The tax on determined digital services (IDSD) create barriers to market entry for small businesses and startups, as they are more expensive to access the services of digital platforms, and will have a negative impact on the well-being of Spanish consumers, particularly on low incomes. This follows from study Who will bear the Burden of DSTs?, presented in Madrid by Paul MacDonnell, Executive Director of the Global Digital Foundation, a platform for dialogue between policy makers, academics and other stakeholders, in support of policies for the digital society that have their raison d'être or justification in empirical data.
According to the report, which analyzes the economic effect of the tax on certain digital services in Europe and its consequences for consumers and small businesses, the 'Digital Rate' raised by the Government of Spain will affect a greater number of companies than initially planned ( digital platforms with certain types of services and certain income thresholds). There are many small businesses that are being created thanks to digital platforms and other Internet technologies, and that will be affected by the tax.
As MacDonnell has explained, the IDSD acts as a fee based on the use of consumer and citizen data. In this way, it is foreseeable that the cost will end up being borne by small businesses, freelancers, users – especially those with low incomes -, non-profit organizations or public bodies. All of them make up the fastest growing part of the digital economy, said the expert.
Lower productivity of the affected companies, lower competitiveness and lower economic growth at national and international level These are some of the long-term negative effects of IDSD. Consequently, the Digital Digital Rate ’will have a distorting effect on the market, creating unfair competitive advantages of certain companies over others, and will reduce the ability of the economy to generate labor and wealth.
Being the technological sector that contributes most to the creation of employment and wealth, and despite the fact that the European Union considers digital technology a lever for improving economic productivity, the creation of the IDSD will stop its use and development. Likewise, the tax approach, taxing income and not profits, contradicts the traditional principle of international taxation of taxing corporate profits.
Among the arguments put forward in favor of the IDSD is that digital companies are more likely to apply strategies to reduce the payment of taxes than those that are not. However, MacDonnell has pointed out that there is no evidence to support this claim. In fact, a comparison of the effective corporate tax rates (ECTR) of digital and non-digital companies confirms that the former use less strategies to avoid paying taxes. In this regard, it highlights that the ECTR in the technology sector is above 26%, comparable with the effective rates in sectors such as food or automobile, among others, and well above the banking sector, which places its ECTR below the twenty%.
For MacDonnell, "if digital platforms transfer the cost of IDSD to their customers and paying users, small businesses and lower incomes will be affected." He also commented that, in relation to digital platforms or the digital economy, "legislators are focusing on the negative features, rather than the positive ones." The result is that the negative side of digital platforms in society is exaggerated and there is a tendency to give less importance to the positive influence of digital and Internet platforms on the economy, such as the ease of dissemination and growth for small businesses and startups. "
For his part, Francisco Hortigüela, general director of AMETIC, has conveyed the employer's concern for the Digital Digital Rate ’, as “It will penalize the digital industry, the first sector that generates growth and employment. In addition, this tax will make Spain perceived as an uncertain and expensive place to do business, discouraging investment in new Spanish companies. ”
Hortigüela has also pointed out that “the IDSD approach focuses on the so-called‘ digital economy ’, contradicting the international consensus that it cannot be separated from the rest of the economy. It is important to remember that any new tax must be applied to all companies, without discriminating on the basis of the specific business model. ”