EBF advisor: Roger Kaiser
Publication date: 06 March 2019
Executive summary
Digital taxation is a relevant issue in the context of the current economic environment and has been included in the work of the OECD/G2O Inclusive Framework on the BEPS project since its elaboration in 2013. In its comments on the OECD consultation on digital taxation, the EBF supports the continuing efforts of the OECD in addressing this topic. We agree on the need to revisit the challenges that arise from digitalisation in the current international taxation framework and to adapt the rules that would apply in an international level, allowing jurisdictions to tax in a fair and efficient manner the profits that derive from both “old” and “new” business models.
The existing corporate tax framework adequately captures profits earned by financial institutions, irrespectively of the specific activities through which they are generated. Any elaboration in the field of the taxation of the Digital Economy should focus on value creation that is not captured by the current tax framework. The EBF takes the view that the project launched by the OECD on the taxation of new types of business models should be limited to having a better understanding of companies with highly digitalised business models, where the traditional principles of value creation and profit allocation do not apply.
EBF contact:
Roger Kaiser, Senior Policy Adviser Tax & Crime, r.kaiser@ebf.eu, +32 2 508 37 11
Iliana Koutoulakou Policy Adviser, i.koutoulakou@ebf.eu, +32 2 508 37 45
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]]>There is a specific issue in the way bank assets in Europe are valuated. An issue that is blocking the further digital transformation and growth of banks.
Current prudential rules prescribe that the use of banking software is penalised instead of incentivised. Software is still valuated as an intangible asset, making it less worthy than basic office furniture.
In other words, EU banking rules treat software as a cost rather than an investment. Unlike in the US, European banks are forced to cover expenditure on software solutions with the same amount of capital.
Investing in software solutions, updates and development is crucial to remain competitive and to strengthen cybersecurity.
A recent survey conducted by EBF shows that European banks as of 2016 had invested more than €18 billion in software, despite the costly conditions in place.
Without a doubt, financial technology and software solutions have become critical functions of the work in banking.
Even in case of a liquidation, when bank assets are sold, software can still be used and thus proves its value.
If we want to let banks innovate, and therewith the European economy, treating software as an ordinary asset is a pure necessity.
Former MEP Cora van Nieuwenhuizen at the 2017 European Banking Summit:
Remarks by Gonzalo Gasos at the QED Banking Package Review event:
Subscribe to the EBF Weekly + FinReg Agenda
Every Friday at noon you can receive the EBF Weekly + Financial Regulation Agenda. This agenda presents an overview of upcoming European and international meetings and conferences in financial regulation, as well as important general financial and economic events and key EBF meetings for the week ahead. CLICK HERE TO SUBSCRIBE
Subscribe to the EBF Morning Brief
The EBF Morning Brief is published Monday through Friday morning and brings you the top banking headlines, relevant announcements from the EU institutions and the latest from the EBF and its members, national banking associations in 32 countries in Europe. CLICK HERE TO SUBSCRIBE
The post Prudential treatment of software: the use of software by banks should be encouraged not punished appeared first on EBF.
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