Proposal for an EU digital levy

Abstract

In the study, the following research questions are addressed: What are the rationales for a digital tax: do arguments for this mechanism presented by the OECD, EU, and other proponents justify its implementation? Is a digital tax a good policy tool from the viewpoint of theoretical principles that should guide an optimal (digital) tax? What are the main elements of a global OECD-led compromise of 2021 on modification of taxation for MNCs, to reflect the changing nature of business models, including the ability of companies to do business without a physical presence? Negotiations on digital tax proposals, conducted in the EU and at the OECD-initiated multilateral forum, are reviewed and assessed from the viewpoint of expected objectives and theoretical principles of optimal tax policy. Digital taxes already in force in a few EU countries are presented. This information is supplemented by a discussion about the positive and negative implications of a digital tax for the functioning of the EU common market and is followed by conclusions.