The creativity of a (German) tax official is unlimited

It is always a pleasure when I receive reactions to my articles. Following the recent blog (Die Privatperson als Vermittler) a German colleague sent me an article. It picks up on the topic of hypothetical services by private persons and fits very well in the current hype bubble of digitalisation. Specifically it concerns the question whether the numerous electronic services, which as private persons we can enjoy free of charge are in fact free of charge but are rendered as an exchange of services in return for our data. This view has been advocated in a technical publication by two representatives of the Hamburg tax authorities (Deutsches Steuerrecht, 2015, 2267 and 2811). They also see no problem in establishing the assessment base, because there would be «good yardsticks for estimating the fair market value of the user data». Indeed, thanks to Google’s search engine there is a good number of hits:


With this interpretation the scope of VAT would increase considerably.

But this interpretation has been convincingly pulled to pieces by Hans-Martin Grambeck (Deutsches Steurrecht 35/2016, 2026):

  • In many cases a consideration does in fact flow, either e.g. by the provider of products or services or subsequently by purchase of the full version;
  • The submission of data is necessary in order to be able to provide the user with the results desired by him (search expressions in Google, personal data in networks, own location for navigation services, etc.);
  • An objective valuation of the data is de facto impossible: the freedom from charge of the electronic services is also not made dependent on a specified quantity and quality of the user data.

Furthermore the exchequer should also bear in mind that chargeable services would also be affected by this reasoning, the value of the data would then have to be considered as an additional consideration. Furthermore, the same rules would also have to apply in the non-digital world, if e.g. in the context of prize competitions, promotions, competitions and trial subscriptions benefits were granted in exchange for data.

One can only hope that other tax adminstrations do not adopt the interpretation of the German tax officials and the EU issuer of directives intervenes in time.

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