Skatteudvalget 2017-18
SAU Alm.del Bilag 202
Offentligt
Mr Jean-Claude Juncker
President of the European Commission
Rue de la Loi 200
B-1049 Bruxelles
Belgium
Re: Reasoned opinion (subsidiarity) regarding the EU proposals for a Council Directive laying down
rules relating to the corporate taxation of a significant digital presence (COM(2018) 147), and a
Council Directive on the common system of a digital services tax on revenues resulting from the
provision of certain digital services (COM(2018) 148)
Dear Mr Juncker,
The House of Representatives of the Netherlands has examined the EU proposals for a Council
Directive laying down rules relating to the corporate taxation of a significant digital presence
(COM(2018) 147), and a Council Directive on the common system of a digital services tax on
revenues resulting from the provision of certain digital services (COM(2018) 148) in terms of the
principle of subsidiarity.
I am writing to inform you that the opinion of the House of Representatives with regard to the
subsidiarity of the aforementioned proposals is negative.
The House of Representatives agrees that taxing the digital economy and reforming the financial
system in order to achieve this are important goals, but takes the view that taxation and taxation policy
are primarily a concern of the member states themselves, and that member states can also achieve this
reform without European harmonisation or interference. The House also has its doubts about the
potential benefits of a European proposal compared to a national approach, especially since member
states are already working on a joint strategy in an OECD context.
As far as the legal basis is concerned, the House considers Article 115 of the Treaty on the
Functioning of the European Union (TFEU) to be the appropriate legal basis for both proposals. The
House therefore also disagrees with the European Commission’s choice of basing the proposal
COM(2018) 148 on Article 113 of the TFEU, because, in its view, it is clear that in this proposal the
purpose of the taxation is also a levy on profit. As such, this proposal, as is also the case for proposal
COM(2018) 147, does not actually concern indirect taxation, for which Article 113 is intended.
The annex sets out the contributions to the debate from the different parliamentary parties, in which
they explain their standpoints with regard to subsidiarity and other matters in greater detail. I would
appreciate your taking these contributions into consideration in your reply to this letter.
A copy of this letter will also be sent to the European Parliament, the European Council and the
Government of the Netherlands.
Yours sincerely,
The Speaker of the House of Representatives,
Khadija Arib
 SAU, Alm.del - 2017-18 - Bilag 202: Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning
Annex: Contributions of the different parliamentary groups to the debate
The House of Representatives of the Netherlands has 150 seats. These seats are distributed as follows:
People’s Party for Freedom and Democracy
- VVD (33)
Party for Freedom - PVV (20)
Christian Democratic Appeal - CDA (19)
Democrats 66 - D66 (19)
Green Left - GL (14)
Socialist Party - SP (14)
Labour Party - PvdA (9)
Christian Union - CU (5)
Party for the Animals - PvdD (5)
50PLUS (4)
Reformed Political Party - SGP (3)
DENK (3)
Forum for Democracy - FvD (2)
In evaluating the proposals in terms of subsidiarity, eight parliamentary groups provided an
explanation of their views.
Standpoints regarding subsidiarity
The
members of the VVD parliamentary group
take the view that there are sufficient arguments for
applying a subsidiarity test to the proposals under discussion. They have the following reasons for this.
General:
Taxes are primarily a concern of the member states themselves. A European solution should
only be considered in the case of major, serious problems that the member states are unable to
resolve themselves. The VVD members agree that the taxation of the digital economy and
reform of the financial system to achieve this is important, but note that many member states
are currently reaching solutions without European harmonisation or interference, such as the
French tax on visual content and the Hungarian tax on advertisements. They therefore have
doubts about the benefits of a European proposal, especially since these national measures can
apparently resolve the problem effectively without European interference.
Various member states have already joined forces in reviewing taxation for the digital
economy within an OECD context. A definitive report outlining solutions for this issue is
expected to be published in 2020. It therefore appears that member states are already proving
able to reach joint solutions without European intervention.
The House of Representatives has previously indicated that it will only consider solutions
involving supranational measures on taxation in cases where national measures prove
ineffective
and it also previously applied a subsidiary test (‘drew a yellow card’) in the case of
the proposals concerning the CCCTB. The current proposals are related to this and provide a
stepping stone towards these
–
previously rejected
–
proposals. The VVD considers this to be
problematic.
European Commission’s arguments:
The Commission argues that the fact that companies conduct cross-border trade could itself be
a reason for justifying European harmonisation. As far as the VVD is concerned, this is
 SAU, Alm.del - 2017-18 - Bilag 202: Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning
jumping the gun. Any assessment of whether European intervention is necessary should in
part be based on the fact that member states are themselves unable to resolve the problem. The
general arguments outlined above demonstrate that the member states are already applying
initiatives, both individually and jointly, to resolve the problem. For this reason, the
Commission has not provided persuasive arguments to demonstrate that no solution could be
found without European intervention.
The Commission argues that European harmonisation has added value that transcends the
actions of individual member states, jointly or otherwise. There is no further explanation
provided for this, which makes it, in the view of the VVD, not convincingly proven. In
addition, the Commission itself states that various member states are taking measures. It does
not claim that these measures are inefficient and would therefore not be workable, but merely
that this would result in a fragmented policy. As such, the Commission has not provided
sufficient proof that supranational European policy should take precedence over national
policy.
The Commission argues that a joint, harmonised tax creates a level playing field with regard
to competition. This is untrue for as long as the other fiscal provisions and taxes in the
member states differ from each other. The Commission’s proposal therefore fails to achieve its
intended objective which raises the question of whether member states would be better
advised to apply policy at national level.
The Commission asserts that it would be undesirable for a member state to take ‘unilateral’
and ‘divergent’ action. The VVD takes the view that acting unilaterally and divergently is part
of a member state’s sovereignty. Enforced joint action can only be permitted
if countries
decide on it
–
jointly and divergently
–
or if a national solution alone provides no remedy. The
VVD takes the view that the Commission has failed to prove this convincingly.
The Commission argues that as soon as a measure affects the
‘internal market as a whole’,
coordinated action at European level is the ‘only’ option. The VVD questions this
argumentation, both in the case of the assumption that measures taken nationally will affect
the internal market as a whole and the conclusion that, if this were the case, a European
solution would be the only ‘appropriate way forward’. They believe that this dismisses the
principle of subsidiarity too easily.
The Commission states that the proposed measure is proportionate and does not interfere with
member states’ freedom to set policy. The members of the VVD do not agree with this
assertion, since it imposes an obligation to levy a specific (temporary) tax.
The Commission argues that the member states cannot take national measures without
‘hampering the single market’. The members of the VVD consider this to be a remarkable
accusation in view of the right of a member state to set its own national policy that may
possibly conflict with the principle of subsidiarity.
The members of the
PVV parliamentary group
consider this proposal to be at odds with the
subsidiarity principle. They refute the argument that only an EU solution, implemented by the EU, is
possible. The collection of taxes and taxation policy are a national power by definition, in which no
EU interference is appropriate. If it should appear that actions are necessary, this should of course only
be in an OECD context.
The opinion of the members of the
CDA parliamentary group
with regard to the subsidiarity of the
long-term solution (COM(2018)147) is positive. It concerns an issue of profit attribution and these
members recognise the advantages of maximum possible agreement between countries when it comes
 SAU, Alm.del - 2017-18 - Bilag 202: Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning
to profit attribution. This means that coordination at OECD level takes preference over agreement at
EU level and, if that proves unsuccessful, coordination at EU level takes precedence over national
regulations. The taxation of digital services should not be seen as a stepping stone towards a
CC(C)TB.
The opinion of the members of the CDA parliamentary group with regard to the subsidiarity of the
temporary solution (COM(2018)148) is partly positive. The taxation of profit is not a concern of the
European Union, but of the member states themselves. This also applies to the introduction of new
taxes. However, indirect taxation is covered by the powers of the European Union and the temporary
solution takes the form of an indirect tax on digital services. It is not clear to the members of the CDA
parliamentary group whether the European Commission has opted for an indirect tax for practical
reasons or because of its own powers.
The members of the
D66 parliamentary group
take a positive view with regard to the subsidiarity of
the EU proposals on taxation in the digital economy. According to these members, the objectives of
the proposal cannot be effectively achieved at the level of individual member states. Another key
factor is that efforts made within an OECD and G20 context have so far achieved unsatisfactory
results. The internet is a cross-border technology by definition. Companies in the digital economy
often operate beyond national borders. Since these companies often have limited or no actual physical
presence, measures are required in order to ensure that profit is as far as possible taxed where value is
created and in order to protect the basis for taxation. For the digital internal market to operate
effectively, it is therefore important that member states take concerted action in modernising taxation.
The European Commission’s proposals for a temporary and permanent solution contribute to
achieving this. These proposals also help create a level playing field and are therefore in the interests
of Dutch businesses and consumers. The D66 parliamentary group will monitor the further
implementation, feasibility and interaction with other international initiatives.
The members of the
Green Left parliamentary group
agree with the analysis below by the European
Commission, which describes why the two EU proposals are in line with the principle of subsidiarity:
“As digital businesses are able to operate across borders without having any physical presence, both
inside the Union and from third countries, uniform rules are needed to ensure that they pay taxes
where they make profits. Given the cross-border dimension of digital activities an EU initiative is
needed and adds value as compared to what a multitude of national measures could attain. A common
initiative across the internal market is required for a direct and harmonised application of the rules on
a significant digital presence within the Union so as to ensure a level playing field for all member
states and provides taxpayers with legal certainty. Unilateral and divergent approaches by each
member state could be ineffective and fragment the single market by creating national policy clashes,
distortions and tax obstacles for businesses in the EU. If the objective is to adopt solutions that
function for the internal market as a whole, the appropriate way forward is only through coordinated
initiatives at EU level.”
The members of the
SP parliamentary group
takes the view that digital companies that operate
‘without borders’ should also pay tax. They believe that it is reasonable to apply a subsidiarity test to
these proposals. They would like to see particular consideration given to the following issues:
Taxation of turnover and profit is a competency of the member states. The fact that
agreements are made for member states to collect this new tax from large digital companies
 SAU, Alm.del - 2017-18 - Bilag 202: Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning
does not undermine the subsidiarity of collection. The SP would like to know how the
European Commission’s initiative will be assessed with regard to this (apparently) new tax
base.
In the Commission’s proposal 147 the place of business is expanded to a digital presence,
based on users, contracts and turnover. The members would like to know whether the
determination of these criteria is at odds with or in line with the subsidiarity principle.
Proposal 148 proposes a uniform tax of 3% in order to prevent fragmentation. The SP takes
the view that this undermines the competency of member states to opt for a higher rate
because the notion of a ‘uniform rate’ appears to rule out a higher percentage.
The SP would like to know whether the levying of the tax can actually be seen as an indirect
tax because it cannot be considered to be a ‘surcharge’ (like excise duty) or a fine since it is
levied on profit at source. This raises the question of whether invoking Article 113 in the case
of COM(2018) 148 is applicable.
The members of the
PvdD parliamentary group
take a negative view with regard to the subsidiarity
of both Directives. It has not become clear from both proposals whether they concern a direct or an
indirect tax, which stands in the way of a full-fledged subsidiarity check. In addition to this the PvdD
thinks Member States should have maximum policy and tariff freedom, and these proposals do not
make clear whether this is guaranteed.
The members of the
PvdA parliamentary group
consider this legislation to be in agreement with the
subsidiarity principle. In general, they recognise that direct tax policies are in principle reserved for
individual Member States. This does not detract from the fact that the Member States have large
common interests in this area. There is a broad international consensus that tax avoidance is
undesirable. There is also a broad consensus that tax avoidance can best be tackled internationally. In
addition, harmonization of tax legislation contributes to the better functioning of the internal market,
and harmonization helps to stop undesirable competition between Member States in the field of
taxation.
Digital companies such as Facebook and Google are characterized by the fact that they are no longer
tied to a physical location for their activities. Their profit derives from the provision of online services,
which is difficult for the national profit tax systems of the Member States to get a grip on. The
members of the PvdA parliamentary group note that the result is that these companies pay very little
tax in the European Member States. In order to correct this, the 'fixed base' concept in the profit tax
system needs to be adjusted. And because these digital companies operate online, independently of
their location, they are international in nature. Because these large companies, which are the subject of
this proposal, operate in all member states of the EU, there is an advantage to be gained from a
European approach. The alternative is a fragmented approach to the taxation of digital companies,
which can disrupt the digital economy that is still under development. In addition, a patchwork of tax
rules will create new opportunities for tax avoidance by these companies. The purely cross-border
business activities of the large tech companies in Europe justify taking a European approach above an
individual Member State approach. In view of the damage caused by a fragmented approach as a result
of different policies by individual member states, the members of the PvdA parliamentary group also
consider the proposal proportionate. In conclusion, the members of the PvdA parliamentary group take
a positive view of the subsidiarity of this EU proposal.
 SAU, Alm.del - 2017-18 - Bilag 202: Begrundet udtalelse fra det hollandske 2. kammer (repræsentanternes hus) og det maltesiske repræsentanternes hus om KOM (2018) 147 og 148 - digital beskatning
Standpoints regarding legal basis
The members of the
VVD parliamentary group
note that the Commission describes the tax as
‘characteristic for an indirect tax’. The VVD members question this comment, since the new tax is
intended to be levied on the profit of digital companies. Only because this is inherently problematical
in view of the digital economy, is the turnover taxed instead. However, the purpose of the tax is still to
tax profit. As such, in view of its purpose, the tax should be considered to be a direct tax (sui
generis)
rather than an indirect tax. The VVD therefore believes that another legal basis from the Treaty on the
Functioning of the EU, for example Article 115 TFEU, would be more appropriate and suitable, if a
positive approach is adopted to the proposal, than the chosen Article 113 TFEU.
The members of the
PVV parliamentary group
take the view that, with these proposals, the EU is
acting unlawfully because there is no need to harmonise taxation in order to prevent distortions of
competition.
Tax legislation is a national power and must remain so.
The members of the
CDA parliamentary group
believe the legal basis to be partially appropriate.
The European Union sees Article 115 as the legal basis for the long-term solution (COM(2018)147)
and Article 113 for the temporary solution (COM(2018)148). These members consider Article 115 to
be the appropriate legal basis for both directives. The ultimate aim of the temporary solution is not to
harmonise various turnover taxes on digital services, but the decision to tax turnover was taken, as the
Commission itself admits, for practical reasons in order to harmonise taxation. The tax on turnover is
therefore the means and not the end. The CDA members also have their doubts about the temporary
nature of this tax on turnover of digital services, especially since the directive now contains no
specified horizon.
The members of the
D66 parliamentary group
have a positive opinion with regard to the legal basis
for both EU proposals and agree with the European Commission’s arguments. The European
Commission refers to Articles 46, 48, 53, paragraph 1, Article 62 and Article 91, paragraph 1 of the
Treaty on the Functioning of the European Union. The members of the D66 parliamentary group
consider this to be the right legal basis.
The members of the
Green Left parliamentary group
agree with the European Commission’s
arguments concerning the legal basis for the EU proposal.
The members of the
SP parliamentary group
take the view that proposal COM(2018) 147 falls
within the scope of Article 115 of the Treaty on the Functioning of the European Union.
The members of the SP parliamentary group do not feel that proposal COM(2018) 148 falls within the
scope of Article 113 of the Treaty on the Functioning of the European Union.
The members of the
PvdA parliamentary group
consider Article 46, Article 48, Article 53 (1),
Article 62 and Article 91 (1) of the Treaty on the Functioning of the European Union the appropriate
legal basis for both proposals.