Analytics, EU – Baltic States, Modern EU, Taxation, Technology

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 16:22

Digitalised economy: OECD efforts to address tax challenges

Eugene Eteris, BC International Editor, Copenhagen, 17.10.2019.Print version
The OECD published a proposal to advance international negotiations to ensure that large and highly profitable multinational enterprises, including digital companies, pay tax wherever they have significant consumer-facing activities and generate their profits.

The new OECD proposal brings together common elements of three competing proposals from member countries of the “OECD/G20 Inclusive Framework on BEPS”, which groups 134 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, making them fit for purpose for the global economy of the 21st century.


The OECD proposal in: http://www.oecd.org/tax/beps/public-consultation-document-secretariat-proposal-unified-approach-pillar-one.pdf


On BEPS see: http://www.oecd.org/tax/beps/

 

According the proposal, some profits and corresponding taxing rights would be re-allocated to countries and jurisdictions where multi-national enterprises, MNEs have their markets.  It would ensure that MNEs conducting significant business in places where they do not have a physical presence be taxed in such jurisdictions, through the creation of new rules stating (1) where tax should be paid (“nexus” rules) and (2) on what portion of profits they should be taxed (“profit allocation” rules). 

 

The OECD Secretary-General, Angel Gurría underlined that the new proposal would make real progress to address the tax challenges arising from digitalisation of the economy, and to continue advancing toward a consensus-based solution to overhaul the rules-based international tax system by 2020. The proposal would bring together common elements of existing competing proposals, involving over 130 countries, with input from governments, business, civil society, academia and the general public, as well as bringing closer to the OECD’s ultimate goal, i.e. to ensure that all MNEs pay their fair share.


”Failure to reach agreement by 2020 would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy; we must not allow that to happen,” Mr. Gurría said.


Taxation in digital economy

The OECD’s inclusive framework’s tax work on the digitalisation of economy is part of wider efforts to restore stability and certainty in the international tax system, address possible overlaps with existing rules and mitigate the risks of double taxation. Beyond the specific elements on reallocating taxing rights, a second pillar of the work aims to resolve remaining BEPS issues, ensuring a minimum corporate income tax on MNE profits. This will be discussed in a public consultation foreseen to take place in December 2019.


The OECD’s ongoing tax work will be presented in a new OECD Secretary-General Tax Report during the next meeting of G-20 Finance Ministers and Central Bank Governors in Washington DC, on 17-18 October.


For more information on the OECD/G20 BEPS Project, see: www.oecd.org/tax/beps/

 






Search site