Digital Tax, Making Enterprises Pay Their 'Fair' Share?

22 Pages Posted: 8 May 2019 Last revised: 20 Jun 2019

See all articles by Venetia Argyropoulou

Venetia Argyropoulou

Tilburg University; European University of Cyprus Law School

Date Written: May 1, 2019


During the last 20 years, we have witnessed the digital transformation of the economy with the rise of digital giants, companies like Google, Facebook, Amazon, Netflix and Apple, whose business takes place online. Existing corporate taxation rules, however, have proven to be ineffective for the taxation of such businesses, as they do not take into account their particularities, including, inter alia, the absence of physical presence in the countries where their products are marketed online. Indicatively, the European Commission announced that on average digital companies pay an effective tax rate of just 9,5%, whilst traditional enterprises pay an effective rate of 23,2%.1 Currently, policy makers worldwide are looking into effective measures to adapt the corporate taxation into the digital economy and to achieve a “fair” and “just” tax system for same. In this regard, on September 21st, 2017, the European Commission released a Communication on ‘A Fair and Efficient Tax System in the European Union for the Digital Single Market’, which led to the proposition of two directives on the subject. The first proposal introduces rules for the establishment of an additional type of Permanent Establishment (PE) on the basis of a ‘significant digital presence’. The second proposal introduces an interim measure, to allow Member States to immediately tax revenues stemming from digital services that currently escape taxation. The present Article will explore the proposal introduced by the European Commission and critically analyse whether such proposals can in fact establish a fair tax system or whether they will lead to further discrimination and injustice. It is divided into three parts. In the first part I will explore the motives and underlying reasoning behind the European Commission’s initiatives and other initiatives in the field of taxation of digital enterprises taken by the OECD and other States and explore if such initiatives afford a more fair result. In the second part, I will analyse and critically review the EU proposals and attempt to respond on the question of whether in fact a fair tax system is achieved. On the third part, I will briefly examine the steps that need to be taken in the future.

Keywords: Digital Tax, Significant Digital Presence, Digital Service Tax, EU Fair and Efficient Tax System

JEL Classification: K34

Suggested Citation

Argyropoulou, Venetia, Digital Tax, Making Enterprises Pay Their 'Fair' Share? (May 1, 2019). TILEC Discussion Paper No. DP 2019-007, Available at SSRN: or

Venetia Argyropoulou (Contact Author)

Tilburg University ( email )

Warandelaan 2

European University of Cyprus Law School ( email )

6 Diogenes Street, Engomi
Nicosia, 1516

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