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Postponement of digital economy taxation in both CR and other world countries

Despite assurances made in early March that the COVID-19 pandemic will not slow down negotiations on new international taxation rules applicable to the digital economy, the OECD has now made it clear that it is no longer certain that agreement will be reached by the end of this year.

According to the OECD’s original plan, agreement on how to proceed on the taxation of the digital economy on a global level was supposed to be reached by the end of 2020. However, the OECD’s May webcast showed that the member states were devoting all their attention to COVID-19-related issues and did not have any time left for other issues, among them the taxation of the digital economy. This was further confirmed by the fact that the originally-planned July date for reaching a consensus has been postponed until October.

Any chance of reaching agreement before the year-end has been further marred by the USA recently withdrawing from the debates at the OECD level, all this after their long-time criticism of the introduction of international digital economy taxation rules, as the rules would mostly affect American technology giants. The USA announced that they will examine the procedures of the states that have already introduced or intend to introduce a digital tax on national levels. The Czech Republic is among such countries. It will be interesting to see where the USA pressure will be strong enough to bring about a change similar to that in France, recently deciding to suspend the collection of the national digital tax until the end of 2020.

The postponement of consensus at the OECD level may also result in the acceleration of efforts to implement a digital tax at the EU level, as indicated by the European Commission, proposing that the digital tax may be one of the new internal resources for the financing of extensive investment to revive the European economy after the coronavirus crisis. While the Commission has been actively supporting the negotiations led by the OECD and G20, it remains ready to interfere if worldwide consensus is not reached.

Nevertheless, despite growing pressure from the USA, the Czech Republic continues to make preparations for the introduction of a Czech digital tax. In early June, the Budget Committee of the Chamber of Deputies confirmed the proposal of a 7% tax effective from 1 July 2020. But the coalition council subsequently agreed to postpone the effective date until 1 January 2021 and reduce the rate to 5%. These changes were submitted in form of an amending proposal to be discussed by deputies.