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Jason Piper, ACCA senior manager for tax and business law says: ‘The aim of the consultation is to define an approach about how the digital economy should be taxed. We agree with the Commission’s aims that the approach to the taxation of the digital economy must be fair and transparent, and one that supports public revenue. A level playing field is also a must – not just in Europe but globally too.’
However, ACCA says that complications arise because of the legal definition of what constitutes a purely digital business for the purposes of taxation.
‘While it is easy to identify ‘pure’ digital economy businesses at one of the spectrum, it is increasingly difficult to set a clear dividing line of the kind needed to discriminate for legal purposes between a digital solution to a conventional business issue and a conventional business which utilises some digital tools in its existing processes.
‘To be as effective as possible, the fair taxation of the digital economy needs to be implemented in a consistent global fashion, and based upon agreed and recognised definitions and principles. A policy decision such as this cannot be rushed and needs to be balanced against the long term considerations. EU policy makers need to work with international bodies, such as the OECD, and with businesses themselves, to enhance the effectiveness of measures and avoid unintended and undesirable side effects of change.’
Jason Piper concludes: ‘The need to distinguish between those businesses or transactions which are affected and those which are not will add to administrative complexity and burdens for tax payers and the accountancy profession alike. We believe that taxpayers and their advisers will need time to familiarise themselves with novel processes and definitions, while tax administrations will need to implement their own tools for processing and auditing returns. The long term impact of these economic costs should not be underestimated, especially where that burden might fall upon smaller businesses which will have smaller absolute reserves and may be relying upon those to fund accelerated growth.’