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During the year, more than 30 countries around the world imposed digital taxes on technology giants . Chinese senior officials have also frequently expressed their plans to put digital tax studies on the agenda. Experts said last year that in the short term, China should not consider levying a digital tax. And now what about?
Digital taxes often appear in the mouths of senior Chinese officials as technological giants face the global anti-monopoly wave, and related discussions are also on the rise.
What’s been happening?
In general, although the current digital tax is mainly levied by large multinational Internet platform companies, the concept of user value creation behind it expresses the view that user data is the value source for the platform and should not be free.
It is also of great importance for SMEs to investigate and pay attention to digital taxation.
He further stated that the implementation of the digital tax still faces challenges. The next step will be to pay close attention to the progress of the international reform of digital taxation, to strengthen the theoretical research and practical exploration of digital taxation, to actively participate in the formulation of international rules, and to establish a digital tax system that is standardized, fair, scientific and reasonable.
At the Fourth China Internet Finance Forum the day before, Zhu Guangyao, former Vice Minister of China’s Ministry of Finance, also stated that it is time to conduct a general study on digital taxation, including international digital taxation issues, as well as those within the nation particularly those with country-specific research on large-scale technology, data, and consumer traffic platforms.
He said that digital taxation has been discussed in the international context in the past few years, but the domestic digital taxation of a single country has not been on the agenda. Today, countries with large Internet businesses should in due course, put domestic digital taxation on the agenda.
The research, formulation and implementation of digital taxation is in Zhu Guangyao’s view, one of the policy issues that needs to be addressed in order to promote the development of the digital economy under the macro framework. In addition, the formulation of general rules, such as data security, digital currency issues and antitrust issues, should be taken into account. Difficulties etc.
What is digital taxation?
What exactly is a digital tax frequently mentioned by senior officials?
As early as July, Feng Qiaobin, a member of the Academic Committee of the China Academy of New Supply Economics, pointed out that e-commerce taxation is the primary meaning of digital tax, and turnover tax is the nature of it. At the same time the concept of a domestic tax is also a digital tax at this level. There is a complete right for each country to decide whether or not to expropriate and how to expropriate.
The other meaning of digital taxation is digital economic taxation. This is the tax solution for the digitalization of the OECD economy, which at international level has received considerable attention.
At this level, digital taxation involves the distribution between different countries of the enormous profits generated by multinational Internet companies and digital giants, and it is income tax. Issues relating to the tax distribution of different countries fall within the category of international taxation and need to be negotiated on an international basis.
Looking deeper, Wang Yongjun, director of the Central University of Finance and Economics’ Government Budget Research Center, broadly defines digital tax as an additional tax on digital companies (digital business income and profits), covering digital compensatory tax and digital corrective tax, the former Support to the Common Market, which promotes social justice.
He wrote that the first theoretical basis for digital taxation is to impose a digital offset tax on digital enterprises in order to correct the deviation from competitive neutrality, so that under the conditions of the digital economy, competitive neutral tax conditions can also be fulfilled.
As a punishment mechanism to internalize the negative externalities of digital enterprises, the corrective digital tax to eliminate digital rent can be used.
Currently the two sides of the digital economy have created a background for theoretically fundamental thinking on digital taxes: digital companies can use digital power to do good, or they can abuse and profit from digital power to do evil”
Together the competitive neutrality that promotes the effective functioning of the common market and the constraint on digital rents that support social justice define the two fundamental roles that digital taxes should play as a ‘anti-evil’ instrument.
It is therefore appropriate and necessary to divide the digital tax into the digital compensatory tax and the digital corrective tax. As a relief mechanism for BEPS, the former aims to’ fill the tax gap’; the latter aims to prevent and control additional damage. “negative externalities”negative externalities.
The digital compensatory tax is “necessary” and the digital corrective tax is “optional” Different mechanisms for controlling externalities, including mandatory additional supervision and disclosure of information to digital companies, should be chosen.
Europe’s been acting
Research on digital taxes has also been promoted by the European Union and other economies in recent years.
A few years ago, the European Union has already proposed anti-monopoly oversight of technology giants, including penalties such as the introduction of digital taxes. In recent years, the EU government has emphasized “digital sovereignty” and recently announced new data sharing rules, and has presented a number of proposals to promote cross-border data circulation within EU Member States.”
The digital tax levy, the first digital tax levy in the world, was approved by the French Senate in July 2019.
Recently, France has also announced that in December it will restart the above-mentioned digital service tax collection plan by imposing a 3% digital service tax on Internet companies with revenues in excess of EUR 25 million and global revenues in excess of EUR 750 million.
A number of US Internet businesses are involved in the plan, and many US Internet giants, such as Google, Facebook, and Amazon, are all taxed. Currently, Facebook and Amazon have received notifications from the French Department of Finance concerning tax payments.
As of this year, more than 30 countries worldwide have announced the levy of digital taxes on large Internet companies, according to People’s Daily Online.
Since January this year, digital tax bills formulated by their respective countries have been implemented successively by Italy, Austria, the United Kingdom and other countries. Digital tax bills are being prepared and implemented by the European Union, Spain, Austria, the Czech Republic, Poland and other economies.
In Asia, a bill was approved by the Philippine House of Representatives in the middle of this year. The Philippine government will impose a 12 per cent value-added tax on digital services, according to the bill’s proposal. Countries such as Singapore, Malaysia, India, Indonesia and Thailand have previously passed or implemented digital tax levy bills.