Taxing Transactions on Digital Payment Platforms like PayPal and Apple Pay
In the ever-evolving world of digital finance, the European Union (EU) has been reconsidering its approach to digital taxation. However, it is important to note that at present, the EU is not actively pursuing a digital tax specifically targeting payment services such as those provided by PayPal or Apple Pay.
Recent developments indicate that the EU has dropped plans for a common digital services tax (DST) on large technology companies, including American giants, as part of its next multi-year budget starting in 2028. This decision comes amid trade negotiations with the United States and concerns over retaliation.
The EU's focus has shifted to other levies, such as an excise tax on tobacco, a tax on discarded electronic equipment, and a corporate tax on large companies with significant turnover in the EU. These levies do not specifically or uniquely target digital payment services.
Lukas Homrich, a freelance journalist specialising in economic and financial topics, emphasises the importance of a global solution to digital taxation to avoid fragmentation and double taxation. The EU Commission shares this view, preferring a coordinated international approach rather than imposing unilateral EU taxes on digital companies.
The abandonment of the digital services tax is seen as a diplomatic move to preserve favorable trade relations with the U.S. and avoid economic retaliation. However, this does not mean that payment services are entirely unaffected. Ongoing regulatory scrutiny and enforcement actions, such as the Digital Markets Act, continue to impact their operations in the EU.
Separate from digital taxation, the EU is implementing the ViDA (VAT in the Digital Age) package to modernize VAT rules, including mandatory electronic invoicing for cross-border transactions starting in 2030. Payment services may need to comply with these changes, but they are not a form of digital tax.
The European market is fragmented, and the technological gap is significant, making it difficult for European solutions to compete with large international players. This reality has led to concerns that a digital tax could most likely affect local companies and consumers.
Despite these developments, the need for European payment sovereignty remains a priority. Piero Cipollone, a member of the European Central Bank's board, has emphasised this point. In the past, the EU Commission has not been lenient with US payment companies regarding potential competition violations.
In conclusion, the EU's decision to abandon the digital services tax is a significant shift in its approach to digital taxation. Payment giants like PayPal and Apple Pay remain unaffected by new EU digital levies in the near future, but they remain subject to evolving EU regulations and VAT reforms. The EU continues to strive for a constructive dialogue in the global digital taxation landscape.
- The European Union (EU) may be focusing on different levies instead of a digital services tax (DST) directly targeting payment services, but ongoing regulatory scrutiny and enforcement actions, such as the Digital Markets Act, continue to impact the operations of payment services in the EU.
- Lukas Homrich, a freelance journalist specialising in economic and financial topics, emphasises the importance of a global solution to digital taxation to avoid fragmentation and double taxation, which is a shared view by the EU Commission.
