TEI Comments on European Commission Digital Economy Survey regarding 'fair taxation of the digital economy,' disagreeing with the Commission's proposed alternatives to taxing digital commerce.

• Position: Tax Executives Institute

In accordance with the final section of the European Commission's consultation regarding the fair taxation of the digital economy (the Consultation), Tax Executives Institute, Inc. (TEI), submits the following remarks to provide additional context and clarity to its responses to the Consultation's questionnaire.

TEI was founded in 1944 to serve the needs of in-house tax professionals. Today, the organization has 56 chapters around the world, including one in Europe. As the preeminent association of in-house tax professionals worldwide, TEI has a significant interest in promoting fair tax policy at all levels of government. Our nearly 7,000 members represent 2,800 of the largest companies in Europe, North and South America, and Asia. TEI is included in the EU Interest Representative Register (Register ID number 52413445902-12).

Additional Remarks on the Consultation

Principal Observations

It is neither feasible nor useful to attempt to separate the digital economy from the global economy. The entire economy has been digitalized and any tax policies, even if they are intended to apply only to the "digital" sector, will ultimately apply to the rest of the economy. The options presented in the Consultation questionnaire represent fundamental changes to the global corporate income tax system and will affect all multinational enterprises, whether or not their business activities are wholly or partly digital or digitalized. Consequently, it is inappropriate to address a theoretical digital economy or digital enterprises. It should thus be recognized that any changes will impact all international businesses and the focus should be the development of a sustainable, globally agreed and consistent corporate income tax system that provides certainty and administrability to taxpayers and tax authorities.

Tax policies should promote global economic growth. The tax options under consideration would create significant barriers to entry for all businesses trying to compete in the global marketplace and reduce investment in smaller and developing markets.

Tax should be imposed where value is created. The principles of the OECD's BEPS project, which has benefited from the support of over 100 countries under the project's Inclusive Framework, were built on an intention to ensure taxation is assessed in the country where economic value is created. However, the proposals here discard these agreed principles. The analysis should be focused on economic research...