From Digital Taxation to CORE: Europe’s Obsession with Turnover Taxes

Europe’s flirtation with digital services taxes (DSTs) appears to be cooling. In July 2025, the European Commission dropped its proposed digital levy from EU budget plans, largely in response to US trade pressure. Yet the debate is far from settled.

In March 2019, the Council of the European Union agreed not to move forward with the Commission’s proposal for an EU-wide DST, taking note instead of a narrower compromise limited to digital advertising services and choosing to await OECD-inspired solutions.  Crucially, this 2019 decision was not a legal prohibition. It merely paused Brussels’ ambitions while leaving the door open for future initiatives.

Since then, several Member States, notably Austria, France, Hungary, Spain, and Italy, have pressed ahead with their own DSTs, and voices in the European Parliament continue to call for EU-level action to ensure that “big tech” pays what they deem a fair share.

From DSTs to CORE: Turnover Taxes Rebranded

The digital services tax is far from buried. National versions remain in force, while groups in the European Parliament, notably the Greens/EFA, continue to push for an EU-wide levy to make “big tech” pay its “fair share”. The idea has also been sustained by a CEPS study commissioned by the Greens/EFA and published in April 2025. It is argued that an EU-wide DST would still be a viable short-term path for the EU, building on the Commission’s earlier work and Member State experience.

The point is not to single out CEPS; exploring policy options is what think tanks are meant to do. But their study helps explain why the DST debate refuses to fade: it treats the idea of taxing digital business with little scrutiny and reinforces an old Brussels narrative that is misleading in many respects.

The flaws in the pro-DST case remain unchanged: reliance on hypothetical and discredited figures on companies’ effective tax rates, failure to recognise that the tax burden ultimately falls on European SMEs and consumers, and disregard for risks of retaliation and WTO disputes. Other major flaws include the discriminatory design of DSTs, which creates market distortions, and the way DSTs destabilise established tax principles, leading to significant tax uncertainty and an overall unfavourable investment climate in the EU.

The story does not end there. The European Commission has just proposed the Corporate Resource for Europe (CORE), a turnover-based levy that mirrors many of the DST’s flaws while raising new constitutional questions about taxing powers. With a few political adjustments, especially in a less confrontational post-Trump US–EU climate, Brussels could well seek fresh revenue streams under the banner of “digital fairness”, extending to industry sectors beyond online platforms.

Four Critical Misconceptions with the DST

Europe’s debate over digital services taxes has lingered for nearly a decade. What was sold as a simple way to make “big tech” pay more has instead become a recurring distraction from meaningful tax reform. The case is no stronger today than it was in 2018: DSTs remain symbolic measures that raise little revenue, risk trade conflict, and ultimately punish the very European firms and consumers they claim to protect.

There are at least four critical misconceptions that continue to prop up the case for a digital services tax.

1. Chasing Marginal Revenues While Missing the Big Picture

DSTs are a political shortcut that disguises the real problem: Europe’s corporate tax system is fragmented, politicised, and riddled with “loopholes”. Revenues from national DSTs are negligible – less than one percent of total tax receipts in France, Spain, or Italy. By pursuing DSTs, policymakers are chasing marginal, short-term revenues while foregoing the long-term gains that come from greater investment. Instead of fostering innovation and growth, DSTs add to the cost of doing business in an already heavily regulated environment, further discouraging the very investment and innovation that Europe needs to expand its economy and generate sustainable tax revenues. The real debate should be about the balance between labour, VAT, and capital taxation, not about squeezing a few hundred million more from the technology sector.

2. Who Really Pays Digital Services Taxes

The burden does not fall on Silicon Valley, but on European businesses and consumers. When France introduced its DST, technology companies passed the cost along, leading to higher prices for users and households. The same pattern has been observed in Spain and Italy. DSTs punish local European businesses and the very European consumers policymakers claim to protect.

3. Hypothetical Numbers About Tech Companies’ “Fair Share”

The CEPS paper leans on the European Commission’s oft-repeated claim that digital firms face an average effective tax rate of 9.5% compared with 23.3% for “traditional” companies. Yet these figures were never real data – they came from a 2016 ZEW-PwC model that its own authors later clarified could not be used to compare tax burdens across sectors. The model illustrated the relative attractiveness of tax regimes for intangible assets, but it did not measure actual corporate tax payments.

Despite these caveats, the European Commission and several national politicians presented the numbers as hard evidence, reinforcing the simplistic narrative that “digital companies don’t pay tax”. In reality, major US tech firms reported effective tax rates of 26–28 per cent between 2012 and 2017, higher than many European industrial champions such as Renault, Volkswagen, or Deutsche Telekom, whose rates often sat between 15 per cent and 21 per cent.

The notion of a digital sector “free-riding” on Europe’s tax system is politically convenient but empirically false. It is convenient precisely because large foreign firms, especially US tech companies, make for an ideal scapegoat: they are highly visible and criticising them comes at little political cost. Yet more recent data show these firms paying effective rates in the mid-teens to low-twenties, while large European firms now often face higher rates, highlighting Europe’s structural disadvantage of heavier corporate taxation.

If fairness is truly the goal, however, the focus should shift to the subsidies, carve-outs, and loopholes that benefit EU-headquartered multinationals across all sectors. Whether a company runs on servers or steel, the real problem lies in the structural bias of Europe’s nationally fragmented tax codes and high statutory tax rates.

4. A Design Flaw, Not a Policy Tool

DSTs tax turnover rather than profits. DSTs also create economic double taxation as they typically fall outside the scope of double tax agreements. This distorts competition, penalises low-margin firms most severely, and exposes the EU to the risk of trade retaliation. Even the Commission acknowledges that DSTs are merely a stopgap ahead of the OECD’s Pillar One framework. Building an EU budget strategy on such a contested and temporary instrument would have been not just short-sighted but reckless.

The Commission’s Turnover Tax Experiment – CORE and the EU Budget

With DSTs stalled, CORE is Brussels’ new experiment. CORE would apply a capped turnover-based levy on firms with revenues above €100 million, expected to raise €6.8 billion annually. Though framed as a “contribution”, it is a genuine EU tax, created entirely by EU law, collected nationally but channelled directly to the EU budget. That would be unprecedented in the Union’s fiscal history.

Its design raises three major concerns. First, it is regressive: like DSTs, turnover taxes hit low-margin firms as hard as highly profitable ones. Second, it is legally uncertain: the scope of Article 311 TFEU to create new EU-level taxes remains contested, and several national constitutions may not permit it. Third, it faces formidable political hurdles: unanimity is required, with Germany and others already voicing scepticism. Beyond internal resistance, CORE could also provoke retaliation from the EU’s trading partners, mirroring the risks already seen with DSTs.

But here too, the biggest problem runs deeper: CORE pretends to “charge” large companies for benefiting from the Single Market. The trouble is – Europe doesn’t have a Single Market. Not in any meaningful sense compared with the US or China. After more than thirty years of “official” integration, Europe’s legal landscape is still a patchwork: fragmented tax codes, fragmented labour laws, fragmented consumer protection rules, legal fragmentation everywhere you look.

To claim that companies should pay extra for a market Brussels has never properly delivered is to invert both logic and fairness. Worse still, rather than completing the Single Market, the EU has layered on a myriad of complex and disproportionate digital regulations, from the DMA and DSA to the AI Act, which raise compliance costs, disincentivise innovation, and deter investment. Charging firms for access to such a fragmented and over-regulated market is not a case of fair contribution; it is a penalty for trying to do business in Europe.

DSTs and CORE differ in packaging but share the same DNA. Both are political shortcuts aimed at visible multinationals, especially in tech, while sidestepping the harder work of reform and European legal and economic integration. Both tax turnover rather than profit, distort competition, and promise fairness without delivering it.

As concerns taxation in Europe, key questions Europe avoids remain the same:

• Can the EU continue to rely so heavily on labour taxation?
• Are VAT systems equitable and efficient across Member States?
• How should capital income be treated in a global economy?
• And who ultimately bears the burden of taxes on corporate income – owners, workers, or consumers?

From Tax Symbolism to Substance

DSTs are not dead. And CORE shows that the turnover-tax instinct has not disappeared but merely mutated into a new form. Both are political shortcuts: symbolic gestures that distort competition, reduce competitiveness, deter investment, and shift costs onto SMEs and households, while leaving Europe’s real structural problems untouched.

What Europe needs is not another levy disguised as “digital fairness” or a fee for supposedly benefitting from the Single Market, but a genuine modernisation of its tax mix. That means easing the excessive reliance on labour taxes, reassessing the fairness of VAT systems, clarifying how capital income should be treated in a global economy, and tackling the patchwork of exemptions, carve-outs, and subsidies that also impact competition in the EU.

What Europe needs is not more turnover taxes, but a serious debate about what it should tax and why. Only by tackling these deeper questions can Europe move from symbolism to substance in tax policy. The task is not to punish a handful of visible multinationals, but to design a system that is efficient and fit for a truly integrated Single Market that promotes innovation and economic development.