More taxes for digital platforms?

Rules must be established to determine whether or not other taxes on digital services will be assessed. New exemptions must be tested to stimulate demand and it is stated that the tax on digital platforms is in default of implementation.

Digital platforms pay two taxes in Colombia: VAT and reteica. The fact that our country belongs to the OECD restricts the extension to other types of taxes, so these companies have managed to enter with force to our territory.

As for the collection of these two taxes, in 2019 it was 253,678 million pesos. In the first 10 months of 2020, the value amounted to 209,887 million pesos.

“From the Dian’s point of view, and despite not having an infrastructure in the country, these platforms should transfer more revenue to the treasury”

From the Dian’s point of view, and despite not having an infrastructure in the country, these platforms must transfer more income to the treasury, and not elude these resources in tax havens or in returns to their countries of origin.

For Isabella Bello Hurtado, manager of Legal and Tax Services at PwC, there is a lack of clarity when discussing the issue of charging more taxes to digital platforms, as a strategy to increase revenue collection in the country.

Clear rules must be established

“Local digital platforms are taxed like any other company. The problem is that they do not have clear rules for the territoriality of their services and, therefore, there are discussions between municipalities”.

For example, he indicates that, for purposes of ICA or income rules such as limitations for expenses abroad, the only thing they do is to tax by limiting the deduction making local businesses unviable or that Colombia is moving towards a digital economy issue, which goes against everything the Government intends through the orange economy.

He reiterates that, for the case of foreign platforms, these are already taxed in Colombia, since 2017, through VAT.“They must register, liquidate and pay this tax when their customers are users not liable for VAT in Colombia,” he clarifies.

That taxing digital services does not become a decrease in investment.

Bello Hurtado emphasizes that clear rules must be established to determine whether or not to liquidate, apart from VAT, other taxes on these digital services.

“We need to modernize, make some spatial rules of territoriality for this type of new services. If this type of rules are going to be established, either by source or even by a possible digital permanent establishment, we have to think that it is not about taxing all digital services just because, but to look for reasonable thresholds and simple compliance rules that do not discourage investment in Colombia”, she thinks.

She is clear in stating that establishing that any digital business should be taxed in Colombia, regardless of its income, would not be a rule that we can control and, probably, would generate the opposite of what is expected: a decrease in investment.

It would be a positive tax for the collection

For his part, Jeisson Ramírez Morales, public accountant and legal representative of Touché Asesores SAS, states in Actualícese that it is time to try new exemptions that seek to stimulate aggregate demand.

“Several countries have adopted the so-called GAFA tax (acronym for Google, Apple, Facebook and Amazon), which is nothing more than the tax that would be charged to technology giants, due to the boom of their digital platforms in recent years, and even more with the pandemic,” he says.

He thinks that, hand in hand with an adequate control by the tax authority, this tax would be positive for the collection.

A tax that is in default of implementation

Jorge Enrique Espitia, professor at the National University of Colombia, columnist in digital newspapers on public finance issues, comments in Actualícese that the tax on digital platforms and the tax on international financial transactions are in delay of being implemented,“This situation is largely due to the fact that there is no consensus between countries and because the institutional framework is very weak,” he says.

Espitia brings up the announcements of the former president of the United States, Donald Trump, with the approval of a 3% tax on local income earned by large technology companies in France, and Europe has moved in that direction.

“One of the advances is to break with that paradigm that taxation generates perverse effects on investment and on entrepreneurs,” he stresses.

Source: Actualícese