MNI BRUSSELS WATCH: Ecofin To Discuss Taxation Of Digital Econ

--Discussion Paper Says Current Rules Are 'Outdated'

--Estonia Wants Common EU Position By December

By Jean Comte

     BRUSSELS (MNI) - European Union finance ministers will tackle 'corporate

taxation challenges in the digital economy', during a discussion at an informal

meeting in Tallinn, Estonia, next week, Market News understands.

     The discussion paper, obtained by MNI, states that international rules on

taxation are 'outdated' and 'cannot cope with the challenges of the

digitalisation of the economy'.

     The fact that business can only be taxed where they have a 'physical

presence' is creating massive distortions, it adds.

     'The scale of the described market distortion is growing rapidly since the

share of the digital economy in the global economy is expected to grow

exponentially. It is urgent to close the gap in international tax rules,' the

paper concludes.

     Discussions at Tallinn's September Ecofin are only intended as a starting

point, but current EUCO presidency holders Estonia wants talks to continue until

December, when they hope to find agreement on a common way forward.

     The legislative path is vague at best at this point. EU law, which already

contains several tax-related texts, could be a good basis -- for example,

through the project of a Common Corporate Tax Base under scrutiny.

     But given the size of the issue, action could be more relevant at an

international level. In particular, the Organisation for Economic Cooperation

and Development, who led the fight against fiscal avoidance in recent years,

could be an ideal place to continue work on digital taxation.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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