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A closer look at the EC’s proposed digital services tax

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The European Commission’s proposed 3% digital services tax, a temporary turnover-based tax on certain digital services provided to users located in EU member states, is primarily aimed at social networks, search engines and online marketplaces. As the extent to which user participation creates value for those businesses is debatable, the Commission’s decision to target those particular businesses, as opposed to any other type of digital business, seems random and arbitrary. Although the Commission’s stated aim is to prevent distortions in the single market resulting from member states implementing their own equivalent domestic measures unilaterally, its decision specifically to target social networks, search engines and online marketplaces is in fact a politically loaded attempt to tax multinational businesses that are perceived to be paying too little in taxes worldwide. Member states are divided on the proposal, with some expressing serious concerns about the negative impact on the EU’s competitiveness.

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