1) The document discusses global efforts to tax the digital economy as countries scramble for new tax bases in response to COVID-19 impacts and rising debt levels. 2) It outlines the European Union's previous approach to digital taxation under Moscovici, including a proposed digital tax and changes to permanent establishment definitions. 3) Italy unilaterally expanded its definition of permanent establishment and introduced its own digital tax, though implementation has been delayed due to global uncertainties.

1. Scrambling for New Taxable Bases
Global Digital Economy and Local Fiscal Measures
Sevilla, December 3rd 2020
Marco Greggi, University of Ferrara

2. Outline of the Presentation
1. The European COVID-19 scenario as 2020 comes to an end;
2. The Moscovici’s legacy on digital taxation;
3. The Unilateral measure in being: case Italy;
4. Concluding remarks.
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3. The Current Scenario
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1. Asymmetric impact in the
Continent;
2. No clear pattern of incidence (no
North-South
or East-West dichotomy);
3. Different policies in progress as to
address the situation in the different
States of the Union.
WHO data plotted by the Author

4. The Debt Adjustment
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1. Traditional pattern confirmed in
absolute terms;
2. Trajectory of convergence towards
the Southern model ?
3. Temporary suspension of the
Eurocurrency
constraints in term of Deficit/GDP
and Public debt / GDP:
• Italy non compliant on both (and
Spain ?).
• Covid-19 response essentially
debt-based.
Eurostat data plotted by the Author

5. Liking Debt with Digital Tax ?
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Eurostat data plotted by the Author

6. GDP Variations in 2020
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1. Further evidence of the different
resilience levels by countries
across the European Union;
2. Economic data are essential con
conceive and deploy a proper tax
policy reaction to Covid-19;
3. Traditional measures arguably
inefficient, including:
• Income tax adjustments;
• VAT / Consumption tax
adjustments.
European Commission data plotted by Philipp Heimberger

7. The Scramble for New Bases
• Expanding the Power to Tax of the
State beyond the traditional
borders, surpassing the
Westphalian model of taxation
(cuius regio, ejus tributum);
• European challenge: regulate the
expansion.
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a.d. 1648

8. The European Model
(the Moscovici’s legacy)
• Two Prongs approach:
• Soft law:
1. Recommendation to the Member state to re-negotiate wherever / whenever
possible DTCs with third countries consistently with the necessities of the digital
economy;
• Hard Law:
1. Directive proposal addressing the definition of permanent establishment where
DTCs are not in force with third countries, as to attract more income in the EU in
qualified circumstances COM (2018) 147;
2. Directive proposal introducing a new Digital Tax to target specific digital operations
COM (2018) 148.
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9. The Digital Presence
• Article 4, § 3 of the (proposed) Directive;
• A digital presence occurs when:
• Revenue originated via digital services in the country exceeds € 7.000.000 or
• The number of users exceeds 100.000 or
• The number of business contracts exceeds 3.000;
• And is applicable to:
• Both EU and non-EU resident businesses;
• And is applicable if:
• A conflicting DTC is not in force with the third Country.
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10. The Digital Tax
• "Third kind" of (digital) taxation targeting (Article 3):
1. Advertising;
2. "Multi-sided digital interface" (aka social networks);
3. Transmission of data collected about users (for advertising purposes);
• It is triggered if the taxpayer's:
• Worldwide revenue accounts for more than € 750.000.000 and
• EU revenue accounts for more than € 50.000.000;
• …
• It is applied with a rate of 3%;
• Around 19 articles out of the 27 of the Directive deal with compliance
duties (…).
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11. The Italian Job
• Italy so far has:
• Unilaterally extended the scope of permanent establishment in 2018
including the hidden PE concept “A continuous economical presence of a non
resident business arranged in a way as not to match the physical presence
test”;
• Introduced a targeted digital service tax (Act n. 145 as on December 30th
2018), inspired by EU guidelines, lately changed as from January 1st 2019:
Italian Finance Act 2019);
• Implementing regulations still pending due to the uncertainties of the global scenario.
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12. Preliminary Findings
• Problem: cope with the necessity to abide by customary law (pacta
sunt servanda) and tax treaties … and the necessity to carve out a
broader tax base;
• Solution: Abuse of law Doctrine;
• Concern: specific remedy should not be used as a broad policy
instrument.
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13. Digital Services Tax
• Latest version still inspired by the European findings;
• Tax on Revenue on the Italian territory charged as a “third kind tax”
• As to prevent possible overlapping with VAT;
• As to avoid / prevent the application of a possible double taxation convention
(today, with the US, tomorrow with China).
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14. Who ?
• Companies / group of companies matching simultaneously two
conditions:
• Overall worldwide revenue of more than € 750.000.000;
• Revenue in Italy derived from the digital services of more than € 5.500.000;
• Time period: solar year.
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15. What ?
• Revenue arising from (§ 37):
• Advertisement, availability of an interface allowing people to connect with
each other, data sale and trading;
• Revenue excluded ( § 37 bis):
• Traditional direct ecommerce cases; traditional ecommerce when the
counterpart is not and intermediary;
• In real life: difference between “sold on Amazon” and “sold by Amazon”;
• Fintech services and financial services delivered on the net;
• …
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16. How Much ?
• 3% on the gross amount of revenues as they arise form Italy;
• The territorial link:
• IP of the client;
• Apportionment of the global revenue according to the specific service
delivered in the country;
• Huge uncertainties as to the proper calculation.
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17. Thanks for your Attention
marco.greggi@unife.it
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18. How did It come to an End ?
(The Netflix Case)
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19. Then …
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20. The End, for Real !
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