The Baltic nation wielded a veto over laws intended to modernise tax for the digital economy.
EU plans to digitalise invoicing for value-added tax, and make the likes of Airbnb and Uber register to pay the levy, were today (14 May) blocked by Estonia, at a meeting of finance ministers in Brussels.
The proposals – which could have pushed up the cost of online rental and ridesharing by as much as 25% – were first put forward in 2022, as part of a bid to ensure the sharing economy pays its fair share of tax.
But Estonia – home to taxi app Bolt – worries it would mean consumers face higher prices when they book services online.
“Our concerns still remain and cannot be overlooked,” Estonian finance minister Mart Võrklaev told his counterparts, adding: “This is not a tax on platforms, it’s a tax on SMEs [small and medium-sized enterprises] that provide their services on a platform.”
That was denied by EU tax commissioner Paolo Gentiloni, who said the plans ensured the “necessary flexibility” for SMEs by allowing national authorities to tailor their approach.
Vincent Van Peteghem, finance minister of Belgium who is currently chairing talks in the EU’s Council, said he still wanted to find agreement by the end of June – but wasn’t minded to give in to Estonian demands to make the plans optional.
“I’m determined to move forward to find a compromise that also reflects the position of the 26 other member states,” Van Peteghem said.
Võrklaev has previously told Euronews of his “serious concerns” with the plans, which he said would mean platforms can’t reclaim input taxes, and face unfair competition with direct sales.
Under EU tax rules, any one of the 27 member states can block new laws – and in this case, Estonia’s veto also puts the brake on a wider reform to the tax, modernising invoicing and reporting rules to fight fraud.
VAT, charged on the sale of goods and services, has been largely harmonised across the bloc for decades – but officials are worried online services are slipping through the net.
Lobbyists for the conventional hotel industry, who already charge VAT, say they face unfair competition from digital rivals – but Bolt argues that many small-scale taxi drivers aren’t liable for the tax anyway.
Brussels has been increasingly concerned that online giants – who may have little or no physical presence in the countries they operate in – may not be paying enough taxes.
Plans to impose an extra levy on online services such as advertising prompted a furious backlash from the US – and led to wider global reforms to corporate taxation.
At the same meeting, ministers unanimously agreed to new rules on withholding tax – the levy that’s taken off shareholder dividends.
Lengthy procedures mean cross-border investors can face double taxation, and loopholes can lead to scandals like Cum-Ex, in which traders fraudulently claim billions in repeated repayments.
