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EU announces new tax plan that clamps down on digital platforms

Credit: European Business Magazine

The European Union on Wednesday announced that it has adopted a series of new tax measures that put increased pressure on digital platforms like the App Store.

The EU says that new tax package focuses on "the twin pillars of fairness and simplicity." Notably, the announcement come shortly after Apple and Ireland won an appeal in a $14.4 billion back tax case.

The new tax package is aimed at supporting "economic recovery and long-term growth" by curbing tax abuse and anticompetitive behavior while increasing transparency, the EU said.

Documentation of the plan includes tax transparency regulations that will apply to digital platforms, such as the App Store and Google Play store.

"The proposal on administrative cooperation (DAC 7) extends EU tax transparency rules to digital platforms, so that those who make money through the sale of goods or services on platforms pay their fair share of tax too," the EU said in a statement. "This new proposal will ensure that Member States automatically exchange information on the revenues generated by sellers on online platforms. The proposal also strengthens and clarifies the rules in other areas in which Member States work together to fight tax abuse, for example through joint tax audits."

The plan also introduces new mechanisms for "an automatic exchange of information" between member states for digital platform revenues. That's meant to "help tax administrations verify that those who earn money through digital platforms pay the appropriate share of taxes."

According to Reuters, the plan also seeks to shore up defenses against "corporate tax regimes of member states that have broadly harmful effects," including those known for fostering tax evasion and avoidance.

Previous attempts to change EU tax rules have been overruled by the power of veto by member states. The EU is now looking to sidestep that, Reuters reported.

The European Commission is also continuing to push ahead with a plan to tax digital platforms in the region, something that could spur a trade war with the U.S. In June, talks between Europe and the U.S. broke down after officials from the latter country reportedly left the meeting. On Tuesday, the EU said it may delay digital tax proposals until later in 2020 to avoid a transatlantic trade war.

News of the tax plan also comes in the midst of increased antitrust scrutiny for Apple's App Store and digital services, both in Europe and elsewhere across the globe.