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The European Commission and the
Taxation of the Digital Economy
• The EU budget agreement reached in 2020 called for a new digital levy as a
• Evidence on the taxes paid by digital companies calls into question the
arguments in favor of a digital levy.
• EU policymakers should focus on continued implementation of digital VAT
policies and ongoing international negotiations rather than design a new tax
on digital companies.
• The three digital levy options each have serious flaws and would negatively
impact consumers and businesses who are increasingly relying on digital
products and services.
Vice President of Global Projects
TAX FOUNDATION | 2
The budget agreement reached by the European Commission in 2020 described a new digital levy
which would be an own resource used to fund the European Union budget.1 The agreement set a
target date of June 2021 for a proposal with an expected implementation at the beginning of 2023.
Recently, the European Commission opened a public consultation on the digital levy under its agenda
for a fair and competitive digital economy.2 The consultation mentions three policy options but no
details on how they would be implemented. These options include:
1. A corporate income tax top-up on all companies with digital activities in the European Union
2. A tax on revenues from certain digital activities in the EU.
3. A tax on business-to-business digital transactions in the EU.
Behind these options is an assumption