12/02/2014

Adapt tax policies to the digital age, say European culture professionals

Tax evasion by non-European digital giants and high taxes for cultural products on digital support discussed at European Parliament conference

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Adapt tax policies to the digital age, say European culture professionals

The digital era has brought new challenges to the cultural and audiovisual sectors, but Europe's legislative and fiscal frameworks have no kept up. The European Coalition for Cultural Diversity addressed the issue at a conference at the European Parliament on February 11.

Tax evasion and tax fraud are currently estimated to generate losses in tax revenue of around 1 trillion euros per year in the European Union alone. While this affects welfare, it also diminishes future funding for cultural policies. Taxation and culture are more tightly linked than one would think.

Fiscal policies in Europe nowadays are not clearly defined by a common framework. This leads to tax competition among EU member states and unfair practices.

For example, in Ireland, for historical reasons, tax on trading income is set at 12,5%. While its low corporate tax regime has led a giant like Google to base itself there, the same regime has also created competition between European Union states and tax loopholes: “A low tax regime is neither a long-term investment nor interesting for a country,” said member of European Parliament Pervenche Berès.

Those who profit the most from this kind of tax regimes are digital giants like Google, Amazon and iTunes, who are not even European and do not contribute to the welfare of European countries: “We have created a single market of consumption for products sold by the digital giants, which are in a situation of oligopoly, if not monopoly, and are not European,” said Jacques Toubon, French delegate for the taxation of cultural goods and services.

“[Although] the initial idea was to build a single market to avoid double taxation, the current sad reality is that we have double non-taxation,” said Walter Zampieri, head of the culture and policy unit at the European Commission's directorate general for education and culture.

This leads to a situation of inequality, where small and medium enterprises are subject to much higher income tax than the digital giants. They are therefore unable to compete with the giants and are doomed to disappear.

European countries must respond firmly and together, said conference participants.

The European Union has signed the UNESCO Convention for Cultural Diversity, and this convention should be respected within taxation as well, reminded the European Coalition for Cultural Diversity.

A good solution could be progressive tax harmonisation at the European level. But, particularly for intangible assets, it is difficult to decide who levies the tax: the country of origin or the country of consumption? The European Commission has proposed that taxation be applied in the country of consumption. There should be a vote on the decision, by unanimity, on January 1, 2015.

“One must not forget that digital giants are not the only ones avoiding taxation,” further added Lorena Boix-Alonso, from the European Commission's directorate general for communications networks, content and technology.

The digital era offers incredible means of promotion to European cultural production. For example, iTunes is still the video-on-demand provider with more European film titles, according to the European Audiovisual Observatory.

But, in many member states, the same cultural product is not taxed in the same way, depending on whether or not it is sold on a physical support. A striking example is the UK, where standard format is taxed at 0%, while digital is at 20%: “These kind of policies are equivalent to mortgaging the future,” said Richard Charkin, executive director of Bloomsbury Publishing.

“There is no reason why cultural goods distributed or sold via digital devices should not benefit from a lighter tax rate,” added Pascal Rogard, president of the French Coalition for Cultural Diversity.

 

Sara Petti

Photo: European Parliament

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