise taxation in order to prevent distortions of

competition.

Tax legislation is a national power and must remain so.

The members of the

CDA parliamentary group

believe the legal basis to be partially appropriate.

The European Union sees Article 115 as the legal basis for the long-term solution (COM(2018)147)

and Article 113 for the temporary solution (COM(2018)148). These members consider Article 115 to

be the appropriate legal basis for both directives. The ultimate aim of the temporary solution is not to

harmonise various turnover taxes on digital services, but the decision to tax turnover was taken, as the

Commission itself admits, for practical reasons in order to harmonise taxation. The tax on turnover is

therefore the means and not the end. The CDA members also have their doubts about the temporary

nature of this tax on turnover of digital services, especially since the directive now contains no

specified horizon.

The members of the

D66 parliamentary group

have a positive opinion with regard to the legal basis

for both EU proposals and agree with the European Commission’s arguments. The European

Commission refers to Articles 46, 48, 53, paragraph 1, Article 62 and Article 91, paragraph 1 of the

Treaty on the Functioning of the European Union. The members of the D66 parliamentary group

consider this to be the right legal basis.

The members of the

Green Left parliamentary group

agree with the European Commission’s

arguments concerning the legal basis for the EU proposal.

The members of the

SP parliamentary group

take the view that proposal COM(2018) 147 falls

within the scope of Article 115 of the Treaty on the Functioning of the European Union.

The members of the SP parliamentary group do not feel that proposal COM(2018) 148 falls within the

scope of Article 113 of the Treaty on the Functioning of the European Union.

The members of the

PvdA parliamentary group

consider Article 46, Article 48, Article 53 (1),

Article 62 and Article 91 (1) of the Treaty on the Functioning of the European Union the appropriate

legal basis for both proposals.