DAC7 at last? European Commission targets digital platforms and sharing services

With the implementation of DAC6 underway in Europe, the European Commission has now submitted an initiative that may bring the seventh revision of the Directive on Administrative Cooperation in the Field of Taxation. It focuses on digital and shared services platforms. Its aim is the fair taxation of income generated via digital platforms, in terms of all taxes. This means that, unlike its predecessors, DAC7 would most likely cover both direct taxes and VAT.

The aim of the initiative submitted for public consultation by the European Commission is to identify entities that generate income via digital platforms and ensure that such income is properly taxed. A survey carried out in the EU has shown that services provided through online platforms with an international reach are growing. At the same time, numerous entities do not report the income, with member states losing significant tax revenues for their state budgets.

The initiative aims to give local tax administrators access to information on income generated via digital platforms, allowing them to control the taxation of this income in a quick and efficient manner thanks to cooperation among national financial administrations. The system should be based on an analysis of the existing national rules for collecting data on the digital economy in individual member states. Currently, an analysis is being prepared to assess and evaluate the potential impact a new reporting duty may have on both local tax administrators and businesses. The European Commission hopes that a uniform information standard will reduce the costs of setting up and operating information systems that member states would otherwise have to develop themselves. The new system should enable the fast and efficient exchange of information, cover all taxation areas, prevent data duplicity, and gather information in accordance with the GDPR.

So, will there be DAC7 and a new reporting duty? We have to wait and see. The European Commission will leave it up to further debate whether to introduce the outlined measures, and in what form – a wide range of options is available, from recommendations to member states, to a new directive. Public consultation will run for 8 weeks and feedback can be given through the European Commission’s website. Next steps in this matter are planned for July 2020.

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