AER’s comments to the European Commission’s public consultation on Digital Levy

The Association of European Radios (AER) is the Europe-wide trade body for commercial radio, representing the interests of companies operating over 5,000 commercial radio stations to the EU Institutions. AER promotes the development of commercially-funded radio broadcasting in Europe, by ensuring a fair and sustainable economic framework for radio so it can continue to thrive.

We welcome the European Commission’s ambition to respond to the developments and challenges of the digital economy, and agree with the statement that online platforms currently enjoy significant regulatory advantages. Specifically, that certain digital businesses can benefit from ‘scale without mass’, due to the fact they may have little or no physical presence despite significant economic activities and do not necessarily pay corporate taxes in all jurisdictions where they operate. They are also able to shift profits to certain jurisdictions more easily and thus pay less tax compared to more traditional businesses. It is also true that large digital companies exploit network effects and acquire dominant positions, thus worsening market inefficiencies.

In contrast, commercial radio abides by strict regulation at local, national and European level to provide listeners with trusted news and high-quality content. As broadcasters, they contribute to the European economy at large and pay direct and indirect levies at national level. In comparison, online platforms, while they compete directly with commercial radio, are not subject to a comparable legal framework, including on taxation. We therefore support the European Commission’s initiative to create a modern, stable regulatory and tax framework in which digital companies contribute their fair share to society, enabling a fair and competitive environment in the internal market. Digital businesses, in particular internet giants (search engines, social media, online marketplaces, etc), create large revenues by monetising users’ data and user-generated content. Those who generate revenues in certain jurisdictions but operate in others, need to pay a fair share of taxes in the places where they actually extract value.

We also support the idea of a European Directive as members’ experience with digital tax legislation at national level is very different. The divergence of the way that legislation is implemented can have very negative impact on traditional taxpaying companies. Divergence on adequate thresholds, scope of activities that are taxed, where the funds are allocated and transparency measures are important factors in this respect and it is best to be coordinated at a European level.

As commercial radio listening online is increasingly growing, radio operators will rely more in the future on an online business model to disseminate and fund its content, while still following a strict regulatory and taxation framework linked to its nature of broadcaster. With this in mind, it is paramount that the scope and definitions of a European Digital Levy do not lead to the double taxation of already tightly regulated actors of the European economy.

AER members would undoubtably ask for clarity with regards to how the Commission intends to guarantee tax certainty. Some services intended to be part of the scope of the Directive are also offered by radio broadcasters, namely online advertising services, streaming of content financed by advertising and online news outlet financed by subscription advertising.

However, traditional radio is already taxed for its activities. We therefore caution against a drafting that would have detrimental consequences on commercial radio actors that have been badly hit financially by the crisis stemming from the COVID-19 pandemic.