The Compatibility of the EU Digital Services Tax with EU and WTO Law: Requiem Aeternam Donate Nascenti Tributo

International Tax Studies 1-2019, IBFD

Posted: 14 Aug 2020

See all articles by João Félix Pinto Nogueira

João Félix Pinto Nogueira

International Bureau of Fiscal Documentation; University of Cape Town (UCT)

Multiple version iconThere are 2 versions of this paper

Date Written: February 18, 2019


This article aims to do a comprehensive analysis of the compatibility of the EU Commission's proposal on a Digital Services Tax with the European Union and WTO Law.

The DST aims to answer concerns expressed by many EU citizens that were further amplified by non-governmental organizations and the media. These concerns are grounded on the shared understanding that big multinationals bear lower taxes in comparison with smaller companies or individuals.

However, more recently, there was an association made between multinationals and digital giants. Somehow, the concern (and in some cases, anger) was focused on companies operating with digital business models. Suddenly, the problem is no longer the arbitrage to which only multinationals have access, but the systematic lower taxation of digital business models.

Instead of focusing on the digitalization of the economy and the challenges it brings to the tax system, national governments and international organizations have started to focus solely on the taxation of digital service companies.

In the author's view, the digitalization of the economy affects all economic agents and not only those primarily or fundamentally providing digital services. It also affects both corporate entities and individuals. It is applicable to all economic sectors and players. Moreover, digitalization is needed.

The discussion about the (tax) challenges brought by the digitalization of the economy should take into account not only the threats, but also the advantages of this phenomenon. The new landscape may lead to new forms of tax administration or even revisit the existing taxes.

In the author's view, the European Commission's proposal for a DST is compliant with WTO law. The same cannot be said regarding EU law. In fact, the proposal raises several issues concerning the adherence to the underlying goals required by its legal basis, as well as issues concerning proportionality and subsidiarity. Thus, even if adopted (something that is highly doubtful), there are sufficient grounds to challenge the legality of the proposal and its compatibility with the EU treaties.

Keywords: Taxation, Tax law, European taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24

Suggested Citation

Pinto Nogueira, João Félix, The Compatibility of the EU Digital Services Tax with EU and WTO Law: Requiem Aeternam Donate Nascenti Tributo (February 18, 2019). International Tax Studies 1-2019, IBFD , Available at SSRN:

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