EU Flash: results of the European Council summit, digital taxation and cross-border payments

04/04/2018

During the European Summit of 22 and 23 March, the European Council discussed jobs, growth and competitiveness, as well as the Paris Agreement and Digital Europe. The European Commission proposes new rules to ensure that all companies - including digital companies - pay fair tax in the EU. In addition, the European Commission also aims to make cross-border payments in euro fairer and cheaper.

Below you can find a summary of these topics.

European summit

During the European Summit of 22 and 23 March, the European Council formulated its conclusions on Jobs, Growth and Competitiveness, as well as some of the other items.

Single Market

The European Council calls on the Commission to present a state of play regarding the implementation, application and enforcement of existing legislation that is key for the functioning of the Single Market and an assessment of remaining barriers to and opportunities for a fully functioning Single Market.

Trade

The European Council reaffirms its commitment to an open and rules-based trade and encourages progress on all ongoing negotiations for ambitious and balanced free trade agreements.

The Commission will examine how to strengthen the enforcement of commitments undertaken by third countries.

Social issues

Delivering on the European Pillar of Social Rights is a shared political commitment and responsibility of the EU and its Member States. The European Council invites the Council to examine the initiatives presented by the Commission under the Social Fairness package, including the proposal on a European Labour Authority.

Paris Agreement

The European Council invites the Commission to present a proposal for a strategy for long-term EU greenhouse gas emissions reduction in accordance with the Paris Agreement.

Digital Europe

Social networks and digital platforms need to guarantee transparent practices and full protection of citizens' privacy and personal data. EU and national legislation must be respected and enforced. This important issue, together with other issues relating to Digital Europe, including the adoption of all the legislative instruments establishing the Digital Single Market in 2018, and the promotion of research and innovation and the development of digital skills, will be discussed by the Heads at their informal meeting in Sofia in May.

Digital taxation measures

The European Commission proposes new rules to ensure that digital companies also contribute their share of tax in the EU, thus supporting the Digital Single Market.

Two distinct legislative proposals were proposed by the Commission to tax digital activities in the EU:

  • The first proposal aims to reform the EU’s corporate tax rules for digital activities so that profits are registered and taxed where businesses have significant interaction with users through digital channels. The new rules set out criteria for determining whether a digital platform has a taxable 'digital presence' or a virtual permanent establishment in a Member State. The new rules will secure a real link between where digital profits are made and where they are taxed.
  • The second proposal provides an interim tax that applies to revenues created from certain digital activities which escape the current tax framework entirely, i.e. activities where users play a major role in value creation, such as revenues from selling online advertising space or data generated from user-provided information. Tax revenues would be collected by the Member States where the users are located. This indirect tax is an interim measure, until the comprehensive reform has been implemented and has inbuilt mechanisms to alleviate the possibility of double taxation.

The legislative proposals will be submitted to the Council for adoption and to the European Parliament for consultation.

Cheap euro transfers everywhere in the EU and fairer currency conversions

The European Commission proposes to make cross-border payments in euro cheaper across the entire EU. Under current rules, there is no difference for euro area residents or businesses if they carry out euro transactions in their own country or with another euro area Member State.

The proposal aims to reduce the fees charged for cross-border payments in euro to the same level as the fees that would be charged for similar domestic payments in the local currency, bringing down fees to a few euro or even cents.

Moreover, the Commission is proposing to bring more transparency and competition to currency conversion services when consumers are buying goods or services in a different currency than their own.

This proposal will  require that consumers are fully informed of the cost of a currency conversion before they make such payment, thus raising transparency. At the moment, consumers are usually not informed or aware of the cost of a transaction that involves a currency conversion. This means they will be able to compare the costs of different conversion options to make a fair choice.

The European Banking Authority will be tasked with drafting the necessary Regulatory Technical Standard to implement this enhanced transparency. The legislative proposal will now be submitted to the European Parliament and Council for adoption.

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