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Digital Tax Increase to Take Effect in Europe

Digital Tax Increase to Take Effect in Europe

1 st  January 2015


The New York Times - Mark Scott

Europe’s tax showdown could be headed straight to people’s wallets.

With the new year, a change in fiscal rules in the European Union is increasing the tax on many purchases of digital content like e-books and smartphone applications.

Under the new rules, first approved in 2008, the tax rate on digital services like cloud storage and movie streaming will be determined by where consumers live, and not where the company selling the product has its European headquarters. Tax experts say Europe’s revamped rules could add up to an extra $1 billion in annual tax revenue for European governments.

What remains unclear is who in the 28-country bloc will pay most of the bill.

“There inevitably will be a price change,” said Richard Mollet, chief executive of the Publishers Association, a British trade body. “The question is whether retailers, publishers or customers will have to take on board any increase.” 

The changes to Europe’s so-called value-added tax — a tax on goods and services similar to sales taxes in the United States — are part of a continuing push by lawmakers to tax the region’s digital economy more heavily. Companies like Apple and Amazon have been roundly criticized for housing their European operations in low-tax countries like Ireland and Luxembourg. The companies say they operate there legally.

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