Estonia has been a pioneer in all things tech, so who better to drive the digital agenda for EU member states than former Estonian Prime Minister Andrus Ansip?
Since 2014, Ansip has held the role as vice-president for the European Commission’s digital single market, and from July to December 2017, Estonia holds the presidency of the Council of the European Union. As part of this, Ansip has been tasked with finding EU consensus on issues such as modernising tax rules to become fit-for-purpose to suit an increasingly digital economy.
Finding a one-size-fits-all solution for EU member states on digital taxation has not been easy, but Ansip tells TP Week he believes the EU is closer than ever to realising the common consolidated corporate tax base (CCCTB). The CCCTB would treat the EU as a single market for corporate tax purposes, meaning companies would have to comply with just one set of rules instead of different systems in each one of the jurisdictions they operate in.
Member states would still be able to set their own corporate tax rates at which they would tax companies. However, member states such as Ireland and the Netherlands have argued that the CCCTB would make their tax regimes less attractive internationally and breach the principle of national sovereignty. They also fear that the CCCTB is the first step towards completely harmonising the EU tax system, which could include corporate tax rates.
Ansip also talks to TP Week about the equalisation tax proposed by France, which would tax revenue instead of profits. After an ECOFIN meeting in Tallinn in mid-September, the proposal garnered support from many countries, and Italy announced this week plans to implement an equalisation tax. Ansip is gathering multinationals’ views on this and other proposals, and hopes to find a solution that will create an open and innovative European economy.
TP Week:How did Estonia get to the forefront of the digital tax debate?
Andrus Ansip: Many people are calling Estonia ‘e-Estonia’ and are referring to the Estonian [EU Council] presidency as ‘the digital presidency’ because of our ambition to realise the benefits of a digital society for every European. At the same time, a functioning digital economy needs fair taxation. Today, however, we see that many international tax systems have become outdated because they were created before the rapid development of the digital economy. This is where Estonia can step in. The digital economy allows companies to create added value and should allow for people to buy products and services regardless of their geographic location. Our taxation system has to reflect that and become more neutral, fair and transparent. Estonia as a digital country accepts this challenge and is rolling up its sleeves.
TP Week:Where would you like to see the Estonian presidency lead the debate on digital tax?
Ansip: The Estonian Presidency of the Council of the European Union has been very active in tackling taxation of the digital economy. In September, for instance, the Estonian presidency invited tax experts, politicians, and scientists to Tallinn to discuss the present conditions in European tax law while focusing on issues related to taxation of the digital and sharing economy. It became clear quite quickly that tax rules dating more than 100 years back no longer function and we are in need of new ones. Estonia’s aim is to agree on the necessity and principles for modernising and harmonising tax rules by the end of the Estonian presidency. Since a similar discussion is simultaneously being held at the OECD, the EU has the opportunity to provide its contribution and input to the global tax debate.
TP Week: Is the technology and digital expertise something the government nurtured into existence in Estonia, crafting an economic niche? What lessons can other countries learn?
Ansip: For many other countries, Estonia is often associated with transparency and efficient e-services. It is true that we have created a wide range of e-services which include for instance e-Voting, e-Tax Board, e-Businesses, e-Banking, e-Identity programmes, e-Tickets and also university classes are accessible via internet. Through these services we have built an efficient, secure and transparent ecosystem that saves time and money because there is less bureaucracy. However, I do not think Estonia can teach any lessons to other countries. To support a country on its way towards digitisation, it is important to set up the right kind of structure in the economy and to support the spirit of entrepreneurship. For example, the fact that Skype was built in Estonia and that it had such a successful development meant not only that Estonia benefited in a major way but also that entrepreneurship became more legitimate, inspiring more and more people.
TP Week:What are your thoughts about the equalisation tax? Do you have any other proposals for taxation of digital companies?
Ansip: When it comes to the [European] discussion on the various kinds of taxation models that could be applied to the digital sector, the EC is exploring all possibilities. In fact, we recently launched a public consultation which we hope will gather the views of the public at large and businesses alike, including on the equalisation tax idea. While our ideal solution is one which is suitable for the single market in the long-term, we are also keeping an open mind on what short-term quick fixes could be envisaged ahead of EC proposals in spring next year. The EU needs a modern and stable tax framework for the digital economy to stimulate innovation, tackle market fragmentation and allow all players to operate under fair and balanced conditions. We need to maintain a level playing field in our single market so that all companies – large or small, more or less digitalised – pay their fair share of tax. This is essential to enable all businesses to innovate, develop and grow in Europe.
TP Week:How likely is a CCCTB looking at the moment and what could be the advantages from your point of view?
Ansip: One of the objectives of the digital single market strategy is ensuring fair competition for businesses. For us it also means that with respect to taxation we need to create a level playing field for all businesses operating in the internal market. We may be able to use the framework of the CCCTB to launch a debate on how to modernise the corporate income tax rules in a way that would take into account the new business models using digital technology. We must target the gaps in the current tax rules which enable taxpayers using digital assets and solutions to conduct their business, to legally avoid paying taxes in the countries where they derive their profits, while taxpayers using physical assets and solutions are also paying their fair share of taxes to the budgets of the market or source countries. On the CCCTB in general, we need member states to continue working on these ambitious proposals and to bring their ideas and input to the table. Our mission is to put in place a corporate tax system that will ensure that profits are taxed where they are generated, and that can also boost investment and growth in the EU. We expect member states to agree on this in the near future.
TP Week:What will you be working on in the coming year?
Ansip: Since the beginning of the mandate, the EC has put forward 43 initiatives to complete the digital single market, of which 24 are legislative proposals. But we still do not have a digital single market. Only six of the EC legislative proposals have been adopted.
So we will work on a wide range of topics to accelerate the adoption of a digital Europe. As for tax-related projects, for now, our focus is on helping member states to converge on a common EU position on digital taxation, to ensure our contribution to the international work is as constructive as it can be. We are keen to see appropriate, workable and innovative solutions coming from the OECD-led process on digital taxation.
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