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BUDG European Parliament
Follow its sittingsApostolis Thomadakis
So the issue is not whether digital activities should be taxed, but also whether the digital taxation can contribute to the EU own resources. Moving to the second slide, I mean on the international now where we stand at the international level, I mean we go back to the starting point of the 2018 proposal by the Commission on the EU-wide DST, which didn't reach unanimity, also because at that time hoping about more of an international solution at this at that time. 2021 we have the OECD Pillar One agreement, which has not been ratified and also the discussions are paused.
In 2023 we have the United Nations multilateral convention on the tax issues. Discussions and negotiations are ongoing and will unfold also this year and next year. And of course this poses the main question that we don't have an effective international solution, so what the EU should do? Should move by itself or wait for these developments to mature? Now, moving at the next slide, I mean, as we said, there are several Member States that they have implemented something much closer to a DST.
There are of course many other Member States that they have and apply taxes on specific niche digital service actions.
What are the main lessons from these countries? The DSTs generate not only revenue that is increasing year after year and also on a constant basis, so a recurring tax revenues. Implementation has proven feasible. And also behavioral aspects that we were feared at the beginning, that how companies will react, will transfer part of their costs to consumers and so on, seems to be not as high as it was initially.
However, this implementation also shows that across member states we have differences, big differences in terms of scope, DSTs in terms of thresholds, tax rates, reporting requirements, and of course this creates the issue of fragmentation and also not forgetting the risks in terms of trade or geopolitical risk that we should take into account.
Now, at the next slide, I mean, if we put some numbers for these four countries, Austria, France, Italy, Spain, I mean, we can see that revenues have been doubled or even tripled in some cases. Of course, seeing that into perspective, I mean, we are talking about 0.8 to 1% of the national corporate income tax, so they are still small, but they are increasing on a significantly on an annual basis.
Now, at the next slide, I mean, what we try to do is to kind of see if we applied an EU-wide DST, what can be the potential revenue for the EU. We focus on the, I mean, at the briefing we present detailed results. Here we focus on 2026 and some forecasts for 2028 for different levels of DST, 3, 4 and 5%. Revenue at EU level can range between 20, 21, going even up to 43 billions if we talk about 2028 for a DST of 5%. Now, this represents about 5 to 6 or 7% of the corporate income tax.
And if we see it in terms of EU budget, yeah, can be anything between 10, 11 to 20%. However, I mean, these are forecasts and should be treated very cautiously.
I mean, potential or actual revenues can be even significantly lower than that. These are estimates and depending of course on which are the specific activities that we want to tax. Here we focus and we try to stay as close as possible to the impact assessment of the Commission in 2018. So we focus on digital advertising, digital media and services. We focus on the cloud computing space and also we focus on digital e-commerce, the business to customer B2C to consumer e-commerce.
Now, moving at the next slide, I mean, what are the potential benefits? DST could provide a new source, let's say, of EU revenue depending on how it will applied and what format it will have. Could reduce reliance on gross national income contributions, greater fiscal autonomy, improve the tax fairness and also reduce fragmentation.
But at the same time, there are risks that we should take into account, that the pass-through or how businesses will react or how they will change their business models in order to avoid this tax. The competitiveness concerns and innovative innovation concerns on whether it will be, let's say, disincentivize companies, innovative companies. Trade tensions should be considered, but also the legal, administrative implementation challenges and complexities that such a digital service tax can have. Now, at the next slide, we try to lay down now what could be the options, let's say, for the EU.
I mean, one option is to wait for OECD Pillar One discussions to start again. International consistency is the main advantage of this approach, however timing is a bit uncertain. The other approach is to wait for the UN convention, which has much broader international legitimacy, but again, duration or how it will unfold, what will be the outcome is not certain.
EU-wide DST, yes, can have revenues, again, depending on how it will be applied and coherence across the Member States, but trade political risks. Can also be a hybrid EU approach, a kind of a EU framework which evolves alongside international discussions at OECD, UN level, but again, although it is flexible and continuity, there is complexity of how this will be applied. Or to move to, let's say, the minimum solution, which is more coordination at national level for DSTs. The aim is to lower fragmentation, improve coordination among Member States, but also the EU revenue stream is not clear.
Now to the next slide, what are the policy considerations? So, I mean, the question is not whether digital activity should be taxed. Yes, it should, but the question is how the EU should react and how it should apply if it goes for that way of an EU DST.
We say that there are many more conditions, let's say, that should be met. An EU-wide DST should place or eliminate as much as possible fragmentation with a common framework, compatible also with the EU, but also more importantly with international discussions, treaties, WTO agreements and so on and so forth, to minimize the administrative burden for companies but also for tax authorities, limit competitiveness impacts and also the aim is of course to provide a constant, let's say, or stable and visible revenue stream. So, and I think this is the last slide and I'll conclude here. So the three main questions or three main points is that as international discussion negotiations remain uncertain, is a question of the EU how it wants to move forward. And of course here is a question of a trade-off.
And it's not only about how much revenues will be raised or not, but also whether these revenues will, let's say, go over and above the potential risks and challenges. The second is that as DSTs have shown in these Member States can be implemented, can generate revenues in a constant basis, in an increasing basis. And the third is that an EU-wide DST could be fiscally significant, but it would require a careful design in order to manage the challenges, the complexities, and also be specific on which services we want to tax, how we want to introduce it, we want to link it to EU own resources, yes, no, and how. So this is more the discussions of the mechanism.
Cristina Enache
Dear Chair Van Overtveldt and distinguished members of the Committee on Budgets. Thank you for the opportunity to discuss the taxation of digital activities in Europe and whether a digital levy could be a solution for the EU budget. I am Cristina Enache, economist at Tax Foundation Europe.
So, starting from the assumption that the EU requires additional own resources, the key question becomes whether a digital services tax is a principled option for funding the EU budget and if not, which path should be considered. First, I will begin by reviewing the existing national DSTs, international negotiations to remove them, and the EU-wide proposal for a DST. Second, I will evaluate the revenue generated by DSTs and their economic incidence. Third, I will analyze the design issues of the DST and the economic distortions they create as well as their implication for competitiveness, innovation, compliance costs, and the single market cohesion. Fourth, I will examine the international responses to trade-related consequences that countries at the EU may face when enforcing a DST.
Finally, I would explore alternative instruments such as value-added taxes-based resources as this is where Europe's fiscal strengths truly lies.
Let me begin with the context. Under the current international tax rules, multinationals generally pay corporate income taxes where production occurs, rather than where consumers or in the case of digital services, users are located. However, proponents of new digital taxes argue that firms can derive income from users abroad without a physical presence and they avoid corporate income taxation in those countries. To address these concerns, in 2013, the OECD started international discussions on how to tax digital activities.
In 2013, the OECD started international discussions on how to tax digital activities. In 2019, the OECD launched negotiations involving over 140 countries to reform the international tax rules. This process culminated in 2021 in the proposal known as Pillar One, which aims to relocate taxing rights so that some profits are taxed where consumers are located.
Despite these ongoing multilateral negotiations, several countries have decided to unilaterally move ahead with a different form of digital taxation, namely DSTs. However, the first proposed DST came from the European Commission in the form of an EU-wide DST. In March 2018, the European Commission proposed rules to tax companies with a significant digital presence alongside a temporary DST as an interim measure. The proposed DST would levy a 3% tax on revenues from digital advertising, online marketplaces, and user data sales within the EU. It only applied to firms with global revenue that exceed 750 million euros and EU revenues that exceed 50 million euros.
However, the proposals failed to gain unanimous support. As a result, individual countries moved forward on their own. Right now, roughly half of the European OECD countries have announced, proposed, and already implemented a DST. Can you move to the next slide, please? In fact, 10 countries, Austria, Denmark, France, Hungary, Italy, Poland, Portugal, Spain, Turkey, and also the UK, have implemented a DST.
That said, these taxes look very different from one country to another. For example, Austria and Hungary focus solely on online advertising revenue, with the stated goal of aligning the tax treatment of online and offline ads. Denmark has also taken a much narrower approach by only applying its DST to streaming services. France, on the other hand, has opted for a much broader tax base, covering revenues from digital platforms, targeted advertising, and even the sale of user data collected for advertising purposes. Tax rates vary quite a bit, ranging from 1.5% in Poland to 7.5% in Hungary and Turkey.
However, Hungary has reduced its rate to zero, and Turkey lowered its rate to 5% starting on January 1st, 2026. In theory, Pillar One would replace unilateral measures like DSTs, as reflected in the agreement with the US in 2021. But in practice, the negotiations have stalled and countries continue to act independently. At the same time, the UN introduced provisions like Article 12B of the UN Model Tax Convention for taxing income from automated digital services, applicable to countries that adopt them. In November 2024, it also launched negotiations for a new treaty on tax cooperation with the target of concluding talks by 2027.
But let's now turn to the first key issue: revenue. Can you move to the next slide? The next one. The next one. Okay, thank you.
Despite the political attention they receive—the previous one, I'm sorry. Yes. Despite the political attention they receive, DSTs generate very limited income.
In countries that have implemented them, revenues range from 133 million euros in Austria to around 1 billion euros in the UK. As a share of total government revenue, they are typically below 0.1% and even in the highest case, Turkey, they reach only about 0.24%. At the EU level, the European Commission has estimated that the DST could raise up to 5 billion annually. Put this into perspective. This represents roughly 0.07% of total tax revenues in the EU and about 2.6% of the EU budget.
A negligible contribution relative to the EU overall financing needs. In short, if the objective is to fund the EU budget in a meaningful way, DSTs simply do not deliver.
The second issue is even more important. Who ultimately bears the burden of these taxes? Although DSTs are often presented as targeting large digital companies, the economic reality is different. DSTs are levied on gross revenues, not profits, making them similar to excise taxes. And like excise taxes, they are largely passed on to consumers.
In this sense, DST are to imported services what tariffs are to imported goods. And the economic incidence ultimately falls on consumers.
This is clear evidence of this. Companies such as Google, Amazon, Apple have introduced surcharges in response to DSTs, passing the cost on through higher advertising fees, increased marketplace charges, and ultimately higher consumer prices. Academic research confirms that most of the burden falls on the European consumers and businesses, rather than on shareholders of large firms. This has key two key implications. First, DST are regressive, disproportionately affecting lower-income consumers.
Second, they place the added burden on European businesses, particularly small firms that rely on digital platforms. As a result, instead of effectively targeting foreign tech giants, DSTs often end up harming domestic economies. DSTs also face significant design flaws. Because they are levied on revenue rather than profit, they apply even when companies are not profitable and can result in very high effective tax rates, especially for low-margin businesses. Can you move to the previous slide?
For example, a company with 100 euros in revenue and 15 in profit faces a 3% DST, that is 3 euros in tax, which translates into a 20% tax on profits. If the profit margin is lower, the effective tax rate rises dramatically, up to 60% or more. In general, marketplace platforms tend to operate with margins well below 15%, which results in effective tax rates well above 20%. That's 30% or up to 60%. This creates significant distortions.
It penalizes large-margin firms, discourages investment and growth, and distorts business decisions. In addition, DST can lead to tax pyramiding as the same activity may be taxed multiple times along the supply chain due to the absence of a credit mechanism like used in the VAT.
They also apply to business inputs such as advertising and cloud services. Due to this tax pyramiding, DSTs penalizes the specialization needed to make the economy more productive. DST can be discriminatory as well, targeting large firms through revenue thresholds and treating digital businesses less favorably than traditional ones. Finally, they impose substantial administrative burdens. Governments must design and enforce complex rules while companies are required to track user location and comply with multiple national systems.
Because VAT, DST varies widely in design and administration, businesses face high compliance costs when navigating these differences. Historically, Europe replaced turnover taxes like VAT in 1960s to improve the functioning of the single market. By reintroducing similar features, DSTs risk bring back the economic inefficiencies of turnover taxes, as a step backward in sound tax policy. All of these makes DSTs inefficient, complex and economically harmful. So if DSTs are not the answer, what is?
The most promising alternative is already in place: VAT. If the goal is to raise more revenue from digital services, the EU should build on VAT by continuing to tax these services at the point of consumption. VAT has already been adapted to the digital economy, requiring non-EU firms to register and pay where consumers are located. This approach has proven highly effective.
Revenues grew from 3 billion in 2015 to over 33 billion in 2024, around seven times the estimated yield of a new EU DST. Expanded VAT to fully cover digital service could therefore replace the need for DST altogether. In other words, the EU already has a tool that works and performs far better than DST. If the aim is to increase EU budget resources, the focus should not be on creating new own resources, but on encouraging member states to improve the VAT collection by broadening the tax base, especially by eliminating exemptions and reduced rates. Currently, VAT-based resources account only for 9.5% of the EU total revenue, down from 60% in 1988.
This decline reflects reforms to the own resources system that reduced the VAT base and the applicable rate.
There is significant untapped potential. Estimates suggest that broadening the VAT base by eliminating reduced rates and exemptions could generate up to 773 billion in euros in additional national revenue. Even a small share of this would exceed what DST could deliver.
Since each member state VAT revenue determines the base for the EU own resources, this 773 billion euros could translate into roughly 2.3 billion euros for the EU budget, above the lower estimate of 1.3 billion for a EU-wide DST. Additionally, if the VAT base cap is not binding, raising the call rate from 0.3% to 1% could generate an additional 7.7 billion euros in stable funding, without the economic distortions and trade tensions associated with DST. DSTs address a real concern, but the need to adapt taxation to the digital economy, but they are not the right solution.
They raise limited revenue, are often passed on to consumers rather than large digital firms, create economic distortions, increase complexity and compliance costs, negatively impact innovation and competitiveness, and risk international retaliations. By contrast, VAT is already suited for digital age, generates significantly more revenue, and is more efficient, neutral, and stable. Rather than focus on strengthening and modernizing VAT, as in all public policy, tax design should aim to raise revenue efficiently, fairly, and with minimal economic harm. And DST fall short on all three accounts. Thank you very much.
Johan Van Overtveldt
Thank you both of you. I now pass the floor to the two co-rapporteurs on own resources first, Ms. Neyrodova, please.
Danuše Nerudová
Thank you very much, thank you all the speakers on this panel. As you know, the Cyprus presidency presented a negobox including the first budgetary figures and as we expected, it leaves the issue of own resources largely unsolved.
Last week, leaders discussed MFF as well, but there was no breakthrough on resources, and we expect that there will be a huge push on the discussion in the second half of the year under Irish presidency. That's why exactly our work matters, and as co-rapporteurs, we must continue building the technical case now so that when the political window opens, Parliament's position is well-prepared and supported by solid evidence. Let me ask some questions on the first speaker. I have read your paper, and on page 11, you are talking about the threat of tax pass-through in connection with the consumers as well as in connection with SMEs.
So my question is whether you could elaborate how to avoid this effect. Secondly, if you could talk about what should be the scope of the digital levy.
I know that in your paper there have been some products or services which are covered in the estimations, but what should be the scope of digital levy according to your opinion? And to the second speaker, if I understood correctly, you are suggesting as a solution that we should abolish VAT exemptions and VAT reduced tax rates, like reduced VAT on medicals, reduced VAT on children or food, and to increase it. We are the politicians. Do you think that we can go back to our cities and to talk to our people that consumers are going to pay this?
And my question is, in the second slide, how would this graph look like if GAFA would be covered into this study? Because there are many studies talking about the fact that effective tax rate on GAFA in Europe is in between 9% to 20%. So this is my question. Is, are you really suggesting that we should increase VAT and to exempt all the digital sector from taxation in the European Union? Thank you.
Sandra Gómez López
Thank you, Chair. I'm going to speak in Spanish for the...
Bien, pues en primer lugar agradecer a los ponentes su exposición. ¿Se escucha? Su exposición para para esta comisión y especialmente para mi compañero y para mí es muy importante este workshop, ya que hemos introducido, como bien saben, en la propuesta del Parlamento la tasa digital como un nuevo recurso propio junto con las criptomonedas y el juego online, pero la realidad es que este recurso es el que mejor estructurado está, ya que funciona en diferentes países. Sí. Nosotros vemos una oportunidad además de armonización fiscal, porque una de las principales problemas que tiene la Unión precisamente es la fragmentación.
Y por eso entendemos que además viendo los umbrales de recaudación sería realmente interesante la oportunidad de introducir este este recurso. Y ahí quiero empezar con la primera de mis preguntas, ¿no? Porque el primer ponente ha puesto un umbral muy amplio de recaudación y le quería hacer una pregunta muy concreta porque he visto que podría llegar hasta el 20% del total del presupuesto europeo. No sé si es que yo lo he entendido bien o mal porque desde luego estaríamos hablando de una importante cantidad y por lo tanto si nos puede explicar con mayor detalle cómo llega a esa cifra.
Si no cree que también dado eso podríamos excluir a las pymes, se podría hacer un umbral dependiendo el volumen de facturación y qué estructura en concreto nos podría proponer. También cuando proponemos este recurso propio la Comisión nos responde que ya está cubierto con el CORE y si nos puede dar argumentos o si piensan que realmente se podría introducir la tasa digital en ese recurso que ha propuesto la Comisión.
También al primer ponente ha dicho que bueno, que desde su punto de vista considera que la cuestión sobre si hay que tasar las actividades digitales ya ha trascendido y creo que he entendido que lo ve como un tema que sí o sí habría que predeterminar o que habría que, perdona, que aprobar. Mi pregunta es si conoce la posición precisamente del Consejo y si sabe que este tema sigue siendo un gran debate y si nos puede dar desde su punto de vista pistas políticas, ¿no?, de cómo afrontar esto y por lo tanto cuál debería ser nuestra orientación política para conseguir que el Consejo pudiera aprobarlo. Respecto a la segunda ponente y en línea con lo que ha dicho precisamente mi compañera, me ha llamado especialmente la atención que haya dicho que bueno, que la tasa digital va a tener como principal consecuencia que los consumidores al final, los que contratan los servicios de publicidad van a acabar asumiendo esa tasa. Con esa misma lógica podríamos hablar de cualquier impuesto, de cualquier tasa.
De hecho, con esa misma lógica deberíamos de eliminar la directiva sobre el IVA, el impuesto al consumo, ya que efectivamente podríamos decir que las empresas iban a repercutir ese precio a los consumidores. Y eso es absolutamente contradictorio con lo que ha dicho, porque como alternativa a mejorar nuestro presupuesto nos invita a aumentar los recursos que ya están funcionando. Por lo tanto, creo que es una lógica absolutamente contraria que nos gustaría que nos explicara. Y para finalizar, ¿por qué cree que si se aprobara la tasa digital se iba a dañar a la estructura de recursos propios? Ha utilizado, si no he entendido mal en la traducción, que si se aprueba una tasa digital dañaríamos lo que ya tenemos.
Sinceramente no lo he entendido y si lo puede explicar en más detalle.
Thank you.
Fabienne Keller
Merci beaucoup Monsieur le Président. Je voudrais remercier les deux orateurs. Pardon, je m'exprime en français. Je voudrais remercier les deux orateurs pour leur présentation, même si comme pour mes collègues, j'ai relevé que voilà, l'angle n'était pas du tout le même. Donc je vais m'adresser séparément.
Peut-être pour Madame Christina Ennar, je suis frappé effectivement, comme cela vient d'être dit à l'instant, par votre présentation qui en fait s'écarte de la digital tax pour nous en proposer une autre. Donc c'est pas tout à fait ce qu'on avait demandé. Et pour nous présenter des graphes qui en français, on dirait, sont un peu une tautologie. Le fait qu'une taxe qui s'appuie sur des éléments fixes impacte d'autant plus l'entreprise que son niveau de profit est faible, bah ouais, c'est comme ça. C'est toujours comme ça.
C'est une évidence, donc je suis un peu étonné que vous nous présentiez cela dans le cadre d'une d'une attente d'expertise assez précise sur l'impact d'une taxe digitale dont vous avez bien compris que l'enjeu c'est le financement de l'Union européenne. Donc peut-être pourriez-vous nous donner une réponse sur la la question qui me semblait centrale, c'est comment cette taxe pourrait-elle être améliorée, travaillée pour remplir l'objectif d'être une taxe supplé- un revenu supplémentaire, évidemment sans pénaliser les entreprises et l'économie réelle.
C'est une évidence.
À Monsieur Apostolos Thomadakis, je voudrais le remercier pour sa présentation. Je voudrais dire que vous avez très bien retracé à travers vos tableaux l'histoire de la taxe sur les revenus des activités digitales, que pour nous, politiciens, c'est, si mes collègues acceptent d'être inclus, c'est un secteur assez surprenant puisque toutes les activités économiques, quelles qu'elles soient, participent au financement des biens publics, les écoles, les hôpitaux, les routes, sauf le secteur digital.
Donc c'est pour cela que nous souhaitons trouver une bonne contribution qui soit juste, qui soit fair, et l'historique est particulièrement impressionnant. Et donc ma première question ce serait comment la création d'une taxe au niveau de l'Union européenne pourrait peut-être redéclencher une dynamique au niveau de l'OCDE ou au niveau des Nations Unies. On se souvient que l'OCDE c'était post-COVID, que tout le monde avait besoin de ressources pour payer, enfin les pays de l'OCDE pour payer leurs plans de relance aux États-Unis, en Europe notamment, et donc ça a largement porté la démarche de l'OCDE.
Donc comment est-ce que nous à notre tour on pourrait être moteur ? Et deuxième question pour vous Monsieur Tomadaki, on est très heureux de l'importance des chiffres que vous nous présentez, jusqu'à 20 % du budget comme cela vient d'être dit, c'est super. Mais ça fait un grand écart quand même avec les simulations de la Commission qui nous a dit plutôt 5 milliards. Alors est-ce que c'est lié à la base qui est pas tout à fait la même ?
Hein, vous parliez des activités assujetties ou pas, cloud computing, digital e-commerce, targeted advertising. Est-ce que c'est ça l'explication ou est-ce que c'est parce qu'on est dans des fourchettes que forcément, voilà, on ne peut pas savoir de manière comptable, hein ? On est dans une évaluation. En tout cas, je voudrais vous remercier pour votre présentation qui est une source d'espoir et de, voilà, de travail aussi pour de base de travail pour voir ce qu'on pourrait amener, enfin les conclusions qu'on pourrait en tirer qui pourraient nous permettre d'avancer dans le cadre très concret de 2028-2034 où il nous faut bien avancer sur les ressources propres. Tous les collègues en y sont favorables et on a mis dans le rapport intermédiaire, voilà.
Je vous remercie.
Rasmus Andresen
Well, two remarks for the start. First of all, I have to excuse myself, I had to present a report in ECON at the same time, that's why I missed most of the presentations.
And secondly, I like the energy. So maybe it's also good to have a bit different opinions here because I can feel there is a lot of energy coming with from different speakers and colleagues. That's great. My questions basically also goes on the on the design of the different proposals. I think that I mean this issue is also a lot about fairness and also political willingness in moving ahead.
And this is something we need to take into account as politicians and where I also think we have an issue with the member states and with the Commission not really being able to to present some some proposals there, maybe because they are afraid of some geopolitical elements of this.
But this is more like the political part of it. The more technical part for me is on the design question. And also my question goes basically on what Fabienne also already asked a bit about if I got you right. There are many different calculations when it comes to the different proposals. And that's what I also would like to hear a little bit more about on what's the right balance and how to deal also with some of the experiences some member states made in the past when it comes to the digital services tax.
And secondly on BEFIT and the elements we can see in the proposal, which is quite unpopular both here in the house I think but also within the Council.
But do you think there are ways to readdress or redesign BEFIT in a way that it covers really big companies and the digital part of that will be included as well? Because if we really would like to go for a proposal and we really want to do a difference compared to like the debate we had in the past, then I think we need to find smart ways on how to deal with that, also to avoid some of the old blockade we could see in the past when it comes to this issue.
Jussi Saramo
Thank you, Mr. Chair. I have to excuse myself, I was in the same file as Rasmus on the ECON committee, so I didn't hear. I'm sorry if I ask something that was already mentioned, but very shortly, since we know that OECD pillar one is dead and the pillar two is wounded by the side-by-side system of the United States. And we know that Europe, United, I mean the EU and EU countries, they are doing nothing in the UN tax convention, just waiting it to not work. So I'm not seeing what is our plan and what should we, I think we should work in the UN tax convention.
It doesn't look like the member states are doing it.
So, since we have this huge deficit on services to United States, and especially to digital services, there is no level playing field for European companies. And my question is that if we are not using the digital levy, some kind of a DST, how we would make this competition fair and how we would make not just for the companies, but also for the EU compared to United States? Thank you.
Johan Van Overtveldt
Thank you. I now pass the floor to Ms. Kinga Gál from ECON FISC, please.
Kinga Kollár
Thank you, thank you.
So, you just said a few words already about this, but let me continue there. So, it seems that there are some reasons, some case for a digital levy based on economic reasoning because of course there's some cross-border element in the sense that companies do earn profits on other markets where they are present. And also big digital companies usually have a very high economies of scale and because of that they are highly profitable. And actually it comes also from their market position. Let's not forget about that.
I think sometimes we forget why they are able to actually put prices that high that is making them very profitable.
But I think we have to look at this in the geopolitical context as just said. Obviously if we put DSTs then then we open up to a trade war. I mean there's the one of the experts explained about Hungary. I think that I believe I mean I wasn't there but I believe that it it also had to do something with with some pressures that they had to bring down the basically reduce the the rate to zero percent. So I think we just need to understand the the US has has a very strong economic power.
And if we put the DSTs then our companies will actually pay in in tariffs at the end.
So any realistic or let's say optimal solution would be at an international level. And but as just said the OECD pillar one solution is basically dead. The UN framework there is some movement there. But I think even there we we have to think very rationally there because any solution under the UN framework or actually any solution on a global level also means that our companies will have to pay this to other countries. Yeah.
Already in the scope of the pillar one, 17% of the companies would have been EU companies that would have had to pay this tax. Now if it's constructed on a wider base, which is very possibly the UN would go, then even more EU companies would be in the scope of it. So it would look like, you know, we get some money, but actually our companies would be paying a lot, maybe even more, outside of the EU.
So I think that's really we have to think in our own interest first of all. So all in all, I think the question is of course the impossible, you know, how do you do it, how do you design any any levy in a way that it doesn't bring a trade war and doesn't harm our companies and thirdly doesn't harm our consumers, because the expert just said and I think she said very rightly that there is evidence that that any any such tax levies would be actually passed on to the to the consumers as well. So I don't know whether it is possible at all, but I'm curious to hear. Thank you.
Jean-Marc Germain
Merci Monsieur le Président. Moi aussi j'ai pas trouvé que la deuxième contribution ait été très utile, pardon pour ce commentaire un peu sec, parce qu'au fond elle nous explique que la question n'est pas la bonne et nous propose une réponse qui n'est pas praticable. Mais je voudrais plutôt poser deux questions relatives à la première présentation.
La première, c'est comment si on devait mettre en place une taxe sur les services digitaux de 3 % par exemple, comment ça se passerait pour les pays qui ont déjà une taxe sur les services digitaux ? Est-ce que l'idée c'est que ce soit une taxe additionnelle de telle sorte que le total fasse 3 % ou alors que pour ces pays, ça se substitue à la taxe nationale qui serait de facto supprimée et du coup avec une perte de ressources pour les budgets nationaux ? La deuxième question, c'est que nous avons entendu des positions un peu divergentes sur qui paie réellement cette taxe.
Ça a été évoqué par tous, mais dans la première présentation, il nous a été dit que seule une part était payée par les consommateurs et qu'une autre partie allait être payée par les fournisseurs d'accès, tandis que dans la deuxième présentation, c'était un peu d'ailleurs une déclaration de principe qui n'était pas fondée sur des études, mais sur le fait que toute taxe portant sur la consommation est toujours payée par le consommateur, ce qui est d'ailleurs faux. Ça dépend de ce que sont les déterminants économiques du prix. S'il y a une capacité à payer qui est donnée, à ce moment-là, compte tenu du fait que ces grands groupes font des profits gigantesques, alors ils n'auront pas de difficulté à payer cette taxe-là.
Donc je voudrais peut-être que vous nous précisiez un peu l'un et l'autre votre pensée sur qui paierait cette taxe précisément. Et puis troisième question, mais ça relaye d'autres questions qui ont été posées, il y a une sous-taxation du secteur. Et donc quelle serait une possibilité alternative qui taxerait les fournisseurs de services, les GAFAM ?
Est-ce qu'une taxe par exemple sur les importations de services digitaux est envisageable en mettant évidemment à part la question géopolitique d'éventuelles rétorsions qui pourraient avoir lieu des États-Unis ou de la Chine ? Merci.
João Oliveira
Obrigado, presidente. Eu o ponto de partida para as perguntas que quero fazer é o da discordância da criação de impostos europeus, não apenas pelo conflito que isso significa com a soberania de cada Estado em matéria de política fiscal, mas por três outras razões que me parecem particularmente importantes sublinhar nesta discussão. Primeiro, a desconsideração ou desadequação da da política fiscal e dos da estrutura dos impostos em relação às especificidades de cada economia nacional e do próprio perfil produtivo de cada país.
Em segundo lugar, a distorção da natureza distributiva do orçamento da União Europeia com a substituição das contribuições nacionais por recursos próprios ou com o seu esbatimento em relação ao financiamento do orçamento. E em terceiro lugar, pela falta de compensação dos impactos negativos sobre os consumidores, mas também sobre as PME, sobre as pequenas e médias empresas que estas soluções podem ter. E a primeira pergunta que quero fazer é precisamente a da solução que me parece que é mais adequada.
Está esgotada a possibilidade de articulação e de cooperação em matéria fiscal e tributária entre os Estados-Membros de forma a poder aproveitar todo o potencial de tributação em relação ao setor digital ou não? Porque estando esgotada essa capacidade de articulação não há grande alternativa, não estando esgotada essa capacidade de articulação parece-me que esse devia ser o caminho prioritário. Muito brevemente queria apenas colocar duas ou três questões concretas. Aquilo que nos sinalizam como fragmentação é na verdade uma expressão que cada país encontrou de ter um imposto o mais adequado possível à sua realidade nacional. Disseram-nos aqui que há diferentes regimes na definição da base de incidência do imposto, na estrutura do imposto, no montante da taxa, na forma como este imposto se articula com outros impostos que podem incidir sobre a mesma base.
Se há essa diferença de regimes, como é que se uniformiza? Qual é o critério que se utiliza para se encontrar uma uniformização? E como é que essa uniformização não conduz a soluções cegas relativamente à especificidade de cada país e de cada economia? E em segundo lugar, como é que se consegue prevenir, e concluo, como é que se consegue prevenir que o imposto seja repercutido sobre os consumidores ou que tenha um efeito regressivo em relação às pequenas e médias empresas quando comparado com as grandes empresas?
Johan Van Overtveldt
Thank you. We go back to our visitors, our guests, first of all Mr. Tomadakis, please.
Apostolis Thomadakis
Yeah, thank you very much for the questions. I'm not going to go one by one, but also some questions can be grouped and answered in the same way. I mean, first it's important to distinguish between EU-wide DST with revenues remain national, and this is not what we are discussing here. And the other option is the EU-wide DST linked to or be part of the EU own resource.
And then, of course, if you go for that option, then the discussion is how you distribute the revenues. Is that 100% of the revenues from EU-wide DST from the member state, they go to the EU budget? Is it based on some pillar one, let's say, proposal based on the Commission's work on how the allocation between the member states and the EU budget? Do you consider a fixed rate of 50% of the revenues by EU-wide DST raised by a certain member state go to the EU budget? So then you enter the discussion on how the split should be done.
And there are, yeah, there are options for that.
Now, on how to avoid, let's say, the situation of passing the, the costs, let's say, to consumers or SMEs. I mean, now in the figures that I presented, we focus on four digital services activities: the digital advertising, the digital media and streamlining services, the digital e-commerce B2C, and the cloud computing services. In the detailed figures at the briefing, you can see that about 60 or even 70% of that revenue comes from digital e-commerce B2C.
Now, again, there are different ways in how to consider that. This means that what we are capturing is the total turnover B2C, meaning that when a customer goes to a digital platform and buys a product of 100 euros, we consider the full 100 euros value. To eliminate the cost, to eliminate the burden of the pass-through, you can focus more specifically on the commissions and the charges and the fees that digital platforms charge. So, for a 100 euro product, for example, you can only tax the 12, 10, 15 euros, depending on how much is the commission and the fee that each digital platform charges.
And this varies a lot. You have, for example, eBay or other ones that charge anything between 5, 10 to 15 or 20, 30% as commissions. So of course, if you want to be a bit more focused and make sure that the burden is less, let's say, passed to consumer, you may want to focus only on marketplace commissions, platform fees, and intermediation revenues. Now, how to eliminate that SMEs also, let's say, pay a lot of the bill?
How to exclude SMEs users from the tax base, for example? We are talking also, we're focusing on companies with the revenues 570 million, turnover above 750 million and revenues 50 million. You can also increase the revenues if you want and these thresholds in order to capture less companies. Now, other ways will be to exempt SME users from SME users firms from the tax base. You can exempt small merchants.
You can also provide credits, tax credits or other let's say incentives, other benefits to SMEs for using digital platforms. You can also pass part of the potential revenues generated as a relief to SMEs afterwards. I don't know, it can be many different options on how to do that. And now on whether this discussion at the EU moving forward will help or you know push a bit the discussions at pillar one international level, this can be an option. But the question is not what internationally discussions and how they should evolve.
We should think about what we should do and what we are losing, what are the benefits, what are the trade-offs. Are the revenues significant enough to trade off and outweigh the risks and challenges? So these are the important questions that we need to ask. Now on the Council and what is the Council's position, I don't have a view on that. Probably you have a better view than me.
But again, I mean, it's important to make sure that because also on the VAT and to broaden the VAT basis and how we can make sure if we broaden the VAT basis that the consumer and the customer, the end customer will also not foot the bill and take the largest part on it. So there are different alternative options, different ways to tax digital services. As also Christina mentioned, there are countries that they focus on very niche actions of the digital market, or we go to a much broader basis. So that's also options that we need to consider. I'll stop here.
Thank you.
Cristina Enache
Thank you very much for all the questions. I can resume a couple of answers. So first of all, I think we are trying to mislead the European consumers that are not paying the bill of the digital giants.
And we are concerned about VAT being passed to consumers and that they are also paying the bill. The same comes with DST. The difference between DST and VAT is that VAT is well-designed compared to digital services taxes. VAT doesn't end up to tax pyramiding as DSTs do. So that's why VAT is a better option than DSTs regarding to this.
And if the European leaders accept that the US tariffs are ultimately burdened by US consumers, they should also acknowledge that DSTs are largely borne by the European consumers, often disproportionately affecting the low-income households. I've heard a lot of solutions about how to tax, so not to tax the revenue but only the commissions, exclude the small and medium enterprises. The solution is VAT because the commissions are included in the value-added tax, in the value-added that that service is being provided.
So if you are taxing value added tax to that, that's the solution. If you want to exclude small and medium companies, these are the that are most benefiting from large platforms, because they don't have access to advertising services that are so cheap that they can receive from these big platforms, and they can use these big platforms in order to grow the economy. Second, third issue, regarding the revenue. We've seen that the country with the largest, broadest DST is collecting 0.07%. That's France, of its total revenue.
0.6%, 0.06%.
The estimates for the EU is 0.7, so it's even higher than that. And this is only 2.6% of the EU budget. So no matter how much you try to broaden the VAT tax base, it's not going to reach 0.2% of the EU budget.
And regarding to the proposal of broadening the VAT tax base, I have a couple of slides regarding how the VAT, the actual compliance gap, differs across the European countries. So at the EU level, the average actual policy gap is around 27%, but this varies largely across the European countries and it goes from 37% in Spain to 15% in Lithuania. And if you look at the rate gap, which is the difference in the reduced rates, you see that that's 12% and most of it, 4.7%, is through that comes from reduced rates on food and agriculture goods.
But if you are going to increase that rate, what you can do is compensate specifically those consumers with low income earners. And that would be the solution in order to increase the VAT rates because the people that earn more money, they also consume more. So they spend more on VAT and reduced goods. Also, if you look at the books, theater, I don't know, hospitality services, high earners are the one that are benefiting the most from those reduced rates.
So if you want to compensate low-income earners, then you'll have to subsidize them, give them a direct transfer in order to do that, to eliminate the reduced rates and the exemptions.
Johan Van Overtveldt
Thank you. Still a lot to be discussed, I think. But let's move, I thank the two authors for their contribution and of course the MEPs for the discussion. We move to the second panel on international perspectives on digital taxation, and I invite Ms. Amaro, sorry, Amaro, to take the floor, please.
Faith Amaro
Thank you, Chair, and good afternoon to you all. I will discuss the impact of digitalization on cross-border services and the resulting tax implications.
My briefing note was co-authored with Emeritus Professor Sol Picciotto whose scholarship has left an indelible mark on the international tax landscape. Since 2024 we have carefully examined the BATIS dataset which is the Balanced Trade in Services as well as the International Trade in Services datasets really to understand the nature and the scope of cross-border services categories. These are the only comprehensive source of bilateral cross-border services data and they cover 204 economies. So moving on to the next slide. The starting point is that services are not a distinct economic sector.
They constitute a broad range of inherently intangible activities. Digitalization must be seen as transforming the whole economy. It has removed the need for physical contact, and it has sharply accelerated the growth of cross-border services. At least 63% of the EU cross-border services are now digitally deliverable, and this undermines international tax rules based on place of performance. We will look at these distinct categories on the next slide.
If the EU 2018 digital levy—no, we'll come back to it.
Let's go to that, yes. So if the 2018 digital levy targeting services characterized by user value creation, so these are three categories, adverts, platforms and users was adopted, as you'll see on this slide, it would cover some 10% of EU cross-border services and at the 3% proposed rate would generate an estimate of 7 billion annually. This is slightly higher than the Commission's simulations as it's not adjusted for the country-specific thresholds.
If this was extended to a broader DST scope, including streaming as well as computing services like web-based hosting, it could generate up to 13 billion annually. Now, a broader DST applied to all automated digital services could quadruple the revenues, generating nearly 32 billion for EU member states annually and covering some 39% of cross-border services. This can be justified by the substantial profits from accessing large markets at low marginal cost through AI-driven cloud-based services. There's been a discussion in the room about retaliation. A tax with a broader scope would likely have a less discriminatory effect among the foreign services suppliers.
So going on to the next slide. Yes. So using the BaTIS and the ITCS datasets, we classified the 2023 cross-border services in four broad categories. For this discussion, I will only highlight the EU estimates, which would be the second line, the first one is the global position. The first category of services are those that are not digitally deliverable, i.e. they require some physical presence.
These amount to 37% in the EU and they include international transportation, construction, manufacturing, and a broad range of others.
This means that 63% of EU cross-border services imports are now digitally deliverable. Of these, 24% require some human input, including technical, managerial, research and development, consulting, and professional services. The residue 39% can now be produced and supplied automatically, without any direct human input. These are defined as automated digital services, or ADS, and are generally characterized by a high degree of standardization.
So ADS outside the scope of DSTs are estimated at 14% in the EU and they would include financial services, insurance, pensions, computer licenses, telecommunication services, etc. ADS within the scope of a wide DST extend to adverts, platforms, users, but also services like streaming and computing services. We estimate that these would cover 19% of all cross-border services. If we drill this further to the scope within the 2018 digital levy proposal, which is limited to adverts, platforms and users, we estimate that this would cover 10% of EU cross-border services.
Speaker 22
Ms. Amaro, you speak a little bit too fast for the translators to be able to follow. So slow down a little bit.
Faith Amaro
Oh, sorry, I'll calm down. Yeah. Okay. So finally, charges for the use of intellectual property rights.
These are also ADS and they amount to 6% of EU cross-border services payments. They are categorized under treaties as royalties and they may be taxable at source. So if we go to the next slide.
Using the same BATTIS dataset, we estimated the likely DST revenue outcome in France, Italy, Spain and Austria before adjusting for the country-specific thresholds, and we found that these values were broadly comparable with the published data on actual revenues realized. So using this methodology, we then computed three sets of DST revenue estimates for the 27 EU member states. So beginning with the 2018 digital levy scope, it could generate up to 7 billion annually at the 3% rate. If we extend this to a broader DST scope, it could generate up to 13 billion annually. And if we broad it even further to all ADS, it would generate nearly 32 billion annually.
So we'll go on to the next slide.
I will now turn your attention to some of the resulting tax considerations. So the difficulty in taxing income earned by non-residents is faced on both the direct and the indirect tax fronts. So DSTs, and has been highlighted by my colleagues, has been regarded as a transaction tax on imports. So if we look at the indirect side, although technically taxed on the seller, they are collected from the importing buyer on a gross payment basis. So they function economically as a tariff.
Under the WTO global declaration on e-commerce, members would continue their current practice of not imposing customs duties on electronic transmissions.
So both the work program and the moratorium on customs duties have lapsed. They, I think it lapsed in March this year, and negotiations are underway to extend it to 2030. There is also a wider issue of compatibility of DSTs with the WTO's General Agreement on Trade in Services. This must be very carefully examined to determine whether it's discriminatory under the national treatment or most favored nation principles.
Significant progress has also been made in reforming international coordination of indirect taxes, which led to the 2016 VAT DST guidelines. These apply the destination principle so that tax is levied in the country of final consumption. So looking at the direct side then of taxation, these would apply to the cross-border income or profits based on sales after adjusting for expenses, coordinated through bilateral treaties. Active income is taxed where activities take place, that is a fixed base or a PE, and as I highlighted earlier, the impact of digitalization has undermined the place of performance requirement for services.
So the compatibility of DSTs with tax treaties is a bit unclear because they apply to gross revenues and not net income. Arguably, they can be said to be outside the scope of tax treaties, which only apply to income and capital, except for the non-discrimination clause.
So I will now go to the next slide and I'm wrapping up now. I will comment briefly on some new approaches aimed at rebalancing these taxing rights, because DSTs are really only an interim measure. A lasting solution requires aligning taxation with the realities of the digital economy, where services are increasingly being delivered remotely and generated with minimum marginal cost. So again, it has been spoken about in terms of the design of Pillar One, which fundamentally redefined the allocation of taxing rights by treating MNEs as unitary enterprises. It included a detailed methodology, specific sourcing rules, but was very limited in scope.
A number of countries have adopted or proposed alternatives to DSTs, which are characterized as taxes on income rather than transactions.
These include new criteria for taxable presence based on the concept of significant economic presence. Some of these regimes cover very highly digitalized services with thresholds, others potentially cover all services. However, significant economic presence is subject to tax treaties and so cannot apply to entities resident in a treaty partner. And my final slide will just speak to the UN Framework Convention, and the next speaker will broaden this, but what I want to highlight is that the stalling of Pillar One greatly contributed to the political momentum that led to the launch of the Framework Convention. And a comment has been made already about the role of the EU in this.
So there has been a wide, wide support for a withholding tax. The question that is unclear is what kind of rate would be suitable.
So the consideration could be for a simplified profit-based withholding tax that could take the form of say India's 2019 proposal which allocated a third to sales and two-thirds to the supply side or even the UN Article 12B which used an estimate of 30% or multiplying the MNE's global EBITDA margin by the standard corporate income tax rate in the country from which revenues derive in order to specify a withholding tax rate that is more suitable. And from iterations we had a whole range depending on the industry from 1.25 to even 15%. So I'll finish here. Thank you for your kind attention.
Johan Van Overtveldt
Thank you. We next go to Ms. Patricia Brown who is connected remotely. Can you hear and see us Ms. Brown?
Patricia Brown
Yes, I can I can see you, I can hear you and I have found the discussions that I've heard, I didn't hear all of them, to be quite interesting.
So I want to thank you for the invitation to speak today. I'm going to focus on the context of the UN discussions because they are I think quite different from the discussions that or the impetus for the discussions here that you've been having.
So if we can go to the next slide. The and I'm not going to talk about all of these developments over time but I'm going to start with 2015 with the Addis Ababa Action Agenda which put tax coop international tax cooperation into a sustainable development context. So at the United Nations this is directly tied to our sustainable development agenda and ensuring that developing countries have the resources they need to develop over time.
And that means the focus, I think, is slightly different. If we can go to the next slide, and Faith has talked about some of the political momentum. Where we are with the framework convention is that in 2024, an ad hoc committee that was formed by the General Assembly developed the terms of reference, which were approved late in December of 2024 by the General Assembly.
The framework convention and two early protocols are to be completed by effectively August of next year in 2027, to be presented to the General Assembly. The terms of reference established that the first protocol would be on the taxation of income from cross-border services, and the second protocol topic was decided at the organizational session in February of 2025, and it is the prevention and resolution of tax disputes.
So three instruments to be completed by August of next year. The work has, there are three plenary sessions each year. And in between the plenary sessions, the work has been divided up into virtual meetings, three workstreams, one for each legal instrument, and that work has been proceeding. We have been averaging about 130 people in each workstream meeting over the past few months.
We are in our very intensive period preparing for the August session, which will take place in New York from the 3rd to the 13th of August. And the goal is to have zero drafts of all three instruments before that fifth session, and they will be made public, most likely in mid-July. Next year, so this year is about technical drafting, next year there will be the final political decisions and final drafting.
If we can go to the next slide. So when we discussed with our member states during the scoping sessions last year, what we heard was that the most significant barriers to taxing cross-border services are tax treaties that do not reflect current ways of doing business. Many developing countries impose gross withholding taxes on almost all payments made from their jurisdictions. This is quite different from what most developed countries do, which base their taxation rights on physical presence.
And so the withholding regimes that these developing countries have essentially treat payments for services the same way that they tax, impose withholding taxes on interest or royalties or dividends. And so the, it's very simple for them to impose it. And there's also, they've pointed out, a check from an administrative perspective because if they are allowing a deduction for a business expense, they can in fact ask the payor whether they have withheld the tax.
So the corporate tax and the withholding tax reinforce each other in a way that does not apply with respect to net income tax. Now, the protocol that we're working on or that the member states are working on does not address the digital economy more generally. So the examples that I we just heard about physical goods sold through digital means such as eBay are not within the scope of this protocol. There is a potential future protocol under the framework convention that would apply to the digital economy more generally.
So if we could go to the next slide. So how did the UN process started, we looked at how different cross-border services should be taxed without regard to traditional rules. So this was a very normative discussion, if we were starting from scratch, what would we do? What are the basis for a nexus rule?
We looked at a broad range of services and industries. And part of that was that while digital, the automated digital services has been getting a lot of press recently, for developing countries, the what our colleagues are referring to as digitally delivered services have been a problem for them going back to at least the sixties. And this are fees for technical services, management and consultancy fees. But this has become more pressing as it is now easier to provide them remotely. One might even say that I am providing some digital services remotely right now.
And I'm sure that all of you do it from time to time. And the other point is while we think about certain industries as being very tied to a physical location, such as extractives and agriculture, which are important industries for developing countries, the fact is that payments for services in the form of technical service fees reduce the tax base even with respect to those industries.
And so services cut across all of the industries and provide, and produce a negative revenue effect for many developing countries in agriculture, extractives, construction, infrastructure, etc. Now, the other point where I think it's worth pointing out the difference between the United Nations and other international organizations is because of the wide range of economic circumstances and interests of our member states. We have 193 member states.
We try to avoid one size fits all solutions. And so as Faith just described, there are different approaches to taxation of services and those are being explored to see how compatible they are with each other. What that means, I think, is that a UN solution can sit comfortably next to solutions adopted by other organizations.
Can we go to the next slide, please? So the key substantive questions that the plenary session and the intersessional work on the protocol are addressing is what are possible new nexus rules that will be flexible enough to work into the future decades when there are new business models we can't anticipate.
Is there a continued role for physical presence? What net versus gross basis taxation? And Faith mentioned the possibility of a low level of withholding tax. Should there be different rules for different types of services? And what taxes should be covered by the framework convention?
Because what is described as an income tax or an excise tax in some countries is described differently in other countries. Next slide. And I think I will just leave it there since I've slightly gone over my time and am happy to answer questions, of course.
Johan Van Overtveldt
Thank you. We go to the co-rapporteurs on own resources first, Ms. Nerudová, please.
Danuše Nerudová
Thank you very much for the presentations to both of the speakers.
I do have two questions. First, what are the main differences and similarities in the issues faced by developing countries and EU concerning the taxation of cross-border digital services? And secondly, in the previous panels, one of the policy options recommended in the paper regarding the digital services tax was a hybrid framework combining elements of DST with the future international arrangements.
How would this work from the UN perspective? I mean, especially the extraterritorial effects and possibility of double taxation. Thank you.
Sandra Gómez López
Sí, gracias.
Eh, sí querría preguntarle a la última ponente si cree que sería beneficioso para la Unión adherirse al convenio marco de las Naciones Unidas sobre cooperación fiscal internacional, y si eso respondería a los retos a los que hoy nos enfrentamos, nos enfrentamos y cómo podríamos utilizar ese convenio. Y luego a la primera ponente, es verdad que el Parlamento habíamos propuesto tres nuevos posibles recursos propios: el impuesto sobre servicios digitales, criptomonedas y juego online.
Pero en la presentación usted ha defendido un impuesto sobre servicios digitales más general. Y me gustaría preguntarle por qué. ¿Por qué piensa que un ISD general sería una opción más apropiada en comparación a tener tasas más específicas que graben actividades más concretas? Y luego, por último, una pregunta más general. ¿Debería el debate seguir centrándose en la tributación de la economía digital o deberíamos de evolucionar hacia una cuestión más amplia de adaptar las normas fiscales actuales internacionales a una economía global que es cambiante?
Gracias.
Fabienne Keller
Je voudrais remercier les deux intervenants pour leur présentation. Je dois reconnaître que je me suis un peu perdue dans les explications sur les conventions internationales et les différents aspects pour la première présentation des différentes formes de taxes.
J'ai envie de leur demander un conseil, une recommandation. Quelle serait pour vous, vous savez que le budget européen est à la recherche de nouvelles ressources, quelle est votre recommandation en termes de ressources digitales pour l'assiette, pour la manière de la calculer ? Vous avez présenté les avantages, les inconvénients des différents processus. Est-ce que vers quoi, si vous étiez à notre place, vous nous recommanderiez de nous orienter ?
Et deuxième question, mais qui rebondit sur celle qui vient d'être posée, nous avons envisagé d'autres formes de fiscalité qui doivent concerner aussi vos soit vos réflexions soit les Nations Unies. Je pense en particulier aux cryptomonnaies qui sont très importantes dans les flux financiers liés aux différents trafics internationaux. Qu'est-ce que vous pensez des réflexions dans ce domaine pour essayer d'en limiter l'expansion de l'utilisation notamment pour des activités de type criminel ? Je vous remercie.
Rasmus Andresen
And thank you so much to the speakers.
I can only add to what Fabienne Keller already asked about, but first of all I would like to say that I really think it's interesting and crucial also for us, especially to get the perspective of countries outside of the OECD. And I think there is a lot of interesting work going on in the United Nations when it comes to taxation issues.
in the United Nations when it comes to taxation issues and my question also goes in the direction of Patricia Brown on the dynamics you see currently also because you moved already ahead in the whole process on digital taxation and also because the EU also is responsible for coordinating the EU member states when it comes to this in the United Nations. So it would really be interesting for me to hear a little bit more about your assessment on current dynamics there and also of the role of the EU and if you see us being able to speak with one voice or if this is not what you are experiencing. And adding to Fabien Keller on crypto taxation, I also would like to hear a little bit more on the dynamics on the wealth taxation issue in general. I know it's also very important for the debates within the United Nations right now.
Jussi Saramo
I'm thinking about this, it was mentioned that there might be US retaliation. And the truth is that US, they are blackmailing us all the time in all the issues, and taxation is just one thing, and tariffs which have been in the news. I think if we wait for the US, we will never have any kind of global just tax system.
So we just have to take some risks and we have to fight back because who knows what's coming after Mr. Trump. Let's be very clear. It's about the change in the the US governance but even before Trump even before abandoning the OECD treaties actually the treaties made in OECD were made for the states for the countries that are using power in the OECD. The develop the African countries let's say the global south. I think I heard there is maybe four states in Africa that could implement the OECD rules.
The other ones, they just don't have the means because it's actually the big US or even European giant companies that are having the power and not the states. And so they are very vulnerable in front of these big companies. So I think it's great that we have this UN convention. If we would have a just tax system, we could stop development aid because actually they are losing much more money from the taxation than they are getting from development aid. We could have much less involuntary migration.
So actually it would be our benefit, not just think about the European companies, but the global sustainability that we need the just tax system. And it's not just between countries, not just between companies.
Actually the US, they have abandoned their trust legislation. What they used to have, the great way to put leash to the capitalism and these big companies, they are not doing in this digital economy. And this is like a monopolistic system and they are getting all the power, so we should taxate this harmful development. So my question is, actually this was more like a speech about the EU coordination which was already mentioned.
Is there like any European voice? Because I was in Nairobi in the UN convention meeting and it was maybe one European country that was saying anything. All the others were just sitting on the fence and watching what's happening. Thank you.
Kinga Kollár
Thank you. I will just have two questions to Ms. Brown. Since you are following and an insider to this process, can you maybe give us some description where you think this actually will lead?
What would be the, what could be the outcome of the UN convention on especially on the cross-border services? And the other thing is that you mentioned that it will be in your view compatible with the other solutions, so with I presume with the OECD or I mean also EU rules. So how is that possible actually? I mean, how do you see this compatibility? Because of course we want to avoid, you know, like conflicting rules and then extra administration as well.
Thank you.
Jean-Marc Germain
Merci Monsieur le Président. Ma question s'adresse à nos deux interlocuteurs et elle porte sur, au fond, les obstacles qui pourraient s'opposer à l'introduction d'une taxe ou d'un droit de douane sur les importations de services numériques. Puisqu'on voit bien que la meilleure façon sans doute de faire contribuer au bien commun les entreprises productrices de services numériques, ce serait de taxer leurs profits au prorata du service rendu dans chaque pays.
La moins bonne des solutions d'un point de vue économique mais la plus praticable c'est la taxe sur les services numériques parce qu'elle s'impose au marché unique et aux consommateurs de services numériques avec le débat de savoir si elle porte sur les consommateurs ou sur les producteurs et dans quelle proportion. La taxe sur les importations serait assez idéale mais elle elle se confronte aux règles du commerce international et donc ma question porte là-dessus. C'est-à-dire est-ce qu'on pourrait pas considérer par exemple qu'avec les États-Unis étant donné qu'il y a un déficit commercial en matière d'échange de biens et services l'Union européenne serait fondée pour résorber ce déséquilibre à imposer un tarif sur les importations de services numériques sans violer les règles de l'OMC. Merci beaucoup.
Johan Van Overtveldt
Thank you. I go back to our two speakers. First of all Ms. Amaro.
Faith Amaro
Okay thank you very much for these insightful comments.
I guess the starting point for me is where did DSTs even begin? So when we look at the Action 1 of the BEPS report in 2015, failure to make progress on that then pushed countries to implement DSTs as a unilateral measure in dealing with the problem that we already highlighted about the insufficiency of the existing tax rules to deal with the digital economy and the specificity of place of performance. So that is the problem. And I have highlighted already and alluded to it that DSTs are only an interim measure and the more holistic approach would be to redistribute the taxing rights.
So why a more general DST then than specific activities? Because as we have seen from the data, the bulk of cross-border services are now being delivered without any form of human input and that is going to increase even more with AI.
So, being delivered from the cloud, that would be a justifiable basis for the substantial profits that companies get from the access to large markets at very low marginal cost, and that is going to increase substantially both with AI and the cloud. So, when the question has been already raised about online gambling and crypto and all of those, those ideally would fall within the category of automated digital services, so that would come within scope of the broader DST, for which we estimate the revenue to be significantly higher, four times than would under the 2018 digital levy.
So the other question that has been raised, I think there was a lot for Patricia, what has, what way should this group be looking at now in terms of just even the long-term solution? And one consideration that has been highlighted in the paper that I'd like to reiterate even in this discussion is specifically stepping away from profitability, stepping away from revenue to then look at the MNEs and design, and I have highlighted it, you know, a form of taxation specifically based on the profit margin.
So starting with the EBITDA ratio and then applying it at a profit rate, computing a profit rate that would apply broadly across different industries and it would be wide-ranged from a 1.25 to at least 15%. So that potentially is a good way to start in terms of looking at the longer-term solution, but ultimately keeping in mind the fact that this would only be an interim solution and we need to, in terms of just a distribution, a profit-based withholding tax that applies the global revenue rate to the local sales would be, it would result in a more even type distribution than one that is specifically based on revenues because again that will be cascaded down and it will not deal with the problem that we are trying to address specifically with the digital economy and the insufficiency of the treaties to address it. So I'll leave it at that and I'll ask then Patricia to speak specifically to the UN considerations.
Patricia Brown
Thank you, thank you very much. I'm not sure how much time I have to answer, there were a lot of questions. But many of them fall into one general category, which, and I'll answer that one first, which is some concern that the EU member states are not participating in this work.
I'm a little surprised at those comments. I would say that the EU member states are probably the most active members of or participants in the work at this point and they are quite well coordinated. So, in fact, when I'm taking notes, I sometimes just use shorthand because it's we agree with, you know, everybody who came before.
So but there are to respond to I'm I didn't note who asked which question. But you can you can hear nuances from different member states their different concerns and so and their receptiveness to different solutions. So there is coordination I would they're not necessarily in lockstep but their voice is being heard. Now perhaps Mr. Saramo mentioned that only one state was speaking and I think it's worth pointing out that within the United Nations there is a long history of representation by regional groups.
And therefore, when the Africa group speaks, it speaks on behalf of 54 member states. And so it's not necessary for all of the member states to to speak or to even travel to the meetings. And that may give a lopsided impression of who is speaking. And the EU has also been very careful. Normally, sometimes it's the country who holds the presidency currently that speaks on behalf of the European Union.
Sometimes they spread it around to different member states depending on the topic. But but they are definitely speaking and the fact that not all 27 member states speak is a reflection of the UN process versus some other processes. So I think that covers a lot of the questions. The first question was the difference between developing and developed countries.
I think that I did mention that developing countries deal with fees for technical services. I also mentioned the way their domestic law is structured, and it's structured in a way that tax treaties have more of an effect. It limits their right to tax more than developed countries, because developed countries' domestic rules are more consistent with the rules in tax treaties. And so the tax treaties really enforce the developed countries' domestic rules as opposed to running counter to them.
So that's one thing. The there is a current and I think it was raised maybe by Mr. Andresen, but maybe Mr. Saromo, and that is that the the rules that are developed or the traditional I'll just call them the traditional rules really there's some backlash from developing countries.
The developing countries you know a lot of a lot of the comment is developing countries just need to develop their technical capacity in order to apply the rules and the developing countries are saying why should we spend a lot of money and resources to learn how to develop rules that do not serve our interests. And so there is this and and they also say and they've been saying since the first scoping meeting of the ad hoc committee it doesn't matter how much technical capacity we have if our treaties prevent us from taxing in these circumstances.
So there is a disconnect that is felt in terms of the dynamics and the differences in approaches between developing and developed countries. Now, if you listen to the trade unions, the trade unions argue that the same issues that developing countries have are also faced by EU members, but are not acknowledged by EU members, possibly except in the ADS space. Now, with respect to and with respect as a member of the Secretariat of the United Nations, we don't say what we don't recommend what people should do. We implement what our member states ask us to do.
So the request to say what what we would do in your position is not one we can actually answer. There was a question about double taxation. Dealing with double taxation is is something that is very much in the forefront of participants' minds during the discussions, and also dealing, if you have new nexus rules, you have to worry about having multiple source state taxation, which could lead to double taxation.
And so there are some complicated issues about how to deal with those two problems that are being worked through. The question of whether there should be specific taxes versus general taxes, I think the the problem is, and we've seen this, I was a member of the business profits tag in the late 90s, and we looked at certain business models then. Business models have changed significantly since then. Faith has mentioned AI.
And so I think if you focus on specific taxes, you will have to come back over and over again to examine whether they are hitting what it is that you want to hit. One of those things that the UN tax experts committee dealt with is the treatment of software because when the software commentary was written in the early 90s, software had to be downloaded to computers in order for it to operate. Now it operates in the cloud.
And so rules that made sense in the early 90s simply do not make sense now. The wealth taxes and crypto assets, that work is continuing, it really doesn't touch on this topic very closely, so I don't want to take time to speak to that. But I think that that hits the highlights of the questions. But I'm happy to respond if I missed any.
Johan Van Overtveldt
Thank you very much, Ms. Brown. Ms. Gomez Lopez, you want to conclude?
Sandra Gómez López
Gracias, presidente.
Sí, yo simplemente quería concluir para agradecerle en nombre de la Comisión, pues a los ponentes que hayan podido acompañarnos. Para nosotros, le reitero que era un workshop muy importante porque hemos dado un paso que va más allá de la Comisión al proponer la tasa digital. Creemos que es una oportunidad. Obviamente ha habido una disparidad de opiniones que respetamos, pero sí que es cierto que creo que puedo hablar en nombre de al menos una amplia mayoría. Seguimos considerando, sobre todo después de lo comentado, la tasa digital como un buen candidato a poder incorporarse a la cesta de recursos propios.
Gracias por clarificar determinadas cuestiones. Creo que ahora es también el punto del Parlamento Europeo de precisar nuestros posicionamientos más técnicos en paralelo al debate político que está teniendo el Consejo y que por lo tanto, pues como digo y ya para finalizar, este intercambio ha sido particularmente valioso en ese sentido. Así que gracias a los expertos por su reflexión.
Johan Van Overtveldt
Thank you. Let me also thank our four speakers like Ms. Gomez has already done. Thank you very much for your input.
Thank you also to all the MEPs being present and this concludes this part of our budget committee meeting of today. Thank you.
Can we restart our meeting please?
For point number 25 of our agenda, every year the institutions must submit a report on their building policy to the budgetary authority. The EEAS is the first institution to present their building policy this year, to be followed by the Commission just after the EEAS and then the European Parliament later on in the year. The EEAS is the EU institution that manages the most diverse real estate portfolio of all institutions, including buildings both inside and outside the EU and covering office buildings, official residences as well as staff accommodation. Therefore, this exchange of views is a very good opportunity to better understand the EEAS real estate policy and the main projects ahead.
I give the floor to Mr. Francesco Fini, Head of Division for Real Estate, Safety and Greening of the EEAS. Please.
Francisco Fini
Thank you very much, Mr. Chair, and thank you for the introduction. Honorable members, indeed, as you said, we are managing a very diverse building portfolio, covering more than 300 buildings across the world and close to half a million square meters.
All this, as you may imagine, poses great challenges, particularly in the current circumstances. Last year, the management of the portfolio was particularly affected by a number of crises, not only affecting the country concerned, be it in the West Bank, in Africa, in Haiti, but also all the neighboring countries.
In addition, those crises also translated in a huge and substantial increase of prices across the world, which is difficult to manage and to reconcile with the budgetary cap of 2%. So, large and diverse portfolio, huge challenges and constraints across the world. And in order to manage it efficiently, we have established a priority and planning exercise in order to identify mid-term priorities and annual work plans. So this would allow us to each year identify the properties and the projects, the priority for the next three years and the immediate projects for the years to come.
So we are not doing it at random, but all this is based on this exercise. Last year we concluded a number of important relocation and refurbishment projects in Australia, the Holy See, the Democratic Republic of Congo. We also concluded the purchase of the delegation in Brazil and in Ghana.
At the moment, what we have is Cameroon, Central African Republic, Guyana, Turkey, Uganda, Uruguay, new lease for South Korea, Kazakhstan, Brazil, just to name a few examples to indeed illustrate the diversity. Allow me now to briefly present what I see as the main challenges ahead for the building portfolio.
First of all, I would like to refer to the modernization of the EU delegation networks. I had the chance to present this in a previous occasions. We have embarked in a modernization of the network, which will come into effect in September 26, so the next few months. And with this modernization exercise, basically we are creating a number of what we call reinforced delegations, where we would have some additional expertise intended to serve the neighboring delegation, and also scaling down of other delegation which will be then become diplomatic presence delegation. All this, as you may imagine, has an impact on the building policy.
Reinforced delegation requiring refurbishment to host additional colleagues and diplomatic presence scaling down from the current building in order to have the most efficient use of space. So it's an exercise which basically will translate in 16 new projects, 10 scaled down and 6 reinforcement. The second priority which is now has been a priority for the last couple of years and will continue to be so, it's the upgrade of the security installations in order to fully comply with the duty of care in our delegations.
And here I would like to express my deep gratitude to the Parliament for the additional amount that we received in the budget for this year and last year, which was specifically devoted to the upgrade of the security installation. Allow me to just give a couple of examples to show the importance of all this. We are talking about upgrading the security in countries such as Taiwan, Congo, Central African Republic, Yemen based in Jordan. So this is really, this is really key.
And with, we have a plan to basically in four years complete the upgrade of all the security installation so that we can ensure fully the duty of care. We cannot do more per year, obviously for budgetary reason, but also capacity in terms of human resources. Those are very difficult and complex project. In order also to be dynamic in the management of this portfolio, we are selling all unused property that we may have accumulated across the years.
I mean, the EEAS is based on properties and the EEAS network is based also on property which have been acquired by the Commission long time ago. So we have a huge portfolio, sometimes unused. So priority for this year: sale of unused building and at the same time purchase and increase the rate of ownership. You may remember that I presented to this committee a couple of years ago a strategy to increase the ownership in order to make savings, because it's clear that in certain country where we are absolutely certain of staying for long term, increasing ownership means also savings in the long term.
So sales and purchase in order to have the most dynamic management of of the portfolio. The modernization, security, sale and purchase. Another priority, structural priority, I would say those priority are all structural because I think I'm referring to them regularly when I am in front of this committee is the collocation. Collocation it's a structural policy, sub-policy in this management of the real estate.
It's not just a matter of making the best use of space, but also to increase visibility and coherence and consistence of the EU projection in the world. It's a way also to have, to give a practical translation to the Team Europe approach. So it is a policy that has been substantially developed in the last years and we have now reached 144 colocation, 44 with Member States and 100 with other EU partners.
Basically 10% of the office space is in colocation and half of the delegations are concerned by by colocation, be it with EU partners or Member States.
And finally, I would also like to refer to the greening aspects of this real estate policy. It is an absolute priority. This year, the EEAS has been finally certified EMAS here in HQ, and we are also translating this in the delegations with environmental management systems for all our delegations. And this is a criteria which is used and very important and very prominent when selecting new building and new refurbishment.
So, as you may see, and as you rightly pointed out in your introduction, Mr. Chair, a very diverse portfolio with substantial challenges that we manage, I would say, greatly thanks to this priority and planning exercise, which allows us to make best use of the limited resources that we have, human and financial, in order to provide the infrastructure and backbone for the EU External Action Service here in Brussels and in our delegations. Thank you very much, and I stand obviously ready to answer questions you may ask. Thank you.
Johan Van Overtveldt
Thank you, Mr. Finney. We immediately go to our standing rapporteur, Mr. Olivier Chastel, please.
Olivier Chastel
Merci Monsieur le Président. Monsieur Finney, chers collègues, je veux d'abord remercier Monsieur Finney pour les documents envoyés, les réponses fournies à nos questions écrites, son exposé introductif aujourd'hui qui m'a foi est révélateur en matière de défis puisque Monsieur Finney vient de nous l'expliquer, il s'attache effectivement à moderniser le réseau, améliorer la sécurité, avoir une gestion active pour la maîtrise des biens immobiliers, avoir une approche Team Europe au travers de la colocation et enfin verdir le parc immobilier. Je pense que c'est un vaste programme assez ambitieux au regard du nombre de biens immobiliers en portefeuille.
Alors on a souvent eu l'occasion de débattre d'un certain nombre de dossiers bien spécifiques du portefeuille immobilier du SEAE. J'ai quelques questions complémentaires à poser en plus des questions que j'avais transmises par écrit. D'abord par rapport à la sécurisation. L'an dernier, on avait évoqué une liste non divulguée de bâtiments ne répondant pas à 100 % aux standards de sécurité. Est-ce que globalement cette liste s'est réduite ?
Est-ce que le nombre notamment de bâtiments non conformes a diminué ? Alors on a récemment vu une évolution du contexte géopolitique. Je parle de l'Ukraine, du Moyen-Orient.
J'aimerais savoir comment ça a impacté un certain nombre de nos délégations, toujours en matière de de sécurité. Est-ce que vous savez nous rappeler quel est le coût annuel de ces adaptations en matière de sécurité ? Comment finalement est-ce que vous organisez la répartition des investissements en matière de sécurité ? On sait qu'on ne sait pas tout faire en une fois, vous venez d'ailleurs de le de le répéter. Comment est-ce que le service décide de ce qui est fait pour les prochaines années ?
Ouais, je voudrais aussi revenir sur un un élément qui peut paraître anecdotique et je sais qu'en la matière vous ne faites qu'appliquer les décisions, mais le le SEAE a décidé de renforcer sa mission diplomatique à Fidji et à la Barbade. J'aurais voulu savoir quel était le coût de ces missions diplomatiques dites stratégiques et de quel ordre est le renforcement. Dernier élément, c'est la colocation. 144 accords de colocation. J'aurais voulu savoir comment peut-on encore aller plus loin, qu'est-ce qui est en préparation ?
Est-ce que c'est des colocations avec des partages de locaux ou également de partage de services comme le gardiennage, les services de nettoyage ? Comment est-ce qu'on intègre ça dans les perspectives de futures acquisitions ? Merci beaucoup.
Johan Van Overtveldt
Thank you, Olivier. We go to the shadows, Mr. Ušakovs, please.
Nils Ušakovs
Two questions if I may. Given that the reconfiguration of the EU delegation network requires on one hand moving diplomatic presence delegations into smaller properties and on the second hand reinforced delegations into larger ones, what specific legal and financial safeguards are in place to mitigate the budget impact of negotiating early lease terminations and specifically how will the EEAS prevent duplicate rental expenditures or steep reinstatement penalties during the parallel process of securing new premises before existing leases expire? And the second question is in report, report highlights a stark resource deficit, noting the real estate safety and greening division employs only 12 architects to manage 325 buildings worldwide, resulting in overall capability that is explicitly, and I will quote, not aligned with the needs for building projects worldwide.
And considering this bottleneck, how does the EEAS intend to effectively execute its extensive pipeline, which includes selling 14 properties by mid-2027 and managing dozens of ongoing renovations, purchases, and market prospections without incurring project delays, cost overruns, or critical failures in its duty of care? Thank you.
Francisco Fini
Oui. Merci, Monsieur le Président.
Donc pour commencer avec les questions de Monsieur le rapporteur, Monsieur Chastel, sur la sécurisation. Donc oui, je dirais que nous avons une liste relativement longue de délégations non pleinement conformes en termes de sécurité à des degrés divers. C'est pour ça que ces projets de mise en conformité concernent parfois des mises à jour ou des installations complètes. Et ceci me permet aussi de clarifier la question du coût. Une mise à jour, c'est environ 500 000 euros.
Une installation complète tourne autour d'un million deux. C'est pour cela qu'en plus des contraintes de personnel qui viennent d'être évoquées, nous ne pouvons pas faire plus que sept à huit mises à jour par an parce qu'il y a aussi une tournante. Nous avons un stock et un flux. Donc le stock, on le met à jour à un rythme de huit à dix maximum, mais chaque année, il y en a d'autres qui doivent être mises à jour.
Donc moi je suis confiant que d'ici quatre cinq ans, le portefeuille pourra être parfaitement sécurisé et de là, nous rentrerons dans de la maintenance. Mais donc, c'est je dirais le rythme de mise à jour possible. Les contraintes étant d'ordre financier, vous voyez qu'avec 15 millions d'ajouts, on peut faire une dizaine de projets de d'ampleur différente, mais c'est aussi le nombre d'architectes et de spécialistes en sécurité. In order to address the human resource constraints, as I explained, we really focus on priority.
So we we define together with field security division which is the division in charge of threat assessment we define really the order of priority for security projects and in order to start with the most pressing ones. And as far as internal reorganization is concerned I have devoted two additional colleagues specifically to security projects at the detriment of other other domains but we think that the duty of care the security of colleagues especially in certain circumstances it's a priority.
So priority and reallocation of human resources to really speed up the process of updating the security. Fidji et Barbade, oui, disons que la Commission a estimé que ces deux délégations devaient devenir délégations renforcées pour servir les délégations environnantes.
Le renforcement de Fiji et de la Barbade se fait avec les ressources transférées par les délégations voisines. Donc non pas avec des créations de nouveaux postes mais avec les ressources des neighboring delegations. En termes d'infrastructure, puisque ceci est la question qui nous occupe aujourd'hui, nous avons pu accommoder les collègues faisant l'objet de ces redéploiements dans les immeubles existants avec des projets de réajustement interne. Donc sans nouvelle relocalisation, ce qui permet aussi d'avoir une gestion un peu plus efficace de l'espace.
La colocation, la colocation est absolument, comme je l'ai dit, prioritaire. C'est-à-dire qu'à chaque nouveau projet immobilier, nous lançons une demande auprès de toutes les institutions et auprès de tous les États membres pour savoir s'il y a un intérêt.
Donc avant même d'aller sur le marché avec une prospection de marché pour définir les besoins et les surfaces, nous au préalable nous procédons à cette enquête auprès des États membres et des institutions de façon à déjà pouvoir intégrer à ce moment-là les demandes de colocation qui pourraient survenir. Et l'accord de colocation, naturellement le service ne fait pas de bénéfice sur ces accords de colocation, c'est une rétrocession de frais, que ce soit de loyer et un quota proportionnel à la superficie utilisée de tous les frais. Donc gardiennage, électricité, utilities et tout ça. Donc mais sans profit.
Mais cela permet naturellement une entrée, disons que probablement la colocation est la seule source de revenus hors budget du service. Donc, for to address the question of the scaling down of certain delegations and the moving from the current delegations to diplomatic presence, all our lease contracts have an early termination clause, usually of three months.
So, and when we initiate the new projects, we time the termination clause in order to have almost a simultaneous termination and entry in new building. So we really try to limit maximum the overlap to one month. So we do not activate the clause, the early termination clause, as long as we are not almost certain of entering the new building within a reasonable time. So we really aim for maximum one month overlap. And we do not accept contracts without this possibility of the early termination clause precisely because of that.
Thank you very much.
Olivier Chastel
Monsieur le Président, je veux évidemment ici au nom des collègues, j'allais dire des collègues mais ah oui on est quand même trois avec vous, c'est vrai, des collègues présents, remercier Monsieur Finni et ses services pour l'exercice parce qu'au-delà des questions écrites, de son exposé, des réponses aux questions, on maîtrise à chaque fois un peu mieux les défis devant lesquels son service est placé.
Johan Van Overtveldt
Thank you for the colleagues and certainly also for Mr. Finni for his presentation and further explanation. We take a few minutes break because one of the speakers for the next item has not yet arrived. Thank you.
Speaker 37
So, dear colleagues, let's start with agenda point 26, the exchange of views on institutions' building policy of the European Commission.
Our rapporteur is Olivier Chastel. This exchange of views is a very good opportunity to better understand the Commission's real estate policy and the main projects ahead.
I therefore would firstly like to give the floor to Mr. Guy Drowart, head of service of the Office of Infrastructure and Logistics, OIL, in Luxembourg, to present the Commission's building policy. Now I change the agenda and I have the impression because I see arriving Mr. Morten Fjalland. Welcome. He is head of service for the Office of Infrastructure and Logistics in Brussels, OIB, to present the Commission's building policy in Brussels, and to Mr. Dan Chirondojan, Director for Operations and Support Management at the Joint Research Centre, JRC, to present the Commission's policy as regards the buildings of its in-house research service. Is it too early, Mr. Fjalland, or...
Morten Fjalland
Thank you very much, honorable chair. Thank you very much, honorable members. Thank you for inviting both me and colleagues. And in respect of time for colleagues coming after me, I will do all my best to stick to the eight minutes, even if the agenda that we are currently dealing with is a large and we think quite interesting one. And that's the right note, members, to thank you all for the questions that we got in advance, which we have filed with replies, but we'll be happy to go into any discussion on.
I'm pleased to inform you overall that we are on track. We remain on the right track to meet our objectives set out in our 2021 real estate strategy. And that is to reduce the areas occupied by the Commission to 580,000 square meters by the end of 2030. This means a 25% decrease compared to 2019.
We're pursuing also our objective to make sure that each square meter is greener. We are on the right track here to achieve a 30% reduction of our emissions in 2030, and that's again compared to the 2019 levels. Without going into too much detail, but this is an interesting area. How do we do this? We're choosing to occupy fewer and more efficient and lower energy buildings whenever available, and also giving up older, high consumption buildings.
We are gradually starting to look at renovating existing building stock which is still with us.
For instance, we are currently at work in the Charlemagne building, one of the key owned buildings by the Commission in our portfolio, and this is with a view to ensure that some needed works will be done while at the same time allowing to increase the workstations in the building. We're also ensuring that sustainable energy sources are used whenever feasible, and we are also here upgrading installations. One of the key examples is the purchase of significant solar panel systems in the Brussels-Capital Region that provide electricity to both Berlaymont and Charlemagne. Also, we are replacing gas heaters with heat pumps running on green electricity. We are reducing electricity, gas, water consumption through staff awareness and dedicated actions.
We also seeking to support as far as at all possible greener commuting.
We are paying close attention to public transport access when selecting buildings. We are looking to implement facilities for staff to make sure that they can more easily commute by bike or other non-car use. And that also means we are reducing the gradually the availability of car parking spaces in Commission buildings by 2030. And that would be by at least 35% compared to 2019. And this is in line again with the Brussels regulations.
We are also using office space in a smarter way. And this we are doing by rolling out what we call dynamic collaborative space.
And the purpose one of the purposes of this is simply overall to then need less space. Inside the space that we have we're designing that space that to ways that it fits the way that people actually work different zones for different tasks. There's a lot of details on this but also as part of this it's about the space we need but also cutting costs and energy use by needing less space. We have also converted and we will continue to convert existing buildings either fully or partially into this collaborative space.
This is the case currently and in particular for the Berlaymont and the Charlemagne. Since the end of 2025, we are continuing this trend going forward, so now more than 11,000 staff are using this dynamic collaborative space setting overall taking up less space for the purpose overall, of course also with a budgetary effect. Figures from the staff satisfaction surveys show a really good greater appreciation over time of the benefits of DCS over the years, dynamic collaborative space again.
On the issue of having sold 23 of our buildings in 2024, we have been of course been active for the Commission in the prospection and the replacement of office buildings. As examples, and there's more on this in our various budgetary documents, as an example we have in 2024-25 started to rent new buildings, for instance in Tervuren 211 on the outskirts of our prospection zone and also at Montoyer 34. The situation however is somewhat complex. The current offer of available big office buildings in the European quarter which meet our criteria is limiting the options. So we're looking for environmentally friendly buildings and adequate office space at competitive costs.
We've chosen to activate the option to stay longer in some of the soul buildings in order to make sure that we can optimize our portfolio at this given moment. And I would like to thank you, Chairman, for the files passed also this morning for extension of certain of certain contracts on this part. This is this we will need to continue as a strategy to go on to make sure that we continue to prospect in the best possible way and at the best possible outcome for public monies.
To be more flexible and this is in the same vein we are slightly extending and this we have done already our current prospection zone in the European quarter and around the axis between Loi and Montgomery and to the southwest corner of this axis and also to a limited extent in the northern quarter towards the inner city. The Commission already occupies a building in the northern quarter namely SB 34 in internal lingo Simon Bolivar 34 housing three executive agencies and with the plans still on for gathering all executive agencies. Regarding non-office spaces the works of the new conference center started end of September 2024 the delivery is foreseen in 2028.
Finally, with respect to budget forecasts, the utilization of sales revenue has, firstly, allowed to cover the payment of residual debts associated with the buildings sold. Also, it has been used for the purpose of extended use of certain buildings, and as a result, the Commission then has more flexibility on the exit date of these buildings. Secondly, it allows to acquire the new conference center, and this will become Commission's property. And thirdly, it has financed and will continue to finance the occupation of new buildings as well as some refurbishments. In closing, I would like to emphasize that we are committed to delivering sustainable, modern, and accessible buildings to contribute to greening the Commission.
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