The digital tax could perhaps be likened to a bank that unilaterally increases your interest rate tenfold after 2 years on a 5-year mortgage.\nHowever, even this comparison is not entirely accurate, as Slovakia also acts as a bailiff in the digital tax.\nIn fact, it forces the persons paying sums to digital platforms to withhold tax unless they establish a permanent establishment in Slovakia.\nThis is despite the fact that the relevant international treaties prohibit Slovakia from taxing such income. <\/strong><\/p>\n\n

People are now signing mortgages in droves, also because they believe that the bank will not raise the interest rate during the fixation period, or that the current laws will prevent it from doing so.\nBut what if we allowed for that possibility?\nHow many people would be willing to take out a mortgage in the face of such uncertainty?\nHow many entrepreneurs would be willing to borrow money from a bank?\nFewer.\nWhile a reduction in the number of mortgage-takers may appear positive on the surface in today’s environment, the narrowing of the options for entrepreneurs to effectively raise capital is undoubtedly a catalyst for economic decline.\nUncertainty reduces confidence and freezes economic activity.\nAnd we saw the real impact such a freeze can have on tangible macroeconomic variables less than 10 years ago. <\/p>\n\n

Dating with a playmate <\/h3>\n\n

While it may seem unfair and immoral for UBER or Taxify not to pay taxes in Slovakia, quick and compact solutions to such a situation send the wrong signal.\nIn business, we like to work with reputable and fair partners.\nWith such partners, you are more confident that their behaviour oscillates with low volatility.\nIn contractual relations this is called “market standard” and in law “legal certainty”.\nAdherence to these principles contributes to efficiency and accelerates the economy.\nOn the other hand, if you encounter greater uncertainty or a substandard, you demand a risk premium.\nIf you lease a building to an unknown tenant, you naturally ask for a higher rent and a higher deposit.\nIf someone is luring you to invest in Zimbabwe, you demand a higher potential ROI.\nAnd if you want to date a playmate, you have to factor in a life on Instagram. <\/p>\n\n

The primacy of international law?<\/h3>\n\n

From the perspective of public international law, Slovakia applies the so-called.\nThe monistic approach, which in the case of Slovakia is characterised by the explicit primacy of international law over domestic law.\nThis principle was introduced into the Slovak legal order only in 2001.\nTheoretically, we can thus imagine that for countries with which Slovakia concluded a double taxation treaty before that year, a digital tax could be defensible.\nBut even this is highly questionable.\nSection 1 of the Income Tax Act itself, which provides for the digital tax, says that this law applies only if the international treaty does not say otherwise.\nAnd it says something different in the case of digital tax. <\/p>\n\n

Legitimate expectations<\/h3>\n\n

In investment law (and not only there) there is the term legitimate expectations.\nYou invest a lot of money in a business in a country and you expect that the state will not, for example, increase taxes by 10% from one year to the next.\nOf course, the state has every right to raise taxes however it wants.\nHowever, dramatic changes in the legislative environment undermine a country’s credibility as an investment partner and may be actionable by the investor because they are contrary to the investor’s legitimate expectations.\nThis is an oscillation with high volatility.\nIt is also like preparing all year for a wedding only to have your partner finally say no at the altar.\nCouldn’t he have known this sooner? <\/p>\n\n

However, Slovakia’s action in introducing a digital tax is not just about contradicting legitimate expectations.\nIt is about contravening one of the fundamental principles of international law – pacta sunt servanda – agreements are to be respected.\nHere you are not only concerned about your partner’s ‘no’ at the altar, but also about a unilaterally increased cancellation fee at the hotel.\nAnd the hotel also extorts it from you by forcing your guests to hand over the prepared envelopes to the SBS after the church under threat of violence, since the wedding has been cancelled. <\/p>\n\n

Perhaps the right, honest, fair and in line with legitimate expectations would be to force companies affected by the digital tax that are currently doing business illegally in Slovakia to do business legally in Slovakia.\nAnd this could have been done even without the recent decision of the Court of Justice of the EU in the UBER case.\nIndeed, doing business in accordance with Slovak law would very likely entail an obligation to pay taxes on profits in Slovakia.\nAnd as a sweetener, the state would perhaps protect Taxify or UBER drivers from the risk of criminal prosecution for unauthorised business activities, which a critical part of these drivers are committing. <\/p>\n\n

But why booking.com? <\/h3>\n\n

One can understand the anger of the state in the case of some digital platforms, but why address the digital tax to booking.com as well?\nIts profits from Slovakia are, after all, significantly different in content from the profits generated in Slovakia by the activities of UBER or Taxify.\nWhile UBER and Taxify largely determine the content of the underlying service(summarised by Advocate General Szpunar<\/a>), booking.com merely publicises the offer of accommodation services in a more efficient way.\nBooking.com cannot be said to be doing business in Slovakia.\nIf Slovakia wants to tax the booking.com portal, it must also tax the booking systems of hotel chains. <\/p>\n\n

If we simplify it all, Slovakia has sent a signal to the world that legal certainty in Slovakia cannot be fully counted on.\nThis is confirmed, incidentally, by the recent decision of the district court in the Taxify case, which differs significantly from the UBER decision, despite the fact that they are identical services in terms of content.\nIn addition, however, Slovakia has demonstrated that the Treasury Department probably cannot be bothered to make a more thorough and comprehensive recognition of the material differences between UBER’s digital platform and booking.com.\nSuch oversights are probably quite unnecessary on politically neutral topics such as this. <\/p>\n","protected":false},"excerpt":{"rendered":"

The digital tax could perhaps be likened to a bank that unilaterally increases your interest rate tenfold after 2 years on a 5-year mortgage. However, even this comparison is not entirely accurate, as Slovakia also acts as a bailiff in the digital tax. In fact, it forces the persons paying sums to digital platforms to […]<\/p>\n","protected":false},"author":9,"featured_media":3545,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[134],"tags":[101,132],"class_list":["post-242031","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interesting-topics","tag-about-taxes-in-general","tag-sharing-economy"],"_links":{"self":[{"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/posts\/242031","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/comments?post=242031"}],"version-history":[{"count":7,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/posts\/242031\/revisions"}],"predecessor-version":[{"id":242124,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/posts\/242031\/revisions\/242124"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/media\/3545"}],"wp:attachment":[{"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/media?parent=242031"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/categories?post=242031"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hg.amcef.com\/en\/wp-json\/wp\/v2\/tags?post=242031"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}