When goods and services change hands by ones and zeros moving across borders, how are they to be taxed?
Our world is digitalized at a furious pace, and as more products and services become available over the web wherever you happen to be, more money moves across national borders. This leads to problems when it comes to taxation. EU is now appointing a high level expert group on taxation to develop a proposition on how these problems can be solved. Björn Westberg, professor of tax law at JIBS, is one of six experts in the group.
"Taxation is no longer a national issue", he says. "When goods and services are purchased digitally across borders much tax money is lost, both between EU member countries and to the world outside. A lot is going on in this area and it is an urgent mission."
The rules used for taxation of purchases between countries were made for physical goods and supplies. But if you are Swedish and sitting in Germany downloading an update to software that is manufactured in Spain - how do you pay taxes on your purchase?
"It's an exciting mission of the utmost importance" , says Björn Westberg who is getting ready for the first meeting in Brussels.
He says it is too early to predict what the outcome of the expert group will be, but that in any case it is likely that the EU member countries will approach each other’s tax policies .
The expert group's first meeting will be in Brussels on 12 December, and after that the group meets once a month. A proposition for how the EU tax policy in the digital area should be designed is due on 1 July 2014. The group consists of six experts of different nationalities and backgrounds, led by former Portuguese finance minister Vítor Gaspar .