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European online retailers slam EU digital tax plans ahead of finance summit

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Leading European online retailers have written to ministers of finance within the EU to voice their opposition to a new digital services tax (DST).

Signatories included Germany’s Zalando, Poland’s Allegro and Ceneo and Romania’s eMag, which all feature in InternetRetailing’s IREU Top500 ranking.

The letter criticises the proposed DST, which would impose a 3% tax on the revenues of digital businesses with total annual worldwide revenues exceeding €750 million and annual revenues in the EU exceeding €50 million.

Proponents of the legislation argue that the digital economy is relatively undertaxed when compared with traditional businesses and that the sector finds it particularly easy to limit tax liabilities.

However, writing alongside digital companies such as Spotify, the retailers argued that the measure would cause “material harm to economic growth and to innovation, investment and employment across Europe.”

The letter claimed that the DST would result in double taxation, especially when charged on revenues that are already subject to corporate income tax within a jurisdiction.

It also raised objections over how the measure would be implemented due to it being unclear whether it would be a direct tax levied on the incomes of the companies, an indirect tax paid by consumers when buying goods or services, or a hybrid of both.

In addition, it claims that there is no consensus on how user contributions to digital platforms are defined as a tax base. It also claimed that the measure would disproportionately affect European countries and that the unilateral approach could attract retaliatory action from third countries such as arbitrary taxation of European companies operating there.

The letter comes ahead of a meeting of European finance ministers on 6 November.

The UK government this week announced its own digital services tax. The tax of 2% will be levied on money that the businesses make from UK users and is expected to raise £400m a year by 2022/3.

Chancellor of the Exchequer Philip Hammond said that he had opted for the measure in the midst of “painfully slow” progress on a global agreement.

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