In late October, Spain finalised its Tax on Certain Digital Services to tax online businesses where previous physical tax rules were inappropriate. This law is designed to update tax law with modern business models and targets online advertising services, online intermediation services and data transmission services, applying an indirect 3% levy for the provision of any digital services by an online business in Spain. To put this into perspective, this tax alone will generate approximately 1 billion euros which are intended to be funnelled back into Spain’s COVID-19 relief and support.

With this unilateral tax measuring coming into force on 16 January 2021, present companies have already shown some resistance. Notably, Amazon has indicated that it is going to raise its fees by 3% to offset the levy and apply this to all Spanish companies using its platform. Similar taxing has sprung up around Europe as well as Australia and it is apparent that giants like Amazon are willing to increase their fees to negate the impact of tax laws on the operation of their business.

Consequently, this highlights the need to implement an appropriate taxing system that does not hinder the impact of these dominating tech companies in the economy. More importantly, without a unified international system, companies and countries may claim privilege or discrimination. For example, following Spain’s digital tax, the Office of the United States Trade Representative argued tax discrimination against American companies, restriction of international trade, and even breach of international tax principles, providing similar comments to those made against Australia’s News Media Bargaining Code. Ultimately, without broader consensus it will be difficult to manage taxing digital platforms, especially as they have operated for so long under low levels of taxation and regulation.

For the full reading of the tax law see here.